After getting the COVID-19 pandemic under control, the most important task facing the next president of the United States will be to get small businesses back up and running, according to Gary Cohn, President Donald Trump’s former chief economic advisor.
The pandemic has been devastating to such businesses, which account for about half the country’s jobs. Many were forced to close either temporarily or permanently, resulting in major job losses and a U.S. unemployment rate that is now close to 8 per cent. Worse still, larger companies that weren’t forced to close have capitalized on the emptier playing field, meaning that the big have become even bigger.
Without significant new stimulus plans, the nation is likely to face continuing economic turmoil as small companies face an uphill battle in restarting against entrenched competitors.
“It’s very tough to compete against someone who never slowed down or stopped,” says Cohn in the second of three U.S. Election Dialogues webcasts hosted by The Globe and Mail and BMO. Cohn is also the former director of the U.S. National Economic Council and former president and chief operating officer of investment banking firm Goldman Sachs.
“They [small businesses] were deemed non-essential. We are going to have to figure out how to get small businesses up and going again if we want any hope of a real sustained economic recovery.”
In a wide-ranging conversation with Rita Trichur, senior business writer and columnist for The Globe, Cohn discusses subjects including central bank assets, the future of U.S. banking regulations and the effects of the tax cuts he helped to enact during his time in the Trump administration. But he stresses repeatedly that the fate of small businesses is what concerns him most as the Nov. 3 election draws closer.
Cohn praises the US$669 billion Paycheck Protection Program brought in by government in April to help smaller employers meet payroll. Further, similar stimulus efforts and programs will be necessary regardless of whether it’s Trump or Democratic challenger Joe Biden who wins the election.
One possibility, he suggests, is giving tax advantages to businesses operating on a local level. The goods and services they sell could be exempted from sales tax, for example, while larger, national players would continue paying. Such a move might not necessarily be fair, but it could help to ameliorate some of the advantages the bigger players had during the early months of the pandemic.
“Create any incentive and every incentive you can” for small businesses, Cohn says.
A full recovery and a return to more manageable unemployment levels of 4 or 5 per cent isn’t likely until a COVID-19 vaccine becomes available, he adds. Large parts of the economy – businesses in the travel, hospitality and entertainment sectors that depend on large volumes of customers – will continue to languish. But small business stimuli will at least get a recovery started.
“If we get a vaccine, that’s just a bonus on top,” he says. “Obviously a vaccine would catapult that to a new level.”
Cohn is optimistic that Americans will opt to get the COVID-19 vaccine when it becomes available, despite nearly half of respondents saying they won’t in recent polls.
He expects new forms of social pressures will arise. Employees who get the vaccines will be able to participate fully in workplace cultures, while those who don’t will be isolated and forced to continue working remotely and via video conferencing.
“There’s going to be a real quality of life issue for those who don’t take the vaccine,” he says.
Cohn, a self-professed globalist and free trade advocate, resigned from the Trump administration in March 2018. It was widely speculated that Cohn had heavily opposed the president’s move to impose U.S. tariffs on steel and aluminum imports.
He stops short of predicting who will win the election, but stresses that the next president will have to re-establish relationships with ally countries, including Canada, if the United States is to counter China’s growing global influence. He notes that Biden has shown such willingness, while Trump has shown resistance.
“It feels to me, today as we sit here, that we’re gravitating towards more free trade, more open border, a more friendly relationship with our G7 allies and our G7 trading partners of which Canada is one, and I would be supportive of that,” he says. “No one country is going to take on China and get it to reform itself. We’re going to need to work together.”
Cohn is also optimistic about the future of the United States, despite its current economic, cultural and social turmoil. The pandemic and civil issues around race and law enforcement have exposed weaknesses in the country’s fabric, but he’s confident these will be overcome.
He also believes there will be a peaceful transition of power if Biden wins, despite Trump so far refusing to commit to it.
“It’s what we do, it’s what we are,” Cohn says. “I don’t think anyone should worry about that.”
Interested in watching the full webcast? Visit tgam.ca/dialogues or listen to the podcast below.
Advertising feature produced by Globe Content Studio. The Globe’s editorial department was not involved.