Welcome to Part 2 of the Special Edition of Thoughts on the Market.

I'm Michael Zizis, head the Public Policy Research for Morgan Stanley.

Today I'll be continuing in my conversation with my colleague Ellen Zentner with our thoughts on the governmental response to the coronavirus.

Ellen, great to have you back.

So Mike, we've talked a lot about the support that Congress is giving and will likely continue to give the economy at least here in the near term.

And we've talked about how big the deficit to GDP ratio could get on the back of that. But is there risk here in us assuming that regardless

Congress would just simply continue to provide this support? I mean we have elections coming up later this year, you know, can you the I think the election is a catalyst here if investors are taking comfort from the fact that

Congress is continuously pushing aid into the American economy which it has been doing and we think it will continue to do,

the election represents a potential road bump in that.

Think about the trajectory of GDP for example so we are likely to kind of bump off of lows and get closer over time to where

GDP was in the past so that means that at some point in later this year and in 2021 the

economy will be improving perhaps not to the level that we want to see it improve

and so there could be a case for more fiscal stimulus from

US Congress but will Congress deliver it is probably going to be a function of

what happened in the 2020 election and what we know historically is that divided governments don't tend to give fiscal expansion

aid to the economy on a proactive basis and it could be entirely possible that Congress is not really interested or sort of views giving further aid as being proactive if we've been on an upward trajectory on GDP.

So I think we have to think very carefully about what the outcome might be and unless you have one party controlling both chambers of Congress and the White House,

it could be very difficult for the US government to give further aid in 2021.

You know at some point the word austerity has to creep back into the lexicon.

And so shouldn't we expect that somewhere down the line, we've got to get our fiscal

house in order because it's unlikely that we're just going to grow our way out of these

deficits and what does that mean in your view for tax rates, you know, corporate tax rates?

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