David Roberts, VOX
In the short term, recovery; in the long term, resilience and renewal.
As the government considers stimulus going forward from this pause, it should see an opportunity to stimulate the growth of a cleaner, greener, more just economy. Workers should return to find jobs opened up in cleaner industries, with paid medical and family leave, better union protections, and a seat on corporate boards.
The coronavirus has all but ground the US economy to a halt. The list of states and cities that have closed nonessential businesses and urged citizens to stay home is growing by the day. Essential workers remain in place, and some people are able to work from home, but millions of jobs — at bars, hotels, restaurants, gyms, theaters, salons, shops — are simply evaporating.
Late last week, Goldman Sachs predicted that jobless claims in the US will spike to 2 million in the second quarter, which it calls “the largest increase in initial jobless claims and the highest level on record.” The Economic Policy Institute projects that 14 million jobs will be lost by the summer.
All those people with shaky or vanished jobs still have families to feed, mortgages coming due, utility bills, student debt payments, credit card payments, car payments, prescription and medical bills, and children or older relatives to care for. Already, millions of people are uncertain where they will live or how they will pay bills in the months ahead.
The result is a huge, rapid, ongoing loss of purchasing power in the US economy. The same Goldman Sachs report projected a 6 percent drop in US GDP in Q1 and a 24 percent drop in Q2, which is utterly unprecedented in a major modern economy outside of wartime.
The US appears to be heading into the mother of all demand recessions. On top of that, widespread social distancing has just begun. Some estimates say at best it could last three months; at worst — if distancing proves difficult to maintain, if the Trump administration botches the ramp-up of testing and tracing, if a vaccine takes longer than expected — it could last, on and off, for well over a year, stifling any recovery.
Even Republicans seem to have been terrified into action. Two short-term relief packages, with measures like limited paid sick leave and family leave for some classes of workers, have been passed through Congress. Another, reported to total $2 trillion, has just reached tentative bipartisan agreement. But no one believes that will be the end of the help the economy needs. Democrats are predicting at least two more stimulus bills; there will be much more to do.
For the past few days, I’ve been talking to economists and wonks, reading various proposals, trying to wrap my head around what a good economic response to the virus would look like. But there’s a slightly surreal atmosphere to the discussion, because the crucial period for stimulus will be the next six months or so, and for the next six months, the country will be run by Donald Trump and his administration.