To make matters worse, as with the Great Depression, the world’s economies have crashed as well. “Economic carnage wrought by the coronavirus pandemic has forced the global economy into the worst recession since World War II, according to a report published Monday by the World Bank,” the Post reports. “The organization, which provides financial assistance to middle- and low-income countries, estimates that global gross domestic product will shrink 5.2 percent in 2020 as the pandemic continues to disrupt business, travel and manufacturing around the world.”
The depth and suddenness of the recession is unprecedented, but the duration depends on what we do next. The concern from economists and many Democrats is that Republicans, drunk on the better-than-expected jobs report for May (though the good news was tempered by a correction from the government on Friday, which brought the actual unemployment rate to about 16 percent), will cut off recovery efforts, forgoing much-needed assistance to state and local governments. Steven Rattner, former “car czar" in the Obama administration, observed Monday morning that “this is the big issue.” Declining unemployment, he said, is the result of the huge amount of liquidity the Federal Reserve added to the economy. Congress in 2020 also acted much more quickly with much more fiscal stimulus than it did in 2008. But, Rattner warns, while Democrats want to do more, Republicans are grumbling about too much spending. He predicts that the May jobs reports will only cause Republicans to dig in.
Economist Mark Zandi at Moody’s Analytics warns that assuming we are already in a “V-shaped” recovery would be “a potentially grievous error” that could allow the economy to slip back into a third-quarter slump. “In part, that’s because the extraordinary uncertainty over the epidemiology of the virus will continue to weigh heavily on the fragile collective psyche until there is an effective vaccine or therapy that is widely distributed and adopted,” he surmises. “Businesses and households will remain cautious. Moreover, the $2.4 trillion in fiscal support already provided by policymakers will be spent by then. Half of it already has been, mostly through enhanced unemployment insurance, the stimulus checks, and the Paycheck Protection Program for small businesses.” Take away that support for still-unemployed workers or workers whose hours have been reduced, and we may find them unable to pay bills in the fall.
The report also underscores how dramatically the stock market differs from the regular economy that shapes the finances of ordinary workers. Trump’s insistence on touting the stock market may be sufficient to calm the frayed nerves of millionaire donors, but all that does is remind the more than 30 million unemployed Americans that the rich always seems to make out just fine in times of crisis. That is going to play right into Democrats’ hands as they make the case the Trump economy works only for the super-rich.
Note to readers: I will be off for a couple of days, returning on Thursday.