Can America Bounce Back?
The shutdown of the American economy was in large part enabled by the belief that it would be short, that the federal government could borrow a large sum of money at a low interest rate to ease the suffering, and that the economy could come bouncing back in the blink of an eye, making up any losses. The shutdowns have extended so far four times longer than originally intended, with the governors and mayors of several states and cities proclaiming indefinite shutdowns. The moneys borrowed from our future were nowhere near enough to ease the pain, and who lent that money anyway? It hasn’t been borrowed yet, so it’s anyone’s guess. Two of the three pillars supporting shutdowns have fallen, so can America’s economy really come bouncing back, or was that wishful thinking, too?
Which part of the spider web is essential, and which is not?
Economic activity is a web of connections. The Defense Logistics Agency has a Small Business Innovation research grant opportunity out, DLA202-012, “Learning from the Coronavirus: An Economic Assessment on the Effects of Pandemics on the Supply and Demand for Strategic & Critical Materials in the Defense Industrial Base.” This topic seeks a model to predict how strategic supplies of raw materials and pharmaceuticals critical for the defense sector will be affected under the new paradigms of COVID-19. Although the defense industrial and medical sectors were deemed “essential,” many defense supply chains were negatively impacted by the shutdown. Surprised?
Even though the “essential” businesses might have been excused from lockdowns, they were not generally excused from extreme social distancing requirements, impacting their work. They had to spend time and effort adapting to the new requirements, and the new materials they required to operate, such as disinfectants, hand sanitizers and acrylic glass, might have been in short supply. Even once operating, the “essential” businesses’ suppliers might have been deemed non-essential. The businesses and materials that their employees required to maintain their personal lives might have been non-essential, thus affecting their work. Even businesses in free states might have found themselves relying on “non-essential” businesses in slave states, with no alternative suppliers available.
The “essential” businesses depended on the “non-essential” businesses, and the fall of one brought the other down. The only non-essential “businesses” that continued to pay their employees, regardless of whether they worked or not, and suffered no ills were the federal, state, and local governments. Despite continuing strong, these non-essential “businesses” managed to push the other businesses down farther. From an economic standpoint, the wrong thing was shut down. What part of the web is non-essential? The kid with the stick.
The lesson of economic decline is important for economic recovery. Fully one quarter of our economy is lying beaten and bruised in the mud, and those people are not going to just spring up, brush the dust off, and continue as if nothing happened. Nearly 78% of Americans lived paycheck-to-paycheck, including 10% making more than $100,000 per year. Some had too much in their homes, either in mortgages or Section 8–inflated rents. Many others, like Millennials, are lifestyle-poor. What little excess money they had went into economic consumption. Now laid off for almost two months, they are behind on their rents and utilities. Even if they were hired tomorrow, they have one sixth of a year to make up. No extra consumption until 2021; it’s beans and rice to the end of the year.
What does that drop in consumption mean? Likely a short bounce followed by a drop, like an overloaded aircraft trying to take off. Businesses might take their loans and re-open and re-staff quickly, only to find in the next few months that 20% of their business is missing. That means layoffs come August–October. Even if the re-opening were to be staged, it would have the effect of prolonging the agony and likely lead to a worse drop. For example, rather than a few homeowners putting off improvement projects, a large number of unpaid landlords would start putting off projects, or banks might see loan defaults and then be unable to make merchant loans to entice people to finance projects. Quickly reopening, contractors might lose out on 20% of one sixth of a year’s work, but prolonging the shutdowns mean contractors lose out on 20% of one third of a year’s work or more.
A quick recovery seems unlikely, and whoever was whispering economic nonsense into the ear of President Trump seemed to have as cavalier an understanding of economics as the health and safety experts had of viral pandemics. Were they the same people?
Who are these health and safety advocates? At the end of April, the faculty, staff, and graduate students of the Harvard School of Public Health began a media blitz to counter President Trump’s desire to open our economy. A review of their articles reveals that they are pushing such important epidemic-ending health concepts as single-payer health care, seizure of pharmaceutical companies, mass tracking of all people and their associations, travel papers, forced testing and vaccination, and other socialist nonesuch.
If you ever questioned who the health and safety experts were, you should have no doubts now. CNN will host a panel of coronavirus experts led by Greta Thunberg. That’s right: the 17-year-old student from Stockholm, Sweden. This will be a panel of socialists advocating socialism under the guise of science, health, and safety, consisting of former acting CDC director Richard Besser, former HHS secretary Kathleen Sebelius, and TV doctor Sanjay Gupta, led by the most credentialed among them, activist Greta Thunberg. So much for the health and safety experts!
If you want to know who ruined our economic web, look no farther than the kids with the sticks: the socialists masquerading as scientists. The third pillar of the shutdown has fallen; a quick bounce back is highly unlikely; and even if one does occur, it will probably be an overexertion followed by a several months– to year-long depression. Whoever was advising President Trump on the economics of shutdown was apparently as knowledgeable of economics as the health and safety experts were of pandemics. Perhaps they were in cahoots to spread socialism?
ly unlikely, and even if one does occur, it will probably be an overexertion followed by a several months to year-long depression. Whoever was advising President Trump on the economics of shutdown was apparently as knowledgeable of economics as the health and safety experts were of pandemics. Perhaps they were in cahoots to spread socialism?