WASHINGTON: President Donald Trump wants to get the U.S. economy back to work as soon as possible – hopefully, by May. His goal of opening the economy at the soonest possible hour is the right one. Failing to do so could turn this virus-caused recession into a government-prompted depression in no time at all. There is no doubt this virus is having an unprecedented effect on our nation. We witnessed 3.3 million people become unemployed last week alone, and that’s not counting the zero-hour workers who haven’t applied for assistance.
Weekly unemployment claims are skyrocketing.
For comparison, the highest number of weekly claims on record is 695,000 (1982). That’s in stark contrast from the beginning of the year when the U.S. added an impressive 225,000 jobs in January and 273,000 in February.
The coronavirus has been devastating to the U.S. economy. As well as our job growth. All on a scale not seen since the crisis of 2008.
To mitigate this, last week Congress approved several measures aimed at propping up the economy during the outbreak. Means-tested $1,200 relief checks to U.S. adults, with $500 to children in need. At least $454 billion to the Treasury to support Federal Reserve lending programs to businesses will help Americans contain to make ends meet during this painful but necessary temporary economic shutdown.
Additionally, the Treasury will work with the Fed to turn its new funds into $4 trillion to support the U.S. economy.
At this time of extraordinary circumstances, our agencies have needed to respond with unprecedented action. However, doing this over the long term would be wholly unworkable and detrimental to the long-term economic health of the middle-class. Worse yet, it could cause a government-created depression.
A long-term shutdown is unsustainable. Currently, our nation’s workforce has come to a halt, businesses are shuttering, and the circulation of money is grinding to a standstill.
How will the bills be paid?
Much of America’s bills and other commitments will be paid this month, but after that, our nation will be looking at the potential cliff with which we could fall into a depression.
Some estimates put the possible unemployment rate at 30 percent. For context, the U.S. never went above 25 percent during the Great Depression and peaked at 10 percent during the crash of 2008. The role of the Treasury and Federal Reserve have increased substantially in hopes of shepherding the economy back from the abyss, but no amount of Federal agency spending can save an economy that has completely collapsed.
The loss of revenue will destroy our businesses. The loss of tax revenue will cripple the government. Another trillion-dollar stimulus bill will create a huge deficit leading to unpayable debt, and a long-term partnership between the Treasury and the Fed will be entirely counterproductive.
An additional stimulus will lead to crippling inflation. This could enrich Wall Street while killing Main Street, as it always has done. And worse, it will create a loss of capital not seen since the 1930s.
Is more stimulus needed?
As we add stimulus on top of stimulus, we’ll find that the uneven wealth distribution created by excessive government spending. The too rapidly expanding money supply will hurt the very people the government is intending to help.
We saw this after the 2008 recession when the money stock increased by over 2 trillion; the top 1 percent saw their incomes jump more than 30 percent. Meanwhile, mostly caused by economic stagnation, members of the lowest-income tier have grown to account for one-fifth of the country. And so, the very people that the Treasury, Fed, and Congress are trying to help will be hurt should we do this a second time.
Giving money out for free is never a smart long-term play. But this relief won’t be needed if Trump gets the country back to work.
Mitigating the public risk
No one, the president or otherwise, is advocating we reopen businesses in a way that puts public health at risk, but the most recent data show that it’s our urban centers where containment will most likely linger the longest.
Except for a few areas, like New York and Seattle, which may need a bit more time, most of the country should hopefully be ready to go soon. Trump is right that by April 30 we should re-evaluate and see which sections of the country can go back to normal.
While we can all agree with propping up the economy during this sudden severe shock, we know that no economy could sustain this in the long run. A country that lacks a healthy economy can’t operate a healthcare system that protects its citizens.
Mr. President, get this economy open as soon as you safely can. So that the real healing can begin.