Remember all the times we warned about the recession that would almost certainly hit alongside COVID-19? Just as we expected, the recession hit.
Remember all the times we warned that if we don’t take sufficient action to contain the SARS-CoV-2 coronavirus and help Americans survive the economic fallout, the recession would ultimately worsen? Just as we expected, evidence is mounting that the “V-shaped recovery” keeps looking more and more “K-shaped” with every passing day.
Who could have seen this recession coming? (Well, we did, and so did many reputable economists.)
I swear I’m not trying to be any kind of “New Cassandra”. But come on, we discussed this in March: “We really need more short-term fiscal stimulus and long-term economic restructuring to better handle this and future crises. As we know all too well here in Nevada, ‘easy quick fixes’ can only deflect and distract from the underlying problems for so long.” And more specifically, we noted how the subsequent shutdown of domestic and international travel would really hit Nevada’s tourism-dependent economy hard!
Yes, we ultimately got the federal Families First Act and the CARES Act. Yet just after Congress passed the Families First Act and before Congress passed the CARES Act, I warned, “We need to look beyond our own respective wishes and fears to notice those who fear they can’t afford to ‘shelter in place’. Unless and until we properly address everyone’s needs, we’re only making it easier for COVID-19 and the novel coronavirus to inflict more pain and suffering on all our lives.”
Then as we approached the tail end of key Families First Act and CARES Act relief programs, such as boosting the Medicaid FMAP and enhancing federal unemployment aid, we listened as famed economists Raj Chetty and Mark Zandi explained why America still needs more economic aid. During this CBPP press call in July, Chetty pointed to two other western states’ differing approaches on reopening: “Even though Colorado reopened two weeks earlier than New Mexico, there’s no discernable difference in consumer spending. It’s not about states’ decisions to reopen. It’s about consumers’ decisions to go out and risk their own safety.”
Now, let’s cut through the “irrational exuberance” and “voodoo economics” to assess the real state of our economy.
According to recent analysis from Bloomberg Economics, while retail sales and new job postings continue to inch ahead and the equity markets exhibit more of what former Federal Reserve Chair Alan Greenspan once called “irrational exuberance”, most other indicators are pointing downward again. And closer to home, the presenters at last week’s Nevada Economic Forum meeting crunched numbers showing how the $20.9 billion in Families First Act and CARES Act assistance for Nevada alleviated the $25.4 billion drop in Nevada’s GDP so far this year.
But now that federal aid has wound down, so are hopes for the kind of “V-shaped recovery” that Trump and his economic advisers have been promising since April. Between the Nevada Economic Forum’s official forecast, which factors in the likelihood of a “double-dip recession” that continues through early next year, and David Dayen’s “Unsanitized” report in The American Prospect yesterday pointing out why the commercial real estate market collapse was an early canary in this coal mine, it’s become more obvious than ever that additional relief aid is sorely needed.
While Trump and his acolytes continue to indulge in all kinds of “V-shaped” magical thinking (or as George H.W. Bush once called it, “voodoo economics”), let’s do a quick reality check. Due to ongoing COVID-19 international travel restrictions, international tourism remains severely shriveled here in Nevada. And even though domestic travel restrictions have loosened since June, Americans’ concerns over COVID-19 and growing financial burdens are huge factors in domestic tourism remaining far weaker now than where we were a year ago (or even eight months ago).
Believe it or not, Field of Dreams is not a documentary. If we reopen it, there is no guarantee that they will return. As we’ve repeatedly pointed out in these pages, there is no chance of sustainable economic recovery without sufficient action to contain further spread of COVID-19. No matter how often Donald Trump tweets, “LIBERATE!”, and no matter how often state officials cave into “business community” demands to loosen health safety restrictions, we will not experience anywhere near full recovery as long as most people see our still-high level of COVID-19 infections and decide not to take the risk of traveling to an active COVID-19 hotspot.
So how do we take on this recession? (Hint: It helps to realize that COVID-19 itself is also a serious crisis.)
Fact 1: Spending of unemployed workers fell by 14 percent from July to August. Because the level of spending of the unemployed was quite high when the supplement was available, the spending of the unemployed in August is similar to their level of spending pre-pandemic. pic.twitter.com/LBmEjIhg0g
— Peter Ganong (@p_ganong) October 16, 2020
While Nevada’s official unemployment rate ticked down to 12.6% last month, that’s still just over triple the 3.7% unemployment rate from September 2019. And we absolutely must keep in mind the growing ranks of long-term unemployed workers who face greater difficulty in returning to the labor force, especially for many of Nevada’s laid-off tourism and entertainment workers who can’t just take Ivanka Trump’s advice to “find something new” any time soon. (Seriously: The law of supply and demand still applies!)
So what can we do? Here’s where we return to what we discussed earlier this month: We must invest in the public health resources (such as boosting testing capacity and contact tracing efforts) we need to stop the rampant spread of COVID-19, and we must invest in our people by giving them the financial resources they need to survive this pandemic, continue to inject money back into the economy, and prevent more workers from losing their jobs. It really shouldn’t be seen as esoteric rocket science, even though far too many in the White House and in Congress behave like it is.
And once more, with extra feeling: The “stimulus negotiations” that national media pundits continue to obsess over continue to go nowhere fast. It doesn’t help that the Trump administration still balks over basics like public health and aid for state and local governments, and it doesn’t help that the “stimulus negotiations” remain bogged down by extraneous demands and politically driven numerical parsing. If these federal policymakers truly want to do something about this recession, they need to actually address the reasons why we’re in this recession in the first place.