The economic consequences of the lockdown (2)

Click to enlarge. Via Ian Welsh

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Click to enlarge. Via Calculated Risk

Looking at these numbers, I can understand why some U.S. governors are eager to end the lockdown and get people back to work.  But the economic system isn’t something you can turn on and off like an appliance.  The impact of business losses, wage losses and job losses won’t be wiped out by a re-opening,

There weren’t any good choices in dealing with the coronavirus pandemic, even if you decide to consider nothing except dollars and cents.  Sick, dying and scared people are bad for business, whether you have a government-ordered lockdown or not.

Also, the U.S. economy was fragile to begin with.  We U.S. citizens never fully recovered from the previous recession.  We were due for another one anyway.

[Afterthought 5/9/2020]

Only governors, mayors and county health officers can order lockdowns, but only Congress and the President can deal with the economic consequences of a lockdown.

The federal government, unlike state and local governments, has the power to create money.  Many state and local governments, unlike the federal government, have constitutional and legal limitations on how much money they can borrow, tax and spend.

South Korea and other countries responded to the pandemic without devastating consequences because they responded before the virus had taken hold and used massive testing and contact tracing.

The USA might have done the same if—

• The President had responded promptly and exercised national leadership in January.
• Congress had not wasted the early months of 2020 with their impeachment charade.
• Federal and state governments had not, in the name of cost-cutting and keeping taxes low, hollowed out their ability to respond to medical emergencies.
• U.S. manufacturers had not, in the name of cost-cutting and short-term profitability, hollowed out their ability to make vaccines and medical equipment in this country.’
• There was no powerful propaganda network convincing people that the pandemic is unreal.

The USA has great residual capability, if we choose to use it.  For example, I don’t think any other government except the U.S. government could project military power into every corner of the world except the Russian-Chinese Eurasian heartland.

This is a great achievement—a highly dubious achievement, but one that took a great deal of money and a great deal of logistical competence.

The United States as a nation has the capability to bounce back from its present situation.  More importantly, we have the capability to prepare for the next crisis, whatever it may be.  What it will take to do so is a change of thinking and a change of leadership.

LINKS

Ten reasons why a Greater Depression for the 2020s is inevitable by Nouriel Roubini for The Guardian.

The Terrible Jobs Report Gets Worse The More You Read It by Amelia Thomson-Deveaux and Julia Wolfe for FiveThirtyEight.

Tags: Coronavirus, COVID-19, Great Depression, Next Recession, Unemployment