YES: A resilient economy is overcoming the COVID-19 downturn
By David Ranson
Though the president and first lady weren't able to dodge the COVID-19 bullet, the U.S. economy, we now know, has adapted remarkably well to the pandemic and social distancing. As a result, the worst of the COVID-19 recession is over.
Fear pushed public and even professional opinion to be bearish about the prospects of economic recovery. On both sides of the aisle, it became commonplace to assume that economic vitality depended largely on financial aid from Washington.
Therein lies a Catch-22 that's keeping us from paying attention to the economy's rebound. If markets and the economy recover or perform well, the conventional wisdom attributes this to government "stimulus." If they stagnate or perform poorly, it's attributed to Washington's sloth and stinginess. In short, we've been too focused on vulnerability - and the perceived need for artificial stimulation - and not focused enough on resilience.
Real GDP dropped like a stone in the second quarter (April-June) of 2020, at a record annual rate of 31.7%. The great majority of forecasters did not anticipate that we could recover from such a blow anytime soon - even taking into account unprecedented government largesse. Their predictions of sustained weakness are being overtaken by events.
Weeks ago the largest component of gross domestic product, consumer spending, already had bounced back to pre-pandemic levels, recovering twice as fast as employment or industrial production. Within just two months, May and June, retail sales had completed a full round trip. In July and August they rose further.
How well does this good news reflect the economy as a whole? That requires an estimate of GDP itself. With forecasters in broad disagreement, it might seem that we'll have to wait until third quarter results are in.
Happily, thanks to the Center for Quantitative Economic Research at the Federal Reserve Bank of Atlanta, there's now a more timely source of information, unavailable in past downturns, and derived from real-time hard data: the bank's GDPNow estimate. As of Sept. 24 the GDPNow team calculated third-quarter annualized growth of 32%.
This figure exceeds all but three of the 62 forecasts in The Wall Street Journal's September survey of forecasters, and reflects a huge upward revision from GDPNow's earliest estimate at the end of July.
Such quarter-to-quarter growth would be twice the record set by the Korean War buildup. And it implies that the economy already had recaptured three-fourths of its second-quarter collapse in a single quarter.
The speed and vigor of the U.S. rebound can be interpreted in two contrasting ways. One is that federal intervention has been much more effective than expected. There will be no shortage of politicians waiting to take credit for that. The other is that, collectively, virtually all of the so-called experts underestimated the economy's intrinsic resilience.
Back in the days when federal "stimulus" was puny by today's standards, GDP already showed an ability to bounce back from drastic financial shocks, natural disasters, widespread strikes and global crises. To paraphrase Independent Institute senior fellow Richard Vedder, professor emeritus of economics at Ohio University, perhaps the most impressive example is the economic transition following demobilization at the end of World War II. Millions of military personnel became jobless within months and military spending plummeted. But the economy's resilience came to the rescue and the predicted sharp rise in overall unemployment never occurred.
It's not clear whether government "stimulus" funds add to or subtract from the economy's resilience. Relief to those among the newly unemployed who are too pressed to fend for themselves may actually help them become more resilient. On the flip side, moderate deprivation may be a greater spur to self-reliance, encouraging the unemployed to seek work rather than temporary income from government.
Either way, the resilience of the U.S. economy is overpowering the COVID-19 recession, which soon could be history.
David Ranson is a research fellow at the Independent Institute and director of research at HCWE & Co. He wrote this for InsideSources.com.
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NO: This is a recession; Republicans need to stop blocking relief
By Karen Dolan
Before the pandemic, Rosaline Baptiste was working full time cleaning houses in New York. Her pay was less than a living wage, but she had a roof over her head and could send much-needed cash home to her children and elderly mother on the hurricane-ravaged island of Dominica.
Now she has work only two days a month. She lives in a shelter and can no longer help her family financially.
In Texas, Denita Jones was keeping herself and her children safe from the virus, relying on unemployment while her workplace was closed. But when her workplace opened, the help expired - and the state's eviction moratorium ended.
None of that changed when the state's COVID-19 infection rates skyrocketed. Now, the anxiety of having to put her children's health at risk to put food on the table and avoid eviction is taking its toll.
Even before the pandemic, nearly 140 million people in this country were poor or low-income. Now, they're suffering even more acutely than before. I've spent the last several months interviewing some of these people as they struggle to make ends meet.
Nearly six months after reopening, the U.S. jobless rate remains stunningly high, and the latest jobs report was worse than expected.
According to a new survey from the Robert Woods Johnson Foundation and NPR, nearly half of all U.S. households report experiencing serious financial instability as a direct result of the current recession. Food insecurity has doubled in the United States, while fully one in three children in renter households is either food-insecure, housing-insecure, or both.
But that doesn't mean that everyone's suffering.
My colleagues at the Institute for Policy Studies calculate that America's billionaires have collectively seen their wealth increase by nearly $850 billion, or 29%, since the pandemic started. For the wealthiest among them - Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett and Elon Musk - the increase is closer to 60%.
We are living through what economists call a "K-shaped recovery." That is, the recovery line for the wealthy is on its way up while the line for everyone else continues to crash downward.
In truth, this process was underway well before the first case of COVID-19 was detected.
In 2017, President Donald Trump and the GOP passed a trillion-dollar tax cut for the wealthy, exploding the deficit and putting a strain on social programs for those already struggling to get by. Most billionaires now pay lower tax rates than working-class Americans, and more than half of the stock market is now owned by the top 1% of earners.
Throw in a recession where the lowest-paid workers were the most likely to see their livelihoods vanish and you get an astonishing acceleration of inequality.
If you want to get a sense of how lopsided things were even before that point, consider this: In the early months of the pandemic, the official poverty rate - widely seen as an undercount of how many people are actually struggling - actually ticked down.
How could that be possible? Because the March federal relief package issued those $1,200 payments and boosted unemployment benefits. With this emergency aid, many desperately poor families were briefly better off than they were before.
But it didn't last. Extended and enhanced unemployment benefits lapsed, a federal eviction moratorium ended, and there's been no more direct cash aid even as the pandemic has ground on. The Democratic-controlled House of Representatives passed another desperately needed relief bill back in May, but the White House and GOP-controlled Senate have taken no action on it.
Meanwhile, 210,000 Americans have died.
More recently, just after Federal Reserve Chief Jerome Powell gave a stern warning that the economy desperately needs a robust relief package, Trump abruptly and inexplicably ordered all negotiations with the Democrats on relief to end.
Then after the stock market took a nosedive on that news, Trump erratically tweeted that a standalone check should be sent to voters. But the damage is done, and a simple relief check is but a bandage on a hemorrhaging wound.
For all but the wealthiest Americans, this recession is far from over. If we as a country prioritize evidence-based virus safety measures, we won't just wear a mask and practice social distancing. We'll pass a robust relief package that helps those who need it most, so we can weather the storm and end the recession for all of us.
Karen Dolan directs the Criminalization of Race and Poverty Project at the Institute for Policy Studies. She wrote this for InsideSources.com.
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