In today’s blog, I’ll be taking a look at why the economy probably will not drastically improve before the 2020 election, despite the Trump administration’s insistence that it will be soon be morning in America again.
It’s shocking how quickly economic devastation spread alongside the coronavirus. The pandemic-induced recession has wiped out 12 straight years worth of job gains in a span of just three months.
Despite a slight decrease in the unemployment rate last month (from a year’s high of 14.7 percent in April to 13.3 percent in May), millions of Americans are still out of work. This week, almost 1.5 million workers applied for unemployment, making it the 14th straight week in which this figure has reached at least a million or more workers.
This graphic from the NYT pretty much sums up how drastic the job losses have been:
Here are five reasons why I think they’re wrong.
- The expanded monthly unemployment checks that Congress authorized as part of the CARES Act are projected to end next month. For unemployed workers who have been accepted into their state’s unemployment program (which, as a caveat, greatly depends on the state in which they live), these checks have mitigated lost income from the pandemic. The additional $1,200 stimulus payments from the CARES Act also played a role in preventing financial disaster for many. Despite chatter from the administration about another round of stimulus checks, Senate Majority Leader Mitch McConnell seems hell-bent on holding up another round of economic aid unless it’s much smaller than the CARES Act (which appears to throw some cold water on the idea).
- The CARES Act also allowed federal student loan borrowers to waive their monthly payments through September 30. Once this ends, millions of Americans will have to face one of their highest expenses again.
- At the beginning of the pandemic, several entities issued moratoriums on evictions & foreclosures, which was a benefit for both tenants and homeowners who couldn’t afford to pay their rent or mortgage. The lifting of the moratoriums on evictions depends on the state/locality, but most are set to expire by the end of August. The moratorium on foreclosures from the Federal Housing Finance Agency is set to expire (conveniently) around the same time.
- Polls show that most people are not comfortable going out and spending money because they worry that this will make the virus spread faster. Until there’s better treatment and/or a vaccine, no amount of handwringing is going to change their minds, even as states are gradually re-opening. A sharp economic recovery is almost impossible without a sorely needed shot in the arm from higher consumer spending.
- Some sectors of the economy will take longer than others to recover, making it difficult for the overall economy to return to its previous highs. For example, more than 1.5 million state and local government employees have lost their jobs since March. These jobs, unfortunately, aren’t coming back unless tax revenue returns, which is going to be unlikely if consumers are still reluctant to spend money.
Combined, these factors will lead to a cascading effect. At around the same time expanded unemployment checks end, moratoriums on evictions, foreclosures, and student loan payments will end too. This will lead to more people having to slash their spending to try and make ends meet, meaning tax revenue will plummet for all levels of government as people spend less, and consumer confidence will remain low until there are better therapies and/or a widely available vaccine.
I’m not the first person to point out that, absent a miraculous sudden end to the pandemic, the economy is probably going to get much worse before it gets better (Tom Grata at Buzzfeed has a great dive into this issue that examines the current and future state of the economy more in-depth than I do).
In my opinion, the administration is peddling false hope to claim otherwise.
This Week’s WTF Moments in Congress
Oh Reader, it was incredibly difficult for me to name just one this week…so I decided to include two.
In a House Judiciary hearing on the politicization of the Justice Department, GOP Rep. Louie Gohmert did what national Republicans do best: pointlessly make noise. I wish I could make six figures to do the same thing.
Even though this next one is technically from a congressional primary, and not from Congress itself, I couldn’t resist including this shockingly bad 90s era campaign graphic from the recently defeated Rep. Eliot Engel’s campaign.
The governors of Texas and Florida are scaling back their re-openings following skyrocketing COVID cases in their states. It’s a good thing the federal government is really looking out for us during this time. Oh wait…
“If we don’t recognize the COVID pandemic, then surely it will go away!” – this administration.
America First = America Alone.
Until next time…