How America’s Stunning Lack of a Coronavirus Response is Producing Economic Disaster Unseen in Modern History
Another 5 million or so people filed for unemployment last week. That’s 22 million in one month. How much is that, in real terms? The US labour force is 165 million people or so. That’s 13.3% of the labour force unemployed in one month. That’s more than a rate of about 3% a week, as I predicted at the beginning of all this. At that rate, by the end of next month, more than a quarter of the US economy will be unemployed.
We are watching an economy die. There’s simply no other way to put it.As I and most other good economists cautioned, Coronavirus is a shock like we’ve never seen before — ever. Not even a war produces a massive shockwave like this, which is one reason war metaphors are inadequate. But it’s a shock like we’ll again and again in the near future, as climate change and mass extinction and ecological collapse bite — so this is a chance to get our house in order, to make preparations for an age of such shocks.
The first thing you need to understand about watching the economy die like America’s is is that it’s needless: it never needed to happen. The second thing you need to understand about this particular event — a gigantic shockwave of unemployment — is that it’s like the plume of a volcano, or the crest of a tsunami: just a front, which carries a massive wave of destruction right behind it. That damage is yet to come, but it is now on the way, inevitable. So: this massive shock front of unemployment is just the beginning. The nightmarish consequences it will have — depression and what that produces, which I’ll get into shortly — never needed to happen at all, and yet those effects, now that the shockfront is exploding before our very eyes, are going to last, and have dramatic, ruinous consequences of their own. A cascade, a chain reaction of ruin has now been set off.
How and why?
As I pointed out a few weeks ago, the stimulus was woefully inadequate. It provided businesses and households the equivalent of just one week of support…amidst an historic crisis that was going to last months. If the ante wasn’t upped, and fast, the results were going to be catastrophic. Well, here are the results — and they are catastrophic. Of course there’s a massive wave of unemployment, when the government’s only supporting the economy for one week…but it’s already been several.
What’s happening is simple, on one level: businesses are closing their doors, as people stay home. But on a deeper level, as Keynes, the great economist of depressions explained a century ago now, what’s happening is this: a massive loss of confidence. Anticipating no real support, businesses are laying people off. Anticipating no real help, people are cutting back dramatically. The result is the shock front of unemployment mounting at the surreal rate of 3% a week — or about six million people. If that keeps growing — as it’s likely to — what’s going to happen?
Unemployment in America isn’t like other countries. Because of America’s ruinous, obsolete social contract, most forms of social insurance and benefits are tied to “jobs.” As people lose whatever jobs they had, the effects are therefore going to be catastrophic. They’re not just going to lose their incomes. They’re going to lose their healthcare, retirement, childcare, and so forth.
Guidelines for Restart
President Donald Trump issued guidelines to states Thursday aimed at easing social distancing restrictions and reopening parts of the country as it grapples with the economic fallout of the coronavirus pandemic.
The White House strategy, provided to all 50 governors during a phone call, outlines a three-phase approach to gradually bring back parts of public life such as schools, restaurants and theaters in certain areas based on evidence the virus is waning.
“We are not opening all at once, but one careful step at a time,” Trump said at the coronavirus task force press briefing Thursday.
Each phase requires a 14-day period of “downward trajectory” of COVID-19 cases in order to move on to the next phase. Qualifying for each phase will be judged on certain criteria for widespread testing for patients and health care workers, contact tracing and hospital capacity. Vice President Mike Pence said the guidelines to lifting restrictions could be implemented statewide or by county.
The first phase of the “Opening Up America Again” plan requires states or regions meet the criteria and continue practicing social distancing guidelines currently in place. The phase suggests:
- Requiring vulnerable individuals to continue sheltering in place.
- Practicing physical distancing in public, avoiding socializing in groups of more than 10 people.
- Minimizing nonessential travel, continuing to encourage telework.
- Shuttered schools should remained closed.
- Prohibiting nursing home and hospital visits.
- Elective surgeries can resume, on an outpatient basis.
- Bars should remain closed, but gyms can open under physical distancing and sanitation protocols.
The second phase, under which states or regions with no evidence of resurgence that meet certain criteria a second time, can begin easing some of the social restrictions.
- Schools can reopen.
- Nonessential travel can resume.
- Bars could operate with “diminished standing-room occupancy.”
- Vulnerable people would still be encouraged to stay home.
- All people should maximize physical distancing in public.
- Continue to encourage telework.
- Gyms and bars can remain open.
- Visits to nursing homes and hospitals are still prohibited.
- Movie theaters, sporting venues and churches can operate under moderate physical distancing.
- Elective surgeries can resume on an outpatient and in-patient basis.
The third phase, in which states and regions with no evidence of a resurgence and meet the criteria a third time, lifts most restrictions. Vulnerable people may return to social settings while practicing physical distancing and visits to nursing homes and hospitals can resume. Trump emphasized the strategy is a “gradual process,” with some states opening sooner than others. The guidelines, he added, focus on “sheltering the highest risk individuals.”