The Corner

The Economy

A Receding ‘V’

Via Bloomberg’s Maeve Sheehey and Steve Matthews, writing yesterday, more evidence that what recovery we have had is already faltering.

From restaurant dining to air travel and now to filings for unemployment benefits, a growing body of evidence indicates America’s rebound from the pandemic is stalling days before hundreds of billions of dollars’ worth of federal aid is set to expire.

Take a look at the evidence Sheehey and Matthews have put together and it’s hard to disagree.

One of the arguments for avoiding too drastic a cut to the $600 a week UI supplement now being paid by the feds (although just for a little bit longer) is that one of the most effective ways of boosting aggregate demand, at least in the short term, is by weighting help towards those who would otherwise be under intense economic pressure.

Sheehey and Matthews blame the slowdown on “the worsening pandemic” to which the answer is yes, but only in part. While COVID-19 is at the root of our problems, the operation of the lockdowns in a way that appeared to take little account of the fact that the economic risk attached to them grew exponentially the longer they were maintained ought to have shifted the risk/reward calculations surrounding them much more than it did. The idea that the economy would be switched off and then on was never really credible, and the longer the switch was in the off position the more incredible that argument became.

Sheehey and Matthews maintain:

Until a vaccine or effective treatment for Covid-19 is available, the world’s largest economy will at best post tepid, uneven growth and, at worst, endure an extended period of malaise or even a depression.

That’s an unsurprising claim, but waiting around for a vaccine or effective treatment is not an effective strategy. Nor is the institutionalization of (recurring?) lockdown regimes that appear to be that strategy’s corollary.

We will not be able to judge the success of the very different Swedish approach for quite some while (whether there or not there is a ‘second wave’ will be, I suspect, the crucial element in that verdict) and Sweden’s approach may not fit countries with very different cultural and political traditions.

Nevertheless, if we are to avoid an economic catastrophe, some way has to be found of ‘living with’ this pandemic considerably more intelligently than we have managed up to now.

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