05-25-2020, 12:59 PM
I often come from a more optimistic economic perspective — I think there *should* be a partial V-shaped bounce by Q4, but for completeness, I do think there will be a lot of pain for years to come.
First, we had already unnecessarily doubled the annual federal deficit by about 500billion a year with Trump’s tax act, leaving us with less money for a true emergency, and with all the deficits, there will be consequences. I don’t envy who will be president from 2022-2028 because we will have to raise taxes *and* reduce spending. If you have any familiarity with the federal budget, you know how much of it goes toward social security and Medicare (and defense and interest), so I’d say we will have to make cuts in Social Security and Medicare while also bringing back the higher tax brackets on income, and then some.
We also have many longer term problems that pre-existed Covid that will be exacerbated by it: wealth disparities that could harm the social fabric, a post-Truth/rumor mill/“fake news” society where outside influences (Russia), the dishonest wealthy and provocateurs sow discord in American society and just ruin us as a united force, a demographic time bomb, poor education, poor health (leading to higher healthcare costs and a smaller proportion who can work or even be drafted in case of war), an economy lacking in manufacturing capability, already slower growth anticipated in the future (before the pandemic), a diminishing scientific base that would lead to the US losing its role in technological leadership within our lifetimes (and with it, military, global and economic power). Oh yeah, and don’t forget all the impacts of Global Warming.
So, yes, there is a lot of pain to come after the pandemic. But don’t count out how dynamic the US economy can be — by 2022 the GDP should be higher than in 2019. While there are many places in the world that will be a better place to be in 2020 due to the US’s failed response to Covid, you know, other countries have budget deficits and high unemployment also, and it’s not like France was overrun by dictatorship in the 2000s. By 2022, even a messed up US with higher taxes, higher unemployment, continually worsening education and health, more fires and smog, will still be one of the best places in the world to live. But there is a very large range that the US can drop and remain one of the best places to live, and hopefully we can make the drop as small as possible.
* though yes, there is also the longtail possibility of war in the world or a giant meteor hitting us or something. I think the likeliest risk is not China v US but global instability in smaller nations due to Covid. What if Brazil collapses as a state and S America falls into war? What if Russia gets really pissed off at Saudi Arabia? What if some world leaders die and their enemies decide to take advantage of the moment? Etc. and then there is the creeping rise of dictatorship/authoritarianism across the globe that predates Covid. As bad as things are in the US, the reason why the dollar is so strong and our interest rates are so low is that things are even worse in the rest of the world.
First, we had already unnecessarily doubled the annual federal deficit by about 500billion a year with Trump’s tax act, leaving us with less money for a true emergency, and with all the deficits, there will be consequences. I don’t envy who will be president from 2022-2028 because we will have to raise taxes *and* reduce spending. If you have any familiarity with the federal budget, you know how much of it goes toward social security and Medicare (and defense and interest), so I’d say we will have to make cuts in Social Security and Medicare while also bringing back the higher tax brackets on income, and then some.
We also have many longer term problems that pre-existed Covid that will be exacerbated by it: wealth disparities that could harm the social fabric, a post-Truth/rumor mill/“fake news” society where outside influences (Russia), the dishonest wealthy and provocateurs sow discord in American society and just ruin us as a united force, a demographic time bomb, poor education, poor health (leading to higher healthcare costs and a smaller proportion who can work or even be drafted in case of war), an economy lacking in manufacturing capability, already slower growth anticipated in the future (before the pandemic), a diminishing scientific base that would lead to the US losing its role in technological leadership within our lifetimes (and with it, military, global and economic power). Oh yeah, and don’t forget all the impacts of Global Warming.
So, yes, there is a lot of pain to come after the pandemic. But don’t count out how dynamic the US economy can be — by 2022 the GDP should be higher than in 2019. While there are many places in the world that will be a better place to be in 2020 due to the US’s failed response to Covid, you know, other countries have budget deficits and high unemployment also, and it’s not like France was overrun by dictatorship in the 2000s. By 2022, even a messed up US with higher taxes, higher unemployment, continually worsening education and health, more fires and smog, will still be one of the best places in the world to live. But there is a very large range that the US can drop and remain one of the best places to live, and hopefully we can make the drop as small as possible.
* though yes, there is also the longtail possibility of war in the world or a giant meteor hitting us or something. I think the likeliest risk is not China v US but global instability in smaller nations due to Covid. What if Brazil collapses as a state and S America falls into war? What if Russia gets really pissed off at Saudi Arabia? What if some world leaders die and their enemies decide to take advantage of the moment? Etc. and then there is the creeping rise of dictatorship/authoritarianism across the globe that predates Covid. As bad as things are in the US, the reason why the dollar is so strong and our interest rates are so low is that things are even worse in the rest of the world.