I suspect that in retrospect March 2020 won’t be remembered so much for the COVID-19 crisis, but as the catalyst for finally remaking our society into one that works for the people again.
It’s all pretty crazy and hellish right now, but it’s made crazier and more hellish because we’re trying to deal with COVID-19 and our economic crisis by using old rules that no longer work.
Take our Federal Reserve, for example. In reality, the Fed doesn’t have a whole lot of tools left in its toolbox. Its most effective remaining tool is that it prints the money. By effectively throwing out unlimited sums of money, it’s trying to keep our economy from collapsing altogether by underwriting our banks and businesses. It seems to be buying us some time, for example, by keeping banks flush with cash when in times before the Federal Reserve (the Great Depression) there would be a run on banks. But dropping the federal funds rate to 0% isn’t going to help at all. It did in 2008, but won’t anymore. Both businesses and consumers are already in hoc up to their eyeballs. We already can’t afford the debt we got. It’s hard to see how acquiring more of it will help the economy.
In just a few weeks our real unemployment rate is now likely over ten percent. Much of our economy has ground to a halt. It may prove to be ephemeral, which I first thought, but with some weeks to look at what’s going on, I no longer think so.
COVID-19 has thrown nearly the perfect monkey wrench into our economy, which had been hanging by a thread because it was based everyone spending beyond their means. Most companies made it worse. Instead of hoarding cash when times were good to get, they used borrowed money to buy back their own stock, which executives then sold to increase their personal wealth and their companies more fragile. Most people just get by, or have fallen behind, a victim of wages that rarely increase. Mostly, our productivity went into shareholders’ pockets instead. If they couldn’t afford the debt they had before the crisis, they won’t be able to now that it’s here.
All this was made considerably worse by our administration’s counterproductive approach to dealing with a pandemic. The $2.2T relief bill passed by Congress and signed into law won’t be nearly enough. A one time payment of $1200 per person and $500 per child won’t get us through this crisis. At best it will pay a month of rent or a house payment, plus a few other expenses. Expanded unemployment benefits will be a lot more meaningful to most people, if they can get them. It’s hard to apply for unemployment when so many others are doing the same thing. Until the U.S. Treasury bails out states’ unemployment funds, the funds in these accounts won’t last long.
Most likely COVID-19 will keep us at home for months, and when we are allowed to open businesses again, it will be tentatively. The doctors that Donald Trump refuses to listen to expect a resurgence of the virus later in the year unless we maintain strict social distancing. A vaccine is likely at least a year away, so things couldn’t go back to normal until those of us who don’t have it are inoculated against the virus. So most likely we can expect a year or more of doing what we are doing now, with systems under strain if not collapsing all around us.
But the economy really can’t come roaring back, not unless it works a lot differently. Those who get jobs back will be lucky to get what they had before and a wage similar to what they had before. Government cash will help, but it won’t be nearly enough, which will leave people more impoverished in general, and more financially fragile. Without laws requiring debt forbearance, or debt forgiveness, growth looks unlikely.
Which means the only way out is through political change, which hopefully will come in November. People generally vote in their own self interest, so there should be plenty of motivation. Then there’s Donald Trump doing the best to kill off his own supporters. Even if they are smart enough not to follow his advice, a lot of his supporters are poor white people, mostly in rural areas with health care networks that are already fraying at the seams. COVID-19 mostly hasn’t hit rural America yet, but it will, and it will make New York City look like a walk in the park.
These problems won’t solve themselves by a lack of government. You can see now what the lack of government has done: left us largely unprepared for a pandemic. Meaningful change happens through a government that acts in the people’s interests and works to proactively prevent exactly what we are going through now.
It won’t get better though if we keep doing things the way we have always done things. That’s why the Fed’s actions feel so toothless, at best postponing the inevitable. The Fed can’t innovate its way out of our crisis because it has a limited set of tools, and it’s used pretty much all of them. The Trump administration simply doesn’t have the imagination to do what needs to be done. It hopes for short term miracles, which is why Trump is promoting Hydroxychloroquine to treat COVID-19. People have died, are dying and will die for Trump’s bogus medical cures.
We the living who get through this by doing sensible things like staying at home and washing our hands regularly have an opportunity in 2021 to remake America into a country that meets our needs again. We could start to use money not to bail out companies, but instead to create a clean and green infrastructure. Then perhaps we can expect to see a real light at the end of our tunnel.