The Greatest Economic Contraction – On Trump Time (#119)
The second quarter of 2020 will go down in history as the greatest economic contraction the United States has ever experienced. It happened on Trump’s watch. Although the contraction was not all Trump’s fault, as it was primarily due to the novel Corona Virus pandemic, he insisted on taking ALL the credit for the healthy US economy prior to the pandemic. As we all know the healthy economy was obviously not all his doing, so we thought he should also shoulder equal responsibility when it went totally south in 2020.
Besides, there is absolutely no doubt about it that Trump, in order to boost his standing among his base, chose to ridicule the pandemic as just a ‘Democrat Hoax’ in the critical early weeks and months of the outbreak, rather than take decisive action as many other World Leaders had done. And by failing to do so, he made the adverse economic impact significantly worse than it would otherwise have been. In fact it is now the worst in US history.
Apart from Trump’s sheer stupidity, political posturing and criminal negligence, in the face of a dangerous pandemic, he and his Republican Party gutted and de-funded vital government agencies responsible for identifying and preparing for potential pandemics. They also systematic destroyed the US healthcare system, which all put together made America particularly vulnerable to the pandemic when it reached the US shores. There, it found fertile ground as it encountered Trump’s and his administration’s preposterous denials, national unpreparedness, containment policy disarray, undermining of science and expert advice, vital medical supply and essential protective equipment shortages that allowed the virus to flourish and spread without much hindrance, exacting a heavy toll on the US population, the essential workers, particularly the front-line medical personnel, and the economy.
The end result of such a sloppy national response was to very quickly make America the leading country in the World in the number of Corona Virus cases and deaths. Currently, America leads the World by a substantial margin in people infected, with over 4 Million infected and over 150,000 deaths.
To further compound the seriousness of the problem, and against all senior-most medical advice, Trump insisted on reopening the economy too soon. He was quickly followed by his sycophants at the various State levels, and by his wildly dysfunctional, rules flaunting, pied-piper-following support base, with the resulting flattening of the curve of new infections quickly reversing and today America’s new infections numbers are at all-time-record levels.
The resurgence of the Corona Virus infections has now rapidly spread across America and has effectively demolished any hope or chance for a quick economic recovery.
What this reality means is that even if there is an effective and safe vaccine widely available in the next six months or so (and that is being highly optimistic, but Trump is trying to force this outcome), the economic damage done in the mean-time will take a long time to repair, in spite of the multi-Trillions printed and pumped out by the Federal Reserve, and the US government, in support of the economy and the financial and stock markets.
While gobs of money are being thrown at pharmaceutical companies by the federal government to come up with a working vaccine before the November Presidential Election (Trump’s hope of reversing the inevitable), there is the danger that rules will be bent and the processes and protocols will be shortened under Trump’s pressure for a vaccine that may not be properly developed, tested, and safe for people, as that aspect is of least concern to Trump. But in the event a proper vaccine is developed by the end of this year, against all the odds and all past experience, it will be incredibly difficult to roll it out and make it available in enough numbers at a reasonable enough cost to make a difference in the near term.
In the meantime, the highly partisan government is stalled in rolling out the second relief package, with the Democrats pushing for greater relief for ordinary people and the Republicans pushing back vigorously to substantially cutting back the monthly help from $600/week to $200/week, citing the possibility of some laid-off workers being dis-incentivized to going back to work because they are making more with federal aid than they were when working.
Such a cut-back will have a further negative effect on the recovery, as with ‘The Aid’ people have been spending, and with substantially reduced monthly benefits that will automatically stop, triggering a further negative domino effect in the struggling economy.
The most likely scenario, from here on out, is that the battered US economy will recover very slowly, with plenty of bumps along the way. To a larger or lesser extent, the rest of the global economies, now facing their own severe contractions, with similar struggles of getting back to some semblance of the pre-pandemic levels, will make for a severe Global Recession at the very least. One thing is absolutely assured, this US and global economic contraction in the 2nd quarter will go down in history as possibly the very worst, along with Trump as the US President who helped make it happen.