Saturday, April 11, 2020

Foreign Correspondent: Here Comes A Massive Recession-- A Recession Was Inevitable, But COVID-19 And The Trump Administration’s Failures Are Making It Worse


-by Reese Erlich

The current recession was triggered by the COVID-19 pandemic. But after 11 years of economic boom, a capitalist bust was inevitable. And it’s being made worse by the Trump Administration's blunders.

Meanwhile socialist China, despite very real problems, is effectively combating the pandemic and starting an economic recovery.

Here in the US, shuttered businesses, massive unemployment, and the spread of a deadly disease are grinding the economy to a standstill.

Economists at Morgan Stanley predict the Gross Domestic Product (GDP) will decline at a 38% annual rate in the second quarter this year and by -5.5% for 2020. By comparison, the economy contracted at an annual rate of 8.4% in the worst quarter during the Great Recession of 2007-09. (A recession is defined as two or more successive quarters of negative GDP.)

Optimists in Washington predict a “V” shaped recovery-- a sharp economic plunge followed by a sharp return to normalcy. They believe we'll be back to Trump boom times as soon as the pandemic recedes.

But that prediction comes from Fantasyland.

Large states such as New York and California will be shuttered at least until May. But because of the lack of a national plan, other states are seeing an upswing in virus infections and have only recently ordered residents to shelter in place.

New COVID-19 epicenters will likely emerge in Florida, Texas, and other states where rightwing Republican governors refused to protect their people in a timely manner. As late as April 7, when 95% of the US population was under instruction to “shelter in place,” nine states had refused to issue statewide stay-at-home orders.  So we may see pandemic recoveries in some areas while others continue shutting down for months.

“There will be no nationwide all-clear signal,” says Sylvia Allegretto, a labor economist and co-chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley. In a phone interview, she tells me that epidemiologists predict that the virus will continue in regional hotpots. “So we'll likely see an initial significant economic bounce back followed by slower, possibly uneven, growth.”

How bad is the economy?

David Kotz, an economics professor emeritus at the University of Massachusetts Amherst and  an old friend, tells me the US was due for a recession as an inevitable part of the capitalist boom and bust cycle.

The economy did show signs of a possible recession towards the end of 2019 and beginning of 2020, he explains. “Then the coronavirus walloped the economy.”

Kotz says the decisions made by the Trump Administration have worsened the pandemic and hurt the economy. Trump hasn’t made sure that hospitals and first responders have the necessary equipment and supplies, so “states and localities are forced to compete with one another for scarce medical resources, instead of them being directed to the areas of greatest need.”

The Trump Administration cut funding for vital health services and replaced competent government officials with “political hacks whose only qualification is willingness to praise Trump. That has undermined the ability of the government to respond to this crisis,” he tells me.

“Trump’s slow and inconsistent response to the pandemic will prolong the economic crisis,” says Kotz. Trump has also refused to suspend tariffs imposed on numerous countries, from France to China. The tariff policy had already slowed the economy, according to Kotz, because business people couldn’t be sure if other countries would impose retaliatory tariffs.

“Tariffs reduce business investments and will retard the recovery,” he says.

The US government response to the pandemic has been to give qualifying individuals $1,200 direct cash payments and let small and large businesses apply for large loans and grants. The federal government will also extend unemployment insurance, which will be changed to include gig workers and independent contractors.

But even this $2 trillion package won't be enough. Leaders in Washington are already preparing for another outpouring of cash. They face a serious problem, however. No one can predict when the quarantines will end, nor whether consumers will spend money once they do. The recession could deepen.

Needed reforms

The recession has already changed political dialogue in the US. Small government Republicans suddenly favor massive government intervention. Corporate denunciations of socialism have transformed into cries of “help me, Washington.”

Reforms that once seemed out in left field are being seriously considered. Here are a few reforms that could slow the recession and permanently help the economy:
Medicare for All. A single payer health care system would guarantee that everyone could be tested and treated. It could improve health care delivery for African Americans and other people of color.
Nationalized payroll where the federal government pays workers’ wages to their employers for the duration of the crisis as is being done in Germany, Denmark, and Ireland.
Use the Defense Production Act to produce needed health equipment and make sure it’s distributed where it is needed.
Expand social programs and increase emergency aid to states and cities.
Suspend monthly payments for rent, mortgages, and student, medical, and consumer debt for the duration.
The government could partially pay for such plans by trimming the Pentagon budget and increasing taxes on the rich. But it would have to allocate trillions more. The government bailout laws now spend trillions to subsidize big corporations. Why not provide assistance directly to ordinary people?


Unionized nurses in western Pennsylvania went on strike to protest the failure of their nursing home employer to provide protective masks. Gig workers at Shipt, a delivery service, have started a unionization effort. Amazon workers are increasingly angry at working long hours under unsafe conditions. Some walked off the job to protest.

It’s too soon to know if these are the beginnings of a wider anti-corporate, pro-union movement. But an ongoing recession will make people angry and reduce at least some of Trump’s support among white workers and small business people.

So tie your face mask tight. The coronavirus and its impact are yet to be fully felt.


How capitalism responds to a pandemic crisis

• Hospitals across the United States are laying off doctors and nurses just as they are needed to fight the pandemic. Medical facilities have canceled elective surgeries and other lucrative procedures. As they lose money, for-profit hospitals reduce pay or lay off staff. What could be more irrational than laying off doctors in the midst of a pandemic?

• Ambulance drivers face layoffs in Alameda County, east of San Francisco. Falck, a multinational corporation that owns the privatized ambulances, threatens to layoff many of its 600 workers because the state's stay at home policy has reduced the number of ambulance calls. So at a time when authorities expect a spike in emergency COVID 19 cases, EMTs may be filing for unemployment. Cities such as Berkeley that hire EMTs through their fire departments will not be affected.

• In New Jersey, Baruch Feldheim bought up tens of thousands of masks, gloves, and protective gowns in order to sell them for huge profits, in one case at a 700% markup. Federal prosecutors charged him with making false statements and assault on a federal officer. I can't wait for federal prosecution of corporate CEOs for price gouging, but I'm not holding my breath.

Labels: , ,


At 6:13 PM, Anonymous Anonymous said...

And yet, despite the great and evident need to do something about the clear and present danger, all the "Democratic" Party can deliver -as usual- is Trump-lite as our "champion".

Of course, as the "Democratic" Party defines "our", it's a big party - and you aren't in it.

At 6:42 PM, Anonymous Anonymous said...

"Foreign Correspondent: Here Comes A Massive Recession-- A Recession Was Inevitable, But COVID-19 And The Trump Administration’s Failures Are Making It Worse"

Will still vote for Trump. Because the Dems will make it worser :-)

At 8:48 PM, Anonymous Anonymous said...

Us'n Ain't Got None Well Inglitch, 6:42? No MAGAt does.

Trump is the one making things worse. Biden promised no fundamental change except for the name on the White House stationery, so he won't make anything better.

At 10:04 PM, Anonymous Anonymous said...

this article lost me at: "Reforms that once seemed out in left field are being seriously considered." followed by naming MFA and shoring up SSI, for instance.

As anyone who follows even from a great distance, we know that the democraps will never seriously consider MFA and their jesus (and his former boss) has been trying to cut sustenance for decades.

so... horse shit.

At 3:42 AM, Anonymous Anonymous said...

"The US government response to the pandemic has been to give qualifying individuals $1,200 direct cash payments..."

You aren't being given anything. You getting and advance on your 2021 tax refund.

As a mere human, you have to pay for anything you get. You aren't incorporated.

At 8:07 AM, Anonymous Anonymous said...

while capitalism always seems to generate a bust after a boom (or even a flatter bust, as in 2009-2019), the amplitude of the wave depends on what is done to dampen the wave.

Between 1932 and 1980, there were many effective dampeners that lessened the amplitude of the busts.

Since 1980, the dampeners have been largely removed (and are always being threatened by both parties).

The amplitude of this bust would have probably been big anyway. But the pandemic made it even worse. But without a lot of the formerly very effective dampeners, it becomes catastrophic. If not this one, the next one.

It could not NOT happen.

FTR, the undampened nature of this and all future busts are bipartisan. Both Nazis and democraps refuse to reapply the effective dampeners. And obamanation/democraps distinguished themselves in doing absolutely nothing to help the bottom 99.99% during the 2008 bank fraud crash.

And voters want obamanation's retarded scion to preside over this one?

We get what we deserve.

At 11:50 AM, Anonymous Anonymous said...

It's not the voters who want obamanation's retarded scion to preside. It's the corrupt Party who needs a figurehead to use to shield their own version of the Swamp for fun and profit.

Democrat Admits Voters Don’t Choose Pres. Nominee

At 12:08 PM, Anonymous Anonymous said...

the idiots WERE effectively sheepdogged, 11:50. But it was still they who refused to vote for Bernie (the best of the lot) and chose instead to affirm biden (by far, the worst of the lot).

So, yes, the party sent out the dogs to drive the sheep... but the sheep could have refused to budge. They eagerly went along.

At some point you have to place the blame squarely on the non-sentient voters.

At 11:39 PM, Anonymous Anonymous said...

Sure, it was the non-sentient voters who rigged the primaries and caucuses and manipulated the other candidates to drop and endorse Biden.

Got it.


Post a Comment

<< Home