Top image: OECD Chart (data.oecd.org) of United States and South Korea harmonized unemployment rates, Oct. 2019-July 2020
by Ryan Zamarripa
September 15, 2020
The United States is closing in on 200,000 COVID-19 deaths and has surpassed 6.5 million infections—two bleak milestones in a battle that President Donald Trump, in important ways, chose not to fully fight. With the new revelation in Bob Woodward’s book, Rage, that the president understood how deadly the virus was on February 7th—and likely even earlier—but chose not to act in the manner one would hope with that information, there is little comfort to offer the families, friends, and loved ones of the tens of thousands of Americans who should still be alive today.
Instead of putting forth a national strategy to combat the pandemic or issuing guidelines for states on how to curb the virus’s spread, the president actively sowed confusion and downplayed the severity of the situation. Americans were left largely in the dark about the virus’s lethality. Accompanying this carnage is catastrophic economic fallout, which too can be attributed to the president’s inaction and misdirection.
As a result, the United States has been plunged into the worst economic downturn since the Great Depression. Annualized gross domestic product (GDP) shrank by a crushing 31.7 percent in the second quarter of 2020—easily the largest recorded drop in American history. 11.5 million jobs have been lost since February, and slowing job growth is pointing to a stalled recovery. Communities of color are bearing the brunt of the economic fallout, with Black, Latino, and Asian unemployment rates consistently higher than that of their white counterparts.
With no end in sight to the recession, it is worth remembering that this economic crisis was not inevitable. Had President Trump taken steps to curb the coronavirus’s spread within the United States sooner, the economy might be back to normal by now.
International comparisons, while imperfect, can illustrate just how much worse the recession is in the United States compared to other countries. As demonstrated by the experiences of peer nations, a rapid and coordinated public health response could have contained the pandemic more effectively and reduced the mounting economic losses.
South Korea, which recorded its first case of COVID-19 on the same day as the United States, largely avoided shutting down its economy due to its early and aggressive actions to counter the spread of the coronavirus. In July, South Korea’s harmonized unemployment rate, a metric calculated by the Organization for Economic Cooperation and Development (OECD) to enable the comparison of unemployment figures across countries, was 4.2 percent—just 0.9 percentage points higher than it was in February. The United States, on the other hand, registered an unemployment rate of 10.2 percent in July—higher than any point reached during the Great Recession and 6.7 percentage points higher than where it was in February. Every OECD country with published July harmonized unemployment data (aside from Colombia) was performing markedly better than the United States relative to pre-pandemic levels.
The president, of course, argues that the economy is in shambles not because of a failed public health response on his part, but instead due to the lockdowns implemented in most states across the country. These measures, he argues, are the real reason consumer demand has crumpled. The president believes that economic activity would roar back to its pre-pandemic level if only the United States were open again for business.
That’s a false hope built on mistaken empirical assumptions. There is strong evidence suggesting that the fear of the virus’s spread (perhaps compounded by an inadequate policy response) led to an economic slowdown before stay-at-home orders were even in place. As early as February, real-time economic data show a marked decline in spending on high-contact activities. From mid-January to mid-March, consumer spending on (i) transportation, (ii) entertainment and recreation, and (iii) restaurants and hotels declined by 24 percent, 24 percent, and 9 percent, respectively. Spending on groceries, on the other hand, surged by 43 percent over the same time period, indicating a clear public acknowledgement of the health risks of venturing out of the home and economic belt-tightening.
This phenomenon also holds true across states. Analysis shows that states with more serious restrictions did not see worse economic outcomes than states with more lax ones. In many cases, the economic outcomes in states with longer stay-at-home orders improved after lockdowns ended. States that gambled with their residents’ lives by not shutting down or by reopening too quickly ended up with nothing to show for it economically.
This patchwork of lockdowns has only compounded the confusion. Since the beginning of the pandemic, states have been in a constant shuffle of reopening and shutting back down based on caseloads within their borders. Yet there are serious problems with delegating lockdowns to states, the most obvious one being that Americans are mostly free to move between them. Even the most diligent state can have its progress in combatting the virus erased by an inflow of infected guests or a transient mask-weary population.
While the implementation of a national lockdown may be unconstitutional, the president could have taken significant steps to encourage people to stay home and adopted other mitigation measures, and then collaborated with states to enforce such policies. Instead, he offered conflicting messages on wearing masks, downplayed the risks, pushed fake cures, and tried to turn state lockdowns into partisan issues.
Now, the United States is virtually alone among wealthy countries in its mounting death count. Other countries sacrificed economic activity for a short period to bring the pandemic under control, and the results have been mostly positive. Over the month of July, the United Kingdom registered an increase of 12 deaths per million residents. Over August, that figure had dropped to 5, indicating a decreasing rate of growth. Canada’s monthly increase in deaths per million residents dropped from 9 to 5 from July to August. Germany, France, Italy, South Korea, New Zealand, and Singapore registered no change over the same period.
The United States, on the other hand, saw its monthly increase in deaths per million residents surge from 78 to 91 between July and August—a significant and non-trivial acceleration. In August, the United States overtook France in total deaths per million residents. Projecting each country’s growth rates reveals that we will soon pass Italy, the United Kingdom, and Spain.
Much of the evidence available suggests that the economic recovery is consequently stalling in the United States. Consumer spending dropped 33 percent at the end of March compared to pre-pandemic levels, and over the subsequent months it gradually recovered. Since the middle of June, however, consumer spending has remained around 7 percent below its February level. Similar trajectories have been observed in small business revenue, new job postings, and the overall employment level.
Many of the provisions in the CARES Act aimed at helping the most economically vulnerable have expired, subjecting tens of millions of Americans to intense economic hardship and beginning the process of erasing the progress made thus far. The $600 weekly Federal Pandemic Unemployment Compensation payments ended at the end of July, squeezing the finances of over 10 million unemployed Americans. The eviction moratorium has also expired, which has already led to millions of evictions nationwide and is expected to lead to millions more.
The HEROES Act, which was passed by the House of Representatives in May with bipartisan support, would have likely been sufficient to keep the economy afloat at the time it was passed, and in the process it would have provided the country enough time to get the pandemic under control. Unfortunately, the HEROES Act was not considered in the Senate, and the pandemic is still raging across the United States. Now, with the Senate still unable to pass its own bill and negotiations stalling yet again, the prospect of a new round of relief is starting to slip away. There is a real possibility that we won’t see a new aid package until the 117th Congress is sworn in next January. Until a substantive and comprehensive bill becomes law, COVID-19 will continue to kill Americans, and the economic recovery will likely continue to stall.
President Trump could change this trajectory. If he were to unveil a national plan to ramp up testing, work with states to minimize transmissions, and engage in negotiations with Congress to pass a new round of relief, it is still very possible that our country could get the pandemic under control and follow in the economic footsteps of some of our international peers.
It seems though that the president is instead placing all of his faith in the successful development and wide distribution of a vaccine, which would surely lead to an economic rebound. Yet the public health community is not expecting to see widespread vaccination until the middle of next year, and there are mounting concerns that some of the candidate’s clinical trials are not going as well as initially hoped. Even if one of the vaccines successfully passes trials and is approved, there are already significant challenges to distributing and administering it to over 300 million Americans.
For now, it is important to remember that many of the deaths and much of the economic hardship could have been avoided had President Trump acted on the intelligence and public health information he received before the coronavirus crisis began. His repeated abdication of responsibility has led to the worst economic downturn since the Great Depression, and his continued refusal to lead is only lengthening and deepening the economic damage he has caused. The COVID-19 pandemic was the first real exogenous test President Trump has faced in his role, and it has become clearer than ever that he has failed. Unfortunately, things will likely get much worse before they get better.
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