This Looks Like a Depression, Not a Recession
Until we have a vaccine, we are barreling toward economic catastrophe
Just weeks after the stock market crashed in 1929, President Herbert Hoover assured the country that things were already “back to normal,” Liaquat Ahamed writes in Lords of Finance, his Pulitzer Prize-winning history of the financial catastrophe. Five months later, in March 1930, Hoover said the worst would be over “during the next 60 days.” When that period ended, he said, “We have passed the worst.” Eventually, Ahamed writes, “when the facts refused to obey Hoover’s forecasts, he started to make them up.” Government agencies were pressed to issue false data. Officials resigned rather than do so, including the chief of the Bureau of Labor Statistics.
And we all know how that turned out: The Great Depression.
Today, President Donald Trump is accused of minimizing the coronavirus as it has bored down on the United States, initially barring most foreigners who had visited China from entering the U.S., but then losing a full month before taking further measures. The virus would not spread in the U.S., he said February 26, “especially with the fact that we’re going down, not up. We’re going very substantially down, not up.” Even today, the White House has failed to organize a nationwide mobilization that would arrest the virus and persuade traders, CEOs, and ordinary Americans that the crisis is in hand. As a result, Covid-19, on its current trajectory, threatens the U.S. with a profound economic downturn.
Covid-19 arrived amid the longest expansion in modern American history. The economy had grown for more than 11 years and added jobs for 113 straight months. Stock markets were hitting repeated highs. But the economy at large was slowing — it grew by 2.3% in 2019, down from 2.9% the prior year, the slowest in three years, and far below the 3.1% projected by the White House. For 2020, the Federal Open Market Committee forecast just 2% growth in 2020, and economists surveyed by Bankrate estimated a 35% chance of recession by the November election. Red lights of a laggard or even a bad year were blinking: Businesses were not investing in the future — private investment growth had plunged to 1.8% from 5.1% in 2018. Even consumer spending, the singular engine of…