The confusion about the status of the American economy and prescriptions to fix it has merit. The United States is in a recession, but this downturn is unlike any our country has ever witnessed. There was no boom and bust. Instead, our political leaders flipped the off switch on the economy to limit the spread of COVID-19 infections. People stayed home, businesses closed, millions of workers were fired, and commercial activity ground to a halt. This recession is more “man-made” than any before it.
Policy makers are baffled on how much stimulus is needed to get the country through the downturn. To update the sage warnings of Sen. Everett Dirksen: “A trillion here, a trillion there, pretty soon, you are talking about real money.”
The ebullience of the S&P 500 and Nasdaq does not accurately assess our economy. By contrast, industrial production remains 8.2% below the levels achieved one year ago, and unemployment approaches 11%. Consumer spending, small-business reopenings and job hiring have flattened.
Diane Swonk, chief economist at Grant Thornton, wrote, “If we continue to see the pullback and nothing is done by Washington, for state and local government the headwinds going in to the fall are going to be huge, and they could easily be a riptide that pulls us under again.”
Markets still appear to be banking on an agreement between Democrats and Republicans on a stimulus package despite the failure so far to reach a compromise on unemployment benefits, funding for states and local government and other measures. Without a financial lifeline, analysts warn that the economy is likely to falter.
We are seeing some positive economic numbers. Data firm IHS Markit reported manufacturing and services activity rose to 54.7 from 50.3 in July, an 18-month high. A reading above 50 is a sign of expansion.
According to the National Association of Realtors, sales of existing homes soared 24.7% in July from June. This represents the strongest monthly gain in the history of the survey, going back to 1968. The median price of a home sold in July rose 8.5% annually to $304,000. Lawrence Yun, chief economist for the Realtors, said, “The new listings are running a little higher than a year ago, but all those new listings are being grabbed by buyers and taken off the market.”
According to Pew Research, with our country in the midst of a recession, nearly 80% of registered voters say the economy will be very important to them in determining their preferences. Sixty-two percent of voters say the coronavirus outbreak will influence them. Among registered voters, the Republican Party holds a 9% edge over the Democrats on the issue of being better able to handle the economy. By contrast, the Democratic Party holds wide advantages among voters on climate change, abortion, contraception, health care, and issues involving race and ethnicity.
When asked about 11 major issues facing the country today, concern about economic inequality ranks around the middle of the pack, with 44% saying this is a very big problem. Most Americans think the federal government and big business should play a role in reducing inequality. By comparison, about two-thirds say the affordability of health care (66%) and drug addiction (64%) are very big problems. Most Americans feel that the affordability of college, the federal budget deficit and climate change are big problems.
The survey also finds that more than half of all U.S. adults think the federal government has a responsibility to provide all Americans with high-quality K-12 education, adequate medical care, health insurance, adequate income in retirement and an adequate standard of living. Sixty-two percent of Americans feel that ensuring workers have the skills they need for today’s jobs would do at least a fair amount to reduce inequality.
