Economist Paul Krugman: The Fiscal “Cliff Is Totally Visible In Front Of Us”
Vox reports that inaction from Congress is putting the United States on a path toward “prolonged economic distress nationwide.”
- Vox explains that the COVID-19 pandemic put the United States economy “into disarray” earlier in 2020.
- In March, Congress passed the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, “to try to stop the bleeding.”
- This “unprecedented act of fiscal policy” provided measures such as “an extra $600 in unemployment benefits, $1,200 stimulus checks to most Americans, and billions of dollars in forgivable loans to small businesses.”
- From a fiscal perspective, Vox explains that this measure was “bigger than the New Deal.”
- Thanks to the act, poverty rates didn’t increase, and personal income went up.
- Although the stimulus bill was somewhat uneven, with some of the unemployed struggling to access benefits and some small businesses missing out on loans, “in aggregate, the social safety net worked.”
- Skanda Amarnath, director of research and analysis at the think tank Employ America, explains that “When incomes get destroyed, people still have certain kinds of liabilities and expenses to pay… This was exactly where we needed different types of fiscal policy measures to replace the lost income.”
- However, Vox explains that the CARES Act has fallen short in one crucial way: “The stimulus bill had with it an underlying assumption that the economy would improve by the summer, and that was predicated on the country getting the US outbreak under control.”
- However, instead COVID-19 has continued to thrive. Some states that enacted business reopenings—such as Arizona, California, Florida, and Texas—have rolled back those reopenings and are reinstituting restrictions on business activities in response to spikes in case spread and hospitalizations.
- Although jobs lost in May and June seemed to be coming back, that recovery is also declining.
Vox notes that COVID-19’s persistence has raised a question: “whether the government tries to prop up the economy” while it continues attempting to address the COVID-19 pandemic.
- The CARES Act unemployment aid will expire at the end of July, impacting some 33 million Americans.
- In addition to this income loss, many Americans also face evictions, loan deadlines, housing payments, and other liabilities. When struggling Americans fail to make payments such as these, the effects can ripple throughout the economy.
- More layoffs are also in the future as companies who hoped to “weather the storm,” such as United Airlines, are forced to come to terms with their inability to sustain current payrolls.
- The uncertainty surrounding public schools also leaves the child care economy in the lurch, adding further drag to the economy.
However, lawmakers’ response to this economic crisis has been slow.
- The House of Representatives has passed the HEROES Act, a bill that follows in the footsteps of the CARES Act. However, the Senate has yet to address the bill at all.
- Vox notes that President Donald J. Trump sometimes appears to “ignore the pandemic” and “point to the stock market” as a sign of recovery even though it has become “disjointed from reality.”
- Numerous Republican governors and congresspersons have followed that lead.
- Senate Majority Leader Mitch McConnel (R-KY) has also proposed a capital gains tax holiday and a legislative protection against corporate liability for death or injury due to COVID-19.
- Groundwork Collaborative’s Deputy Executive Director Angela Hanks said of the proposal, “I don’t know anyone who would be helped by any of those things, but I do know a lot of people who would be hurt by losing unemployment insurance.”
- Paul Krugman, a Nobel Prize-winning economist and a columnist for the New York Times, warned that “The cliff is totally visible in front of us, and yet we’re not ready.”
Vox calls the economic crisis a “failure of astounding magnitude”:
The US has been incapable of getting the pandemic under control, and now the government is resistant to addressing the resulting economic reality. There were so many ways to not end up here.
And Damon Jones, an economist at the University of Chicago, offered a chilling rebuke of America’s current political situation:
If this is as bad as it feels like to everyone, how is it possible that our representatives can move forward comfortably? What does it say about how well-functioning our democracy is?