We are witnessing the biggest governance failure in modern US history. This nightmare does not need to be happening. The US economy shrank by a tenth in the second quarter — almost a third if you annualise the numbers. Unemployment is now trending back up. Yet as its first pandemic relief package expires today, Congress is nowhere near to reaching a deal to keep people’s heads above water.
Had America taken steps to flatten the viral curve, the economy could now be slowly getting back on its feet. Schools would be preparing to reopen next month and large employers would be readying for at least a modest return to office routines. That opportunity has been thrown away. Google caught the headlines this week by saying its employees will stay at home until summer 2021. It was no different to the conclusions being drawn by hundreds of thousands of small businesses, college campuses, retail outlets and service centres across the US.
America is not winning the war on the pandemic. It barely even seems to be fighting it. There seems to be very little prospect it can turn the corner before early 2021.
I don’t give investment advice. But it’s fair to conclude that the Federal Reserve is doing everything it can for the US economy. This week chairman Jay Powell stated the obvious, which was that the Fed’s stance would be dependent on the path of the virus. That was good news for Treasury bonds since there is no end in sight to Covid-19, which means the US central bank will keep the spigots on for the foreseeable future. It may be the only well-functioning institution around.
But we should not take too much heart from the fact that many sectors of the US economy are relying solely on the Fed to prevent catastrophe. Alas, Mr Powell is not in charge of fiscal policy (or public health guidelines, for that matter). In the absence of serious national leadership, what should we expect in the coming months?
More of the same, or worse unfortunately. In the past few days, the US mortality rate has crept back up to well above a thousand a day, or roughly one a minute. That’s about double where it was in late May before the virus had fully spread to the south. And it is about half the level it was at in late April when New York and New Jersey were at their peaks. There are some signs the crisis is abating in Florida and Texas. But the disease is now springing up in other parts of the south and the Midwest. It continues to wreak a vengeful resurgence on California.
There is no possibility of an effective vaccine being ready for mass distribution before the end of the year. It would be ambitious to expect that in the first half of 2021. Which means that at best America faces another nine months to a year of what it has been undergoing since March.
As I have written before, Covid-19 is beguilingly simple compared to other global challenges. We just need a good vaccine. In the meantime, we must rely on the quality of our governance systems to keep the economy afloat and our children at least semi-educated. I see little prospect of that for the remainder of 2020.
Rana, I know you’re going on vacation soon and are in the mood to take a respite from gloom. Before then, however, do you have any rays of economic — or epidemiological — sunshine?
In my latest column I expand on a recent Swamp Note to look at the troubling rise of anti-vaxxer sentiment in the US and elsewhere. “The lives of America's silent majority are threatened both by the pandemic and by an infodemic,” I write. “It is a bizarre feature of our times that the first looks easier to solve than the second.”
For an example of how a US president should sound, I’d recommend Barack Obama’s eulogy to John Lewis, the late Congressman from Georgia, on Thursday — “at the Ebenezer Baptist Church in the pulpit of its greatest pastor, Dr Martin Luther King Jr, to pay my respects to perhaps his finest disciple”. Obama’s address includes a useful checklist of voting rights that have been undone in the past few years. Then read Lewis’ posthumous op-ed in The New York Times. It is understated and moving.
Finally, for an alternative view, read Dan Senor’s piece on why Trump should not be counted out just yet. I don’t agree with his prognosis. But his advice to Trump is noteworthy — lead the fight against Covid and pin “cancel culture” on Biden.
Rana Foroohar responds
Ed, I have no good news to offer at a national level, but let me echo what you’ve said — governance matters, and at the local level, we’ve seen some pretty good examples of how that can work. I live in New York, where despite being in a stage 4 reopening, cases are not surging again, because we have a governor who has gotten people to do the simple stuff like wear masks. This has become a sign of community togetherness, and respect — also things lacking at a national level.
I’m very glad I’m a New Yorker, because my husband and I are hoping to visit his children in Massachusetts, where they are also taking things seriously — state troopers there are checking to make sure that people who come in from high risk states (New York isn’t one) quarantine for 14 days, with a $500 a day fine for violations. Meanwhile, my daughter’s college, University of Chicago, is doing the same for kids that come from the hot zones, as are many other institutions in responsible states.
Bottom line — if you are lucky enough to live in a state with better governance, you literally have more freedom of movement. That’s about as much optimism as we can hope for at the moment.
And now a word from our Swampians . . .
In response to ‘Big Tech, neoliberalism and what comes next’:
“The key takeaway from the Micklethwait-Wooldridge book synopsis is there is analytical gold to be had by studying the differences between high-performing democracies and low-performing democracies. This topic has much more potential than studying democracy versus autocracy.” — Paul A Myers, Corona del Mar, California
“In regard to the worry over the Big Five tech companies and their ‘monopoly’ status it is critical to remember that all of these companies were once small businesses founded by entrepreneurs with an idea. Second, to what degree, if any, was there ‘corporatism’ involved with their rapid growth toward their current size? In other words, was this growth all driven by the talent of the companies’ leaders and the market or did the government provide special regulations (at the companies’ requests) in order to protect them from competition? . . . What message does a break-up send to other entrepreneurs or potential entrepreneurs?” — Henry D Wolfe, Chicago, Illinois
Get alerts on Coronavirus pandemic when a new story is published