Fantastic unemployment, a sheer drop in sales and production, a sharp decline in GDP and the state budget. All this is happening right now in the United States as a result of restrictive measures to combat the coronavirus pandemic. What is the depth of the American economic catastrophe and why does the very structure of the US economy prevent it from recovering?
Among the American elite and many ordinary Americans, there is a real panic вЂ” their country was in the abyss of the most serious crisis since the Great Depression (the media are already drawing analogies with that time and publishing photos of the 30s вЂ” with huge queues, homeless and hungry people). And вЂ” worst of all вЂ” no one has a universal recipe for overcoming this crisis. After all, it, in fact, is an вЂњideal stormвЂќ, that is, it contains several intertwining crises that form together with a murderous mixture. This is the coronavirus epidemic, and the economic consequences of the epidemic (partly related to the specific structure of the American economy), as well as political strife in the corridors of power, which interferes with at least a little withdrawal of the United States from this storm.
The trigger, of course, was the coronavirus epidemic. The United States вЂ” the main victim of this disease today in terms of the number of infected (755 thousand, almost a third of the global) and deaths (40 thousand, a quarter of the global number of victims) вЂ” and their separation from their pursuers is only increasing.
And despite the fact that almost 90% of Americans are in some degree of isolation, the epidemic in the United States has not yet reached a plateau, its end is not even visible on the horizon. However, American journalists, politicians, and experts are still trying to look beyond this horizon. And itвЂ™s not only and not so much about forecasts regarding the victims of the epidemic вЂ” no one can accurately predict them. We can talk about 68 thousand potential victims, some say 2.2 million by September вЂ” however, the virus is unpredictable, so all forecasts for the virus will be inaccurate.
Moreover, there is not enough money to identify those who are ill. Now in the United States conduct approximately 120 thousand tests per day. According to experts from the Rockefeller Foundation, in order to safely open the economy and minimize the risk of a new wave, it is necessary to conduct 20 times more tests. To date вЂ” and tomorrow, the United States will not have such technical capabilities.
Therefore, observers and analysts are now trying to understand how America will live after the epidemic. And the vast majority of experts agreed вЂ” it will live either badly or very badly.
вЂњWe have built an economy in the country without shock absorbers. A system that seemed to be geared toward maximizing profit вЂ” but at the same time it turned out to be unstable and exposed to risks, вЂќ writes Joseph Stiglitz, Nobel Laureate in Economics. вЂ” People balance like on a rope, without a safety net under them. And situations like today actually drop them down. вЂќ
One of the key problems will be unemployment. Without work, an American is nobody. He has no money to pay for a mortgage (which the majority of the population is burdened with, and late payments on which banks do not forgive). He does not have money or a working social package to pay for medical insurance, without which going to hospitals or even calling an ambulance can turn into thousands of bills (it is not surprising that recently, almost half of personal bankruptcies were related to the inability to pay medical bills). Finally, he has no corny savings to survive his bad years вЂ” 40 percent of adult Americans cannot afford unplanned expenses of $400.
Until recently, it seemed that Trump defeated unemployment. In February, its level was minimal for 50 years вЂ” 3.5%. However, already in March-April the pendulum did not just swing but flew off in the other direction. So, from March 29 to April 4, the US authorities registered almost 6.6 million preliminary applications for unemployment benefits вЂ” almost 10 times more than the record weekly вЂњpre-epidemiologicalвЂќ indicator recorded in 1982.
In total, since Trump declared the state of emergency (that is, since mid-March), almost 20 million people have filled out such statements.
According to some reports, the unemployment rate in the US is now 12-13%, according to others вЂ” all 20%. In some states вЂ” for example, Hawaii-based tourists вЂ” for the past month alone, 22% of all working residents have written an application for unemployment benefits. In industrial Michigan вЂ” 21%, in Pennsylvania вЂ” 20%.
Yes, preliminary statements are written by people, mostly only expecting job loss, but in America as a whole, they predict the loss of 14 to 28 million jobs, that is, up to a little less than 20% of the total working-age population. For comparison: in 1933, during the Great Depression, the unemployment rate was 25%.
In addition to casualties, there are economic losses. The result of mass layoffs has already been a sharp drop in consumer demand. Even without losing their job, people are already starting to save on everything (even to the extent that the lines for distributing free food have sharply increased in the streets, and in Louisiana they have no time to process all requests for food assistance вЂ” almost from mid-March to April 7 87 thousand, and the authorities need at least 30 working days to process them). Forced savings are added to voluntary вЂ” because of measures of social isolation.
As a result, in March, retailers' sales fell by 8.7% compared with February вЂ” and this taking into account the fact that the emergency regime was in effect only in the second half of the month. If we take it by industry, then clothing purchases fell by 50%, furniture вЂ” by 27%, cars and spare parts for them вЂ” by 26%. The income of restaurants and bars was reduced by the same amount. Moreover, we are only talking about the average temperature in the hospital вЂ” for some representatives of the hotel and restaurant business, income fell almost 100 times. And this is not the limit вЂ” economists J.P. Morgan expects even more recession in May.
The fall in consumer activity leads, first, to financial problems for local authorities. The budgets of cities and states are becoming scarce вЂ” after all, 70% of tax revenues to state budgets are just income tax and sales taxes. Secondly, a small and medium-sized business is collapsing, which has little accumulated вЂњfatвЂќ and for which money has already run out in funds created specifically to support American businessmen in an emergency.
Many of them are on the verge of ruin. According to one survey, only 2/3 of small business owners are confident that they will survive the monthly crisis. And only a third will pull four-month. What can we say about long periods вЂ” after all, Patrick Harker, President of the Federal Bank of Philadelphia, predicts at least a six-month crisis? His colleague from New York, John Williams, is even more skeptical вЂ” he is confident that the economy will not recover by the end of the year.
Worse, when the crisis does not end, citizens are unlikely to immediately run to spend money after the end of all restrictive measures. Surveys show that after lifting restrictions, only 20% of Americans are ready to instantly return to their previous level of socio-economic activity. The rest will be victims of psychological fear (as after any crisis) вЂ” they will wait for the end of the global epidemic and grow fat. So, the economic crisis will continue. According to some estimates, the decline in US GDP in the second quarter of 2020 can be up to 40%. At the end of the year, the IMF is confident that the US economy will shrink by 6%.
вЂњWho is to blameвЂќ or вЂњwhat to do?вЂќ
A number of experts are sure that in this situation of economic and psychological instability, America and its GDP can be saved only by large-scale mobilization of the population, tax cuts and other вЂњinvestmentsвЂќ in increasing consumer demand вЂ” an analog of those that were made after the Second World War. And the White House needs to be given its due вЂ” Trump is doing everything possible to save and open the economy as quickly as possible (according to preliminary data, every day a downtime costs the country $25 billion of an unproduced product). Develops plans, builds governors, takes care of business. However, he cannot defeat the fear and insecurity of ordinary Americans, so former US Treasury Secretary Larry Summers is right: вЂњIt doesnвЂ™t matter how much money is allocated from the Federal Reserve, it doesnвЂ™t matter what budget deficit we go to вЂ” we wonвЂ™t be able to solve this problem before defeating the coronavirus.вЂќ
And victory is still far away. The US government resembles a swan, cancer, and pike вЂ” instead of consolidating and developing a single strategy, the fight against coronavirus has become an instrument of domestic political struggle.
While Trump is fighting for the economy, his rival in the November elections, Joe Biden, publishes a video message from the Central Administration of the series вЂњI order to defeat the disease and save the economyвЂќ, the Democrats clashed with the Republicans, the governors were peddling and ignoring the instructions of the White House.
And now the most important thing is that the US government does not itself begin to radiate fear and uncertainty about the future. After all, fear always breeds aggression вЂ” and in this case, it will be addressed not only to American citizens but also to the whole world. Donald Trump has the presidential election on his nose - the election that he was supposed to win in the wake of the economic achievements of his first cadence. And now, when the United States approaches the elections with a ruined economy, split by the public and tens of millions of unemployed, the president can try to win them by mobilizing around external enemies.
Already there are alarming signs that Washington is trying to shift the blame for intra-American problems because of the coronavirus to China and WHO (the first is mercilessly criticized, the second is losing American funding). Some media outlets, which seem to be very respectable, take out old manuals and write that Vladimir Putin is to blame for the collapse of the American health care system. Washington must understand that such accusations will not save the American economy, or American citizens, or American reason, finally.