Pandemic Has Accelerated Economic Shifts
STREET TALK
By Mickey Howley
WVMSA Director
It is the economy. You can fill in the next word.
We are six months in a historic economic crisis. From February to April, the country’s unemployment rate shot up from under four percent to 15 percent. It has since declined to roughly 10 percent – about what it was at its peak during the recent Great Recession (2007-2009).
The current recession has been astounding in speed. Lawrence Katz, an economist at Harvard, recently said, “No national economic shock or downturn in the U.S. has ever happened as fast as this one, we had increases in unemployment in two months that took two years in the Great Depression (1929-1938).
That was the last time the unemployment rate was higher than 15 percent. At the height of the Depression, it reached 25 percent.
What carried many American households through the Depression, Katz said was “a lot of direct relief” from the government, “things like the Works Progress Administration and the Civilian Conservation Corps, where we directly used the federal government to hire people.”
The Great Depression was also when the government, by passing the Social Security Act in 1935, helped establish the unemployment-insurance safety net that the U.S. still has today. What is different now Katz said, “a huge advantage we have relative to the Great Depression is the existence of an unemployment-insurance system where we were able to get over 30 million workers quick support.”
Katz is talking about the payroll protection plan, the one-shot stimulus money check, and mainly the unemployment money boost. Those economic shots for many, kept the roof over their heads and groceries in the pantry. Needed but clearly stop gap emergency measures.
That short-term support is currently a political football that’s being fumbled around in Congress. Republicans want less money and a shorter time period, Democrats want more and longer. And it has stalled and the people in need are really in a jam. The President, to his credit (and mind you, I’m personally not a fan of the man) did an executive order with half the unemployment money from before. Helps but that won’t last, the money is for less than two months.
A far bigger picture issue is the economic life in the United State has been changing gradually and not always for the better, especially from a Main Street perspective. The richer are richer, the poor are poorer. The pandemic has accelerated that.
Here’s some of the long term economic shifts in health and education. Places where Americans spent a greater percentage of their money than they did years ago. Those who can spend it, those who don’t have it do without.
We have a uniquely expensive and inefficient medical system in the United States. Treatments, procedures, and drugs all cost significantly more than in other countries, without better outcomes. The premiums, for those who have health coverage, certainly lift the incomes of companies and people in the health care sector, but they come at the expense of other Americans. That has not been getting better, the pandemic has made it worse.
Research has consistently shown that the benefits of a completed college education in terms of income, health, and happiness are large. That is for those who graduate rather than those who merely earn some credits. One reason for the growing inequality in college graduation has been sharp cuts in states’ spending on higher education. These cuts have left colleges with fewer resources and led to big tuition increases. The cost of higher education and corresponding student debt has been skyrocketing. A smarter society benefits us all you would think. Maybe not, though.
How long will this health and economic crisis last is anyone’s guess. The medical people, and they have been essentially right so far, say another year or more. The economic people say it depends on the medical situation. And after that the economic effect will last longer, as in past recessions or depressions. In that respect, this pandemic driven recession is not special.
