American optimism is becoming a problem
America is a nation addicted to optimism.
We look forward to the future and assume it will be better than today. And we always have. That conviction brought the first settlers to our shores and then the successive waves of immigrants that followed, most of them convinced that they could make a better life for themselves. Faith in the future has fueled our incredible economic dynamism and technological advancements down through the centuries. It even inspires our reactionaries, who assure their devoted followers that recent signs of decline can be reversed and America made great once again.
But what if this national trait no longer suits the reality of the world we now inhabit?
That question has haunted me these past two months, as the coronavirus has shut down the world and killed tens of thousands of Americans (with no end in sight). I've never been a cheerleader for America's inveterate optimism. Yes, it's inspired many of our most impressive achievements. But it also tends to blind us to the ineradicably tragic dimensions of life — the unavoidable trade-offs among competing goods that place hard limits on human striving — and sometimes it even lures us into making terrible (and terribly obvious) mistakes. Whatever else it was, the 2003 invasion of Iraq was an expression of thick-headed American optimism about our capacity to bring liberal democracy to an entire region of the world at the point of a gun.
But the Iraq debacle was merely one (albeit very large) event in a broader world that still seemed to bend to our will most of the time, especially in economic matters. Ever-expanding markets, new opportunities for growth, wealth creation beyond the wildest dreams of human beings prior to the postwar world — the possibilities have seemed endless, the horizons boundless. Sure, there have been bumps in the road, like the financial crisis of 2008. But we got past that, too. The market tanked and trillions were lost. But 10 years later, it had bounced back, with trillions more created.
And that's how it always works out, isn't it? There are glitches and speculative bubbles. Economies contract. Money vanishes, sometimes a lot of it. Yet the longer-term trend always moves in the other direction. Markets go up, jobs get created, growth surges ahead. That's the American reality, seemingly as reliable as the sunrise. We not only expect it. We feel it's bound to happen. Whether or not it's true, our faith leads us to act as if it were, which more often than not helps to ensure that it does. We're a high risk, high reward society. And it's worked well for us for a long time.
But will it still?
I have begun to worry that our irrepressible optimism is serving us poorly through the pandemic.
Consider the stock market. It started falling in mid-February and then fell off a cliff in March, as the magnitude of the pandemic and its economic effects sent traders into a panic. The Dow lost roughly 37 percent of its value in the month or so between February 19 and March 23. But in the month since then, it's come a good part of the way back. The Dow is now just 20 percent off its pre-pandemic highs. The market is volatile. It swings wildly. Bad news, like last week's soon-to-expire oil futures sinking into negative territory, can still spark big drops. But they don't last. The market shrugs it off and fastens onto any word of good news, any sign that we've turned a corner.
The same incorrigible optimism could be seen at work in economic projections issued by the Congressional Budget Office late last week. Most news reports treated these projections as gloomy, both because they forecast greater short-term economic weakness than many private-sector predictions, and because the CBO anticipates that nationwide unemployment will rise to 16 percent in the third quarter of 2020 and remain as high as 9.5 percent through the end of 2021. Yet the report also assumes that we can expect a quick v-shaped recovery in which the economy will sharply contract only in the current quarter and begin growing again in the third.
Will it happen? Philip Swagel, the director of the CBO, notes the "enormous uncertainty" facing the country and the world because of the pandemic. Yet making projections requires making assumptions, and the CBO assumes that all of this epidemiological unpleasantness will be behind us in a few short months. It will take quite a while to bounce back, but bounce back we will.
Unfortunately, we have ample reason to think this optimistic assumption — like the one driving intermittent rallies in the stock market — is wrong.
For one thing, COVID-19 models that would have permitted a return to business as usual in June have already been proven wrong. They predicted that the U.S. would hit a peak of new infections and daily fatalities on or around April 15, with a steep decline immediately following. Yet here we are in the last week of April, stuck at a plateau of around 30,000 new confirmed cases and 2,000 deaths nearly every day. (The numbers dip on weekends, because of reporting lags, but they bounce back soon after.) Some states, like hardest hit New York, have clearly begun to improve. But others are still very much in the thick of the pandemic — with still others loosening public-health measures while large numbers of people are still sick and dying. That could easily delay further a decline in rates of infection and death. In a word, we can't even begin to anticipate how far we are from emerging from the mess.
And what even is the mess we're in? We're still in the early stages of figuring that out. Preliminary studies appear to be pointing toward a fatality rate for COVID-19 that is about 5 times higher than the flu. But there are also indications that some of those who appeared to have relatively mild cases of the disease have developed a problem with blood clotting that leaves them vulnerable to strokes and other serious medical problems. Doctors have also found damage in some patients to the kidneys, the heart, the nervous system, and intestines.
At the very least, COVID-19 would appear to be a respiratory illness with a distressing series of possible complications in other systems of the body. With prospects for a vaccine uncertain and (at best) many months away, herd immunity a long way off, and the possibility of a second wave of infection looming next fall or winter, a very dangerous pathogen is going to be circulating for a long time to come.
Even if those clamoring for an end to the lockdown get their way over the next month or so, businesses will be opening their doors to a world filled with understandably frightened people. How much economic activity are we likely to see in July 2020 in comparison to the previous July? How many people will be planning vacations? Or shopping for clothes? Or going out to restaurants and bars? Or attending sporting events or concerts? How many people will be making big-ticket purchases for cars or homes when there's so much epidemiological and economic uncertainty about the future? Add in the 26 million people (so far) who have lost their jobs and therefore their capacity to spend and we're left with an incredibly bleak view of the near-term economic future.
Beyond that lies a fall when universities, their students, and the parents of those students will have to make a series of wrenching decisions. Should colleges open and run the risk of widespread outbreaks on campus? Or should they instead continue with the online instruction they attempted this spring? This would force students and parents to decide if virtual learning is worth the exorbitant cost of tuition. Unless, of course, schools that can afford to do so cut the price, which could well drive many smaller, more vulnerable schools out of business, decimating the commercial activity that helps to make college towns such desirable places to live and work.
Pick your industry and follow the carnage. And note that very little of it is a function of government-mandated restrictions. People stopped going to restaurants before shelter-in-place orders really kicked in. They aren't going to return en masse to those and other businesses just because state governments and slick advertisements encourage it. Yes, an economy in which shopping is possible will be marginally better than the locked down one we have now. But it will be crippled in comparison to a baseline of three months ago.
That's the way our future looks without the comforts and consolations of optimism. If I'm wrong and the virus fades quickly over the coming weeks, allowing the economy to bounce back strongly over the summer and next fall, maybe the comparative cheer of the CBO report will be warranted. In that case, I will be thrilled to admit my mistake and vow to keep better faith with my more optimistic countrymen going forward.
But if I'm right, it's America's deeply engrained optimism that is going to be tested, and tested severely, over the coming months and years.
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