The coronavirus surge means an economic stall is inevitable
Congress is going to need to have another big rescue debate
The ending of coronavirus lockdowns is plainly not working. Already we are seeing accelerating outbreaks in multiple states, particularly Arizona and Florida. One woman in Jacksonville Beach told local news that a single visit to a bar infected her and 15 of her friends. The mayor of Miami is reportedly pausing the city's reopening procedure for fear of worsening conditions.
There is a high probability in the coming months, then, that the economy is going to stall out well short of recovery, and markets will tank as a result. Democrats should be ready to exploit this possibility with a big bailout bill that both extends the best parts of existing relief measures indefinitely, and adds additional rescues, especially for state and local governments.
We have recently learned yet again that this virus is extremely difficult to contain. Aside from the ongoing disaster in the U.S., China has been forced to put containment measures back in place in Beijing due to a fresh outbreak there. New Zealand saw its first cases in weeks thanks to travelers from Britain. Even island countries with effective test-trace-isolate systems who manage to completely eradicate the virus within their borders are going to have to be on their toes until a vaccine is developed.
But the United States is not an island nation, and has no such test-trace-isolate system on the national level. Indeed, even modest, virtually cost-free containment strategies like mask-wearing have run afoul of the conservative grievance industrial complex, and the general apathy of the population. Reporters across the country find big crowds going to bars and restaurants with little protection. The Montgomery, Alabama city council recently voted down a mandatory mask measure even after multiple doctors testified that their ICUs were in danger of being overrun.
Now, there is a slight bit of good news that, while new cases are increasing in many states, so far the death rates have not. This appears to be because new cases are hitting younger people who are more able to fight off the disease. However, we are also learning that this virus can be nasty even for younger people. A high proportion of people hospitalized from COVID-19 end up with serious damage to one or more organs, particularly the lungs, which can end up permanently scarred. One study from China found that the vast majority of people with asymptomatic cases showed at least some lung damage in scans. Strokes and heart attacks are also common complications, due to what the virus does to the blood. A need for long-term care or rehabilitation is common, and a small fraction of patients end up permanently disabled.
Furthermore, the most important economic rescue program — the enormous boost to unemployment insurance — will expire at the end of July.
Therefore, on our current track I see no way around one of two possibilities. Either people will look around them and refrain from fully going back to their normal activities, and the economy will stall out. Or they actually will resume normal activities, which will sooner or later spark galloping outbreaks in most states, leading many more people to self-isolate, and the economy will stall out. Even Americans' bulletproof individualism will not keep people going to bars and restaurants if tens of thousands of people are dying and hundreds of thousands are becoming severely ill. To quote the Florida woman mentioned above: "I think we were careless and we went out into a public place when we should not have."
So far Republicans have seized on every piece of even slight economic good news to declare that the economy is in perfect shape, coronavirus is over, and no more rescue is needed. "We did it," Vice President Mike Pence triumphantly declared in Iowa on Tuesday. But if more rescues are not passed, and especially if super-unemployment expires, then the economy will stall sooner or later. That will be reflected in economic data like the monthly jobs reports, and probably cause the stock market — which shows every sign of being at wildly unsustainable values — to tank.
If that does happen, Democrats must be ready. A stock market collapse is the only thing that causes Republicans to freak out about the economy, because it harms the rich. They will demand another big bailout, which will give Democrats leverage since they control the House of Representatives. There are many things they should do, but two policies are critical: preserving super-unemployment, which is keeping tens of millions of people from starving, and aid to states and local governments, which are currently slashing their budgets and laying off people by the millions because their tax revenues are in the toilet. Both of these should also be put on autopilot — continuing until full employment is reached, not expiring at some arbitrary future date.
I have very little hope Democrats will actually do anything like this. So far Speaker of the House Nancy Pelosi has consistently given away her leverage and allowed Senate Republicans and the Trump administration to take the initiative. This has happened so many times it almost has to be deliberate. But perhaps with primary challengers knocking on the door of her top House allies, she might feel the need to demonstrate her progressive bona fides and actually legislate on behalf of the American people for once. If so, her path is clear.
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