America just might need another COVID rescue
Another surge of the pandemic means more economic disruption around the world
The coronavirus pandemic is back in the United States, but it is hitting seriously for the first time in many other countries — particularly countries in eastern Asia that are central to the global economy.
It means there is a decent chance that the United States economy is going to stall out or even nosedive in the coming weeks. Democrats should be ready with another rescue package to tide the American people over, in case that does happen.
Let's take stock of the U.S. first. As is now front-page news once again, the pandemic is burning across almost the whole country, and absolutely out of control across the South. In Florida and Louisiana, hospitalizations have surged past their worst point of the winter wave, and are nearly to the same point across much of the South. Mississippi's hospital system is reportedly on the verge of collapse.
All this will almost certainly put a dent in consumer spending. During the low point of the pandemic in June and July, spending on goods and services was returning to something like normal levels. People were flying, going to restaurants and hair salons, and resuming other in-person activities. Meanwhile, previous studies showed that during the pandemic surges last year, most people cut back their spending before state and local governments introduced any control measures — so even if Republican-controlled states do nothing policy-wise to stop the deluge of illness and death, a sizable portion of their populations likely still will.
It's likely then that consumer spending on in-person activities will fall back somewhat over the coming weeks. Though official government data will not be published until next month, there are some initial signs that this has already started — a recent survey conducted by a private analysis firm found that consumers are getting more anxious about entering stores, and Southwest Airlines reported Wednesday that ticket sales are slowing and customers are starting to cancel flights.
This slowdown can only be exacerbated by the tragic situation in eastern Asia. Up until a month or so ago, much of this region had evaded the pandemic almost entirely with careful control policies. Yet even the richer nations in the region have been relatively slow to vaccinate their populations. It's unclear why exactly, though certainly Europe and the United States hoarding so much vaccine did not help (particularly in the case of poorer countries without lots of spare cash), and the international vaccine distribution program is unsurprisingly a chaotic mess.
Now, the tardy vaccination campaigns and extreme contagiousness of the Delta variant seems to be seriously straining the test-trace-isolate systems in many countries with little previous exposure to the virus. Vietnam, South Korea, Taiwan, China and Australia have been scrambling to clamp down on spread to give themselves time to deliver more inoculations. New pandemic control measures, including a full-scale lockdown in Australia, are being introduced in many places.
It's entirely understandable, particularly in countries that only recently got some vaccines. If Delta gets loose in places like Vietnam and Australia that are badly behind on shots, then there will be unimaginable carnage — but if they can hold tight for just another month or so, then almost everyone will be saved, and the controls can be relaxed without too much fear.
However, that means that new supply chain headaches and bottlenecks are inevitable. Australia supplies all kinds of key raw materials (including lithium and iron ore), Taiwan has the largest semiconductor factory in the world, Vietnam makes all kinds of electronics, and China of course is the workshop of the world. It will be hard to operate factories and ships in the face of severe pandemic controls — and sure enough, snarls are already cropping up on top of the numerous prior headaches that had not yet been sorted out.
Summing up: on the one hand, there will likely be some job loss or at least a slowdown in the momentum of new job creation over the next few months — and the U.S. is still far short of full employment. On the other, the global supply system is going to hit a bumpy patch.
Now, there is a lot more the government could be doing now to curb the pandemic. If I were king of America, I would reintroduce stringent pandemic controls in the regions that are worst-hit by the virus, and set up strict vaccination requirements to put this pandemic to bed once and for all.
But at the least the government can make sure that as many Americans as possible have enough money to get by. America's pandemic response was a dismal failure in terms of controlling the virus, but its economic rescue measures were some of the best policies this country has ever passed. I would recommend the same basic structure as happened earlier in the pandemic: extending super-unemployment for another six months (and this time making it mandatory for all states), another round of survival checks (call it $600), and another dollop of small business grants. Congress might as well fix the rental assistance program while they're at it.
Democrats control all three branches of government now, and they can make this happen. It may not be necessary, but they would be fools to not start preparing now just in case.