By "this," I don't mean the Covid-19 outbreak itself, though by cutting CDC pandemic funding 80%, ending epidemic prevention aid to 37 of 47 countries, or by appointing perhaps the worst possible administration official to lead the response effort, he has almost certainly increased the risk of infection to every person in the world.
No, I mean that we're dangerously unprepared for the recession the virus outbreak appears to be encouraging.
Economists have had a hunch we'd eventually get the stock-market correction we got this week, because we had ample evidence that stock values were not in line with fundamentals. However, the S&P 500 losing 10% in one week, wiping out more than a year of gains, has been the fastest correction in history, according to Bloomberg News. And at this writing the indices are still falling.
But the Republican Party passed massive tax cuts two years running, which has resulted in Federal budget deficits exceeding $1 trillion. Now many people are about to find out why a massive deficit in a strong economy reduces our options when the economy slows down.
In a strong economy, people feel wealthy, so they spend more money. We all know that. But people also have a higher tolerance for taxes when they feel rich. In individual states in the US that have constitutional balanced-budget requirements, boom times allow them to save money. In the US writ large, which has no such restrictions, boom times allow us to make investments in infrastructure, education, social programs, and all manner of things we have as a country failed to invest in for years.
Not so coincidentally, the years in which we've failed to invest are the same as the years the Republican Party has preached lower taxes, cutting social benefits, and getting the government so small "you can drown it in the bathtub." The goal is to consolidate wealth in a small minority that can then exert disproportionate control over an ever-more-impoverished majority. As I've said for 30 years, the Republican Party doesn't want to govern; they want to rule. And it's easier to rule peasants than burghers.
The last two years under Trump have made previous Republican wealth grabs look gentle. And they almost got away with it, too. They've kept the economy going just strongly enough, preventing the inevitable slowdown after 10 years of Obama-led growth, to make people feel good about the next election. If only they could have made it to November. Four more years of Trump would, they hoped and planned, allow them to lock in Republican policies for 40 more years.
Walking from the train this morning, I realized the Trump administration has acted like a cocaine addict regarding the economy. They forced lower taxes through Congress (or blocked raising them) since the last years of Obama, then came out of the bathroom with powder on their noses crowing about how low taxes have helped the economy.
At the first signs of a slowdown in 2018 and 2019, they did a couple more bumps to make it last longer, just a little longer. But the crash is upon us, and like a cokehead, it's going to be much worse because it's been too good too long.
So here we are. We've lost hundreds of billions in paper wealth this week, we've got the Spanish Flu exploding all over the world, people are scared, and the front-runners in both parties represent the extremes. A really good recession right now will go a long way to helping the kids understand, on a personal and visceral level, why we don't want extremists in power.
And because of our massive deficits, it will be hard to summon the political will to continue those deficits and start necessary spending efforts to keep people employed and the economy from screeching to a halt. The only arrows we have left in our quiver include printing more money or raising taxes in a recession, both of which will increase inflation, wipe out more paper wealth (but of debt holders, not of debtors, which is the point), and possibly make the retirements of Boomers more uncomfortable than their grandparents had it in the Depression. (Oh, and we Xers will get screwed regardless, but that's been the case our whole lives.)
You think we're smarter than Europe in the 1930s? We're about to really find out.