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The economy is in shambles. Tens of millions are currently unemployed. Businesses are opening back up slowly, taking precautions that prevent many from operating at full capacity. Many consumers are still living in fear, ordering only what they need and staying home as much as possible. But that’s what the 2nd quarter looks like. The third quarter may be dramatically different, according to a former Obama administration economist, and Democrats are scrambling to mitigate the damage it would do to their hopes of unseating President Trump.
Harvard professor Jason Furman has been ringing the alarm bell since April. He believes the economic charts are going to look like a “V” with sharp declines through the coronavirus crisis followed by an historic rapid increase in economic activity in the third quarter. Late summer and early fall will be pivotal months in determining how well the country and the Trump campaign rebound from the collapse we’re experiencing right now.
According to Furman and other economists, this recovery will be nothing like past recoveries that were slow and methodical. The non-economic nature of the cause for the financial collapse means this rebound will likely be swift. Consumers and businesses alike will be eager to move forward with confidence rather than the skittish recoveries following past downturns. The cause of this current financial crisis is unambiguous, so the reversal of economy-killing policies will be met with enthusiasm.
In short, America and the world will be gung ho about moving forward once the coronavirus coast is clear. And that could spell doom for the Democrats’ chances. POLITICO published a comprehensive story detailing the concerns from a leftist perspective. They weren’t shy about declaring the nature of this scenario as it pertains to the election.
The general election scenario that Democrats are dreading
And top policy officials on the Biden campaign are preparing for a fall economic debate that might look very different than the one predicted at the start of the pandemic in March. “They are very much aware of this,” said an informal adviser.
Furman’s case begins with the premise that the 2020 pandemic-triggered economic collapse is categorically different than the Great Depression or the Great Recession, which both had slow, grinding recoveries.
Instead, he believes, the way to think about the current economic drop-off, at least in the first two phases, is more like what happens to a thriving economy during and after a natural disaster: a quick and steep decline in economic activity followed by a quick and steep rebound.
The Covid-19 recession started with a sudden shuddering of many businesses, a nationwide decline in consumption, and massive increase in unemployment. But starting around April 15, when economic reopening started to spread but the overall numbers still looked grim, Furman noticed some data that pointed to the kind of recovery that economists often see after a hurricane or industry-wide catastrophe like the Gulf of Mexico oil spill.
Consumption and hiring started to tick up “in gross terms, not in net terms,” Furman said, describing the phenomenon as a “partial rebound.” The bounce back “can be very very fast, because people go back to their original job, they get called back from furlough, you put the lights back on in your business. Given how many people were furloughed and how many businesses were closed you can get a big jump out of that. It will look like a V.”
Furman’s argument is not that different from the one made by White House economic advisers and Trump, who have predicted an explosive third quarter, and senior adviser Jared Kushner, who said in late April that “the hope is that by July the country’s really rocking again.” White House officials were thrilled to hear that some of their views have been endorsed by prominent Democrats.
Republicans shouldn’t be ordering fireworks shows in November just yet. Democrats are well aware of this potential political disaster and will do what they can to prolong the lockdowns locally for as long as it’s tenable. This is one of the reasons we’ve heard talks of “waiting for a vaccine” or fearing a “second wave.” They know that if they open up their economies and consumers react accordingly, the recovery will begin. The sooner it begins, the more likely it will be in full swing by the time election day rolls around.
It gets worse for Joe Biden, assuming he’s the Democratic nominee. He doesn’t just have to fight against Republicans pushing for the economy to rebound. Speaker of the House Nancy Pelosi will do what she can to make the economy rebound as well. It behooves her and Congressional Democrats if they make positive strides towards jumpstarting the economy before election day. They can’t risk the appearance that they’re obstructing recovery, so they’ll do what they can to take credit for the rise. But while protecting their own political futures, they could be dooming the Democratic presidential nominee’s.
Contrary to popular belief, the economy isn’t always the most important factor in elections. But considering the degree of hardship across the country, a rapid rebound may be just what the Trump campaign needs to solidify their reelection chances.
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