At least some economists think we’re in for a V-shaped recession. And naturally, Democrats are furious:
In early April, Jason Furman, a top economist in the Obama administration and now a professor at Harvard, was speaking via Zoom to a large bipartisan group of top officials from both parties. The economy had just been shut down, unemployment was spiking, and some policymakers were predicting an era worse than the Great Depression. The economic carnage seemed likely to doom President Donald Trump’s chances at reelection.
Furman, tapped to give the opening presentation, looked into his screen of poorly lit boxes of frightened wonks and made a startling claim.
“We are about to see the best economic data we’ve seen in the history of this country,” he said.
The former cabinet secretaries and Federal Reserve chairs in the Zoom boxes were confused, though some of the Republicans may have been newly relieved and some of the Democrats suddenly concerned.
“Everyone looked puzzled and thought I had misspoken,” Furman said in an interview. Instead of forecasting a prolonged depression-level economic catastrophe, Furman laid out a detailed case for why the months preceding the November election could offer Trump the chance to brag — truthfully — about the most explosive monthly employment numbers and GDP growth ever.
Since the Zoom call, Furman has been making the same case to anyone who will listen, especially the close-knit network of Democratic wonks who have traversed the Clinton and Obama administrations together, including top members of the Biden campaign.
Snip.
The Covid-19 recession started with a sudden shuttering 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.
“I totally agree,” Larry Kudlow, the head of the White House National Economic Council, replied in a text message when asked about Furman’s analysis. “Q3 may be the single best GDP quarter since regular data. 2nd half super big growth, transitioning to 4% or more in 2021.” He called Furman, who he said he knows well, “usually a straight shooter. Hats off to him.”
“I have been saying that on TV as well,” said Kevin Hassett, a top Trump economic adviser, who pointed to a Congressional Budget Office analysis predicting a 21.5 percent annualized growth rate in the third quarter. “If CBO is correct we will see the strongest quarter in history after the weakest in Q2.”
As a general rule, it’s best not to punch yourself in the nads, but if you do, it’s far better to get up, shake it off and keep walking than it is to lie weeping on the sidewalk. The American economy was going gangbusters before The Great Wuhan Recession, and if Democratic governor’s don’t try to keep obviously futile lockdowns in place in order to tank the economy, there’s no reason* it can’t start to do better again in the summer and fall.
That, of course, is precisely what Democrats fear.
The former Obama White House official said, “Even today when we are at over 20 million unemployed Trump gets high marks on the economy, so I can’t imagine what it looks like when things go in the other direction. I don’t think this is a challenge for the Biden campaign. This is the challenge for the Biden campaign. If they can’t figure this out they should all just go home.”
As Byron York noted, Democrats fear nothing so much as economic growth.
*OK, there is one reason: A crushing debt load that neither political party seems willing to address. On the other hand, we’ve been fearing the effects of excessive government debt for quite some time now. The Gods of the Copybook Heading can’t be put off forever, but with Treasury 30 year yields under 1.5%, there’s no sign that our government’s bipartisan spending spree has (yet) dulled the world’s appetite for American debt.