Signs hang from the Meridian Heights apartment building in Northwest Washington on Monday, May 18, 2020. (Photo: Caroline Brehman/CQ-Roll Call, Inc/Getty Images)
Economists Warn 'Prolonged Depression Guaranteed' If GOP Refuse Federal Aid to State and Local Governments
"The economy is currently approaching a knife edge in how recovery will proceed."
The ramifications of the coronavirus pandemic on the U.S. economy will be devastating enough to send the country into a certain and "prolonged depression," economist Josh Bivens warned Tuesday, unless federal aid is delivered to state and local governments.
"State and local governments are currently forecast to be facing revenue shortfalls as large as $1 trillion over the coming years," Bivens wrote at the Economic Policy Institute blog. "If no help is forthcoming from the federal government to close these shortfalls, the result will be an economic disaster--one that is not confined to these governments."
In his analysis, Bivens looked at data from the Great Recession from the 2010s and the austerity policies from that time which, he explained, slowed that recovery.
"We need to learn from our past," tweeted economist Elise Gould. "Austerity was a huge drag on the recovery from the Great Recession. Let's not make the same mistake."
As Bivens explained:
The spending austerity in the 2010s was the entire reason why it took a full decade to return to pre-crisis unemployment rates following the onset of the Great Recession. It is why millions of Americans struggled--through no fault of their own--to find work and it is a key reason why wages for tens of millions of Americans barely kept pace with price inflation over this time, as labor markets remained too soft to give workers the bargaining power they needed to demand better-paying jobs.
The austerity "clearly delayed economic recovery for U.S. workers by years," said Bivens.
With similar cuts this time, a "prolonged depression is guaranteed," Bivens warned.
"The economy is currently approaching a knife edge in how recovery will proceed," wrote Bivens. "If the virus relents and effective public health measures are undertaken that allow a phased reopening of business, and if the federal government provides sufficient measures for relief and recovery during this crisis, then recovery could be rapid."
"But this confidence and demand will be savaged if policymakers allow state and local governments' spending to be hamstrung by the crisis," he continued. "These sub-national governments spend about $4 trillion every year in the economy, making them the second-largest source of spending outside of the federal government."
"If they are forced into crash-cutting," Bivens concluded, "the entire economy will suffer."
Bivens warning comes as Republicans in Washington show no sense of urgency in ramping up a federal rescue effort to state and local governments.
As the Washington Post's Jeff Stein reported Tuesday, some White House officials are so confident in the possibility of an economic recovery they have broken off talks with Congress on more relief aid. President Donald Trump and his advisors believe that the economy will roar back to life in the next few weeks, a view that "clashes with the dire predictions of many mainstream economists, as well as Federal Reserve Chair Jerome H. Powell."
Claudia Sahm, who served on former President Barack Obama's Council of Economic Advisers as an economist, told the Post that urgent legislative action from the federal government was essential to stave off the worst effects of the ongoing coronavirus outbreak economic crisis.
"Complacency among policymakers is what made the 'Great Depression' a depression," said Sahm. "If they do not do more, if they 'wait and see,' they will do exactly what happened in the 1930s."
Urgent. It's never been this bad.
Dear Common Dreams reader, It’s been nearly 30 years since I co-founded Common Dreams with my late wife, Lina Newhouser. We had the radical notion that journalism should serve the public good, not corporate profits. It was clear to us from the outset what it would take to build such a project. No paid advertisements. No corporate sponsors. No millionaire publisher telling us what to think or do. Many people said we wouldn't last a year, but we proved those doubters wrong. Together with a tremendous team of journalists and dedicated staff, we built an independent media outlet free from the constraints of profits and corporate control. Our mission from the outset was simple. To inform. To inspire. To ignite change for the common good. Building Common Dreams was not easy. Our survival was never guaranteed. When you take on the most powerful forces—Wall Street greed, fossil fuel industry destruction, Big Tech lobbyists, and uber-rich oligarchs who have spent billions upon billions rigging the economy and democracy in their favor—the only bulwark you have is supporters who believe in your work. But here’s the urgent message from me today. It’s never been this bad out there. And it’s never been this hard to keep us going. At the very moment Common Dreams is most needed and doing some of its best and most important work, the threats we face are intensifying. Right now, with just three days to go in our Spring Campaign, we're falling short of our make-or-break goal. When everyone does the little they can afford, we are strong. But if that support retreats or dries up, so do we. Can you make a gift right now to make sure Common Dreams not only survives but thrives? There is no backup plan or rainy day fund. There is only you. —Craig Brown, Co-founder |
The ramifications of the coronavirus pandemic on the U.S. economy will be devastating enough to send the country into a certain and "prolonged depression," economist Josh Bivens warned Tuesday, unless federal aid is delivered to state and local governments.
"State and local governments are currently forecast to be facing revenue shortfalls as large as $1 trillion over the coming years," Bivens wrote at the Economic Policy Institute blog. "If no help is forthcoming from the federal government to close these shortfalls, the result will be an economic disaster--one that is not confined to these governments."
In his analysis, Bivens looked at data from the Great Recession from the 2010s and the austerity policies from that time which, he explained, slowed that recovery.
"We need to learn from our past," tweeted economist Elise Gould. "Austerity was a huge drag on the recovery from the Great Recession. Let's not make the same mistake."
As Bivens explained:
The spending austerity in the 2010s was the entire reason why it took a full decade to return to pre-crisis unemployment rates following the onset of the Great Recession. It is why millions of Americans struggled--through no fault of their own--to find work and it is a key reason why wages for tens of millions of Americans barely kept pace with price inflation over this time, as labor markets remained too soft to give workers the bargaining power they needed to demand better-paying jobs.
The austerity "clearly delayed economic recovery for U.S. workers by years," said Bivens.
With similar cuts this time, a "prolonged depression is guaranteed," Bivens warned.
"The economy is currently approaching a knife edge in how recovery will proceed," wrote Bivens. "If the virus relents and effective public health measures are undertaken that allow a phased reopening of business, and if the federal government provides sufficient measures for relief and recovery during this crisis, then recovery could be rapid."
"But this confidence and demand will be savaged if policymakers allow state and local governments' spending to be hamstrung by the crisis," he continued. "These sub-national governments spend about $4 trillion every year in the economy, making them the second-largest source of spending outside of the federal government."
"If they are forced into crash-cutting," Bivens concluded, "the entire economy will suffer."
Bivens warning comes as Republicans in Washington show no sense of urgency in ramping up a federal rescue effort to state and local governments.
As the Washington Post's Jeff Stein reported Tuesday, some White House officials are so confident in the possibility of an economic recovery they have broken off talks with Congress on more relief aid. President Donald Trump and his advisors believe that the economy will roar back to life in the next few weeks, a view that "clashes with the dire predictions of many mainstream economists, as well as Federal Reserve Chair Jerome H. Powell."
Claudia Sahm, who served on former President Barack Obama's Council of Economic Advisers as an economist, told the Post that urgent legislative action from the federal government was essential to stave off the worst effects of the ongoing coronavirus outbreak economic crisis.
"Complacency among policymakers is what made the 'Great Depression' a depression," said Sahm. "If they do not do more, if they 'wait and see,' they will do exactly what happened in the 1930s."
The ramifications of the coronavirus pandemic on the U.S. economy will be devastating enough to send the country into a certain and "prolonged depression," economist Josh Bivens warned Tuesday, unless federal aid is delivered to state and local governments.
"State and local governments are currently forecast to be facing revenue shortfalls as large as $1 trillion over the coming years," Bivens wrote at the Economic Policy Institute blog. "If no help is forthcoming from the federal government to close these shortfalls, the result will be an economic disaster--one that is not confined to these governments."
In his analysis, Bivens looked at data from the Great Recession from the 2010s and the austerity policies from that time which, he explained, slowed that recovery.
"We need to learn from our past," tweeted economist Elise Gould. "Austerity was a huge drag on the recovery from the Great Recession. Let's not make the same mistake."
As Bivens explained:
The spending austerity in the 2010s was the entire reason why it took a full decade to return to pre-crisis unemployment rates following the onset of the Great Recession. It is why millions of Americans struggled--through no fault of their own--to find work and it is a key reason why wages for tens of millions of Americans barely kept pace with price inflation over this time, as labor markets remained too soft to give workers the bargaining power they needed to demand better-paying jobs.
The austerity "clearly delayed economic recovery for U.S. workers by years," said Bivens.
With similar cuts this time, a "prolonged depression is guaranteed," Bivens warned.
"The economy is currently approaching a knife edge in how recovery will proceed," wrote Bivens. "If the virus relents and effective public health measures are undertaken that allow a phased reopening of business, and if the federal government provides sufficient measures for relief and recovery during this crisis, then recovery could be rapid."
"But this confidence and demand will be savaged if policymakers allow state and local governments' spending to be hamstrung by the crisis," he continued. "These sub-national governments spend about $4 trillion every year in the economy, making them the second-largest source of spending outside of the federal government."
"If they are forced into crash-cutting," Bivens concluded, "the entire economy will suffer."
Bivens warning comes as Republicans in Washington show no sense of urgency in ramping up a federal rescue effort to state and local governments.
As the Washington Post's Jeff Stein reported Tuesday, some White House officials are so confident in the possibility of an economic recovery they have broken off talks with Congress on more relief aid. President Donald Trump and his advisors believe that the economy will roar back to life in the next few weeks, a view that "clashes with the dire predictions of many mainstream economists, as well as Federal Reserve Chair Jerome H. Powell."
Claudia Sahm, who served on former President Barack Obama's Council of Economic Advisers as an economist, told the Post that urgent legislative action from the federal government was essential to stave off the worst effects of the ongoing coronavirus outbreak economic crisis.
"Complacency among policymakers is what made the 'Great Depression' a depression," said Sahm. "If they do not do more, if they 'wait and see,' they will do exactly what happened in the 1930s."