- Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- On the latest episode of “Pitchfork Economics,” Nick Hanauer and David Goldstein interview Ronald Klain, who served as the leader of the Obama administration’s response team during the Ebola epidemic.
- Klain says Trump’s response measures sabotaged our ability to manage the pandemic, largely because the current administration doesn’t believe the government can solve problems.
- The belief that a trickle-down economy – where America’s wealthy will foster a rebound by providing jobs to others – makes the pandemic worse and hinders an economic recovery.
- Visit Business Insider’s homepage for more stories.
Treasury Secretary Steven Mnuchin on Sunday told Fox News’s Chris Wallace that the American economy would “bounce back” from the coronavirus shutdown by this summer. “As businesses begin to open,” Mnuchin promised, the “demand side of the economy [will] rebound.”
Mnuchin was reiterating President Donald Trump’s line on the economy – the idea that when social distancing ends, the economy will miraculously renew itself to pre-virus levels. “We’re going to rebuild” the economy, Trump promised reporters last week, “and we’re going to rebuild it better, and it’s going to go faster than people think.”
Trump and Mnuchin aren’t the only ones predicting a strong recovery. Ross Walker, chief UK economist at NatWest Markets, envisioned a V-shaped recovery. Carsten Brzeski, chief economist at ING Research, believes the recovery will be more U-shaped, with a slight trough at the bottom before the economy bounces back to normal. At the end of March, Goldman Sachs economists predicted what CNBC’s Jeff Cox characterized as “the fastest recovery in history.” (Goldman has since tempered their rosiest expectations for the rest of the year, but their economists are still predicting an “unprecedented” recovery.)
But the longer this crisis goes on, the less likely a V- or U-shaped recovery becomes. Even in states like Georgia and Florida that are moving too quickly toward reopening, the consumer demand that drives the economy is likely to be suppressed by both massive unemployment numbers and a widespread unwillingness to gather with large groups of people for months to come. And in states with more science-based policies, the recovery will be intentionally slow: Restaurants will be serving customers at half capacity at best, stadiums (and their attendant businesses) won’t reopen for many months, and air travel and tourism will continue at a greatly diminished capacity for the time being.
And all this is literally a best-case scenario; most experts predict that many parts of the country will have to re-enter periods of more extreme social distancing when boomeranging outbreaks of the virus occur in the fall.
Why would so many members of the political and financial establishment misrepresent the realities of the economic recovery? It's easy to guess the motivations of the Trump administration and other Republican politicians: The election this fall will likely hinge on the economic confidence of the average American, so it's in their interests to present a confident prediction in the hopes that voters will believe it.
But what about the economists? They work for investing firms and other market giants that are expected to offer canny, sensible advice for clients. Why are they promoting models for recovery that already seem to bear no relationship to reality?
It's really pretty obvious when you think about it: They're working with a neoliberal mindset that misunderstands some fundamental economic truths. Even the most progressive mainstream economists were likely educated within a trickle-down school of economic thought that believes CEOs and the wealthiest Americans are the true job creators, and that prosperity rains down from them onto the rest of us.
Given that the wealthiest Americans have weathered the coronavirus downturn spectacularly well - many of them have even made more money since the pandemic began - these economists believe that once the economy has opened again, the wealthiest Americans will simply allow prosperity to trickle down in the form of jobs.
It's a simple, elegant theory, but it's entirely wrong
The economic downturn that has marched in lockstep with the coronavirus pandemic has demonstrated that the trickle-down theory of economic growth is a complete and total fabrication. Wealthy people don't create jobs - you and I do.
Unemployment numbers in the United States skyrocketed because consumer demand collapsed, and people aren't likely to find new jobs until consumer demand returns to previous levels. Wealth begins in our neighborhoods and flows through our communities. Until our streets are full of people spending money, working, creating small businesses, and participating broadly in the economy, our country won't fully recover.
It's more clear than ever that trickle-down, anti-government thinking will only make this economic disaster worse. And although nothing could have stopped the coronavirus from spreading around the world, a growing mountain of evidence proves that trickle-down thinking worsened the pandemic's effects in America.
In this week's episode of "Pitchfork Economics," Nick Hanauer and David Goldstein interview Ronald Klain, who served as the leader of the Obama administration's response team during the West African Ebola epidemic. Klain makes the case that Trump's anti-government cuts - including eliminating the pandemic response team and other public health measures established by the Obama administration - sabotaged our ability to effectively manage the pandemic. Because Trump and his staff have "a philosophy of not believing that government could solve problems," Klain said, they created a situation in which the government was unprepared for the biggest global pandemic in a century.
Klain minces no words when it comes to the Trump administration's pandemic response: "I think we will learn as this unfolds that at critical moments in February and March, the ideological bias in the White House against government led Jared Kushner and his allies to promote private sector solutions when we needed public sector solutions."
"Disdain for government officials and government agencies led to a series of wrong choices about testing, and about equipment, and about use of the Defense Production Act, that really further exacerbated this disaster," Klain concluded.
America's outsized coronavirus death toll, he argued, was avoidable. It's our bad economic thinking that got us into this crisis. And that same warped trickle-down philosophy simply cannot imagine any other way to recover from this recession than tax cuts for the rich, lower wages for the working class, and deregulation for the powerful.
Until we shake off this wrongheaded belief that the answer to all of our problems rests in the hands of the wealthiest Americans, we're never going to be able to build the recovery that this economy sorely needs.
