The Congressional Budget Office came out with its new economic projections and they look realistically bad to me. They show the economy declining at a 39.6 percent annual rate in the current quarter and then rebounding at a 23.5 percent rate in the third quarter and closing out the year with a 10.5 percent increase. Unemployment averages 14.0 percent in the current quarter and rises to 16.0 percent in the third quarter. It falls back to 11.7 percent in the fourth quarter, but still averages 10.1 percent in 2021.
While this looks like a pretty bad story to me, I saw comments on Twitter arguing it was too optimistic. The gist of these comments was that people will be too scared when the shutdown period ends to carry on anything like their normal life.
I don’t really see that. First, as we know, there are plenty of jerks who never took the pandemic seriously. Given a green light to go shopping, get a haircut, or a tattoo, many will be quick to do so. The fact that all of these people are not going to die will cause others to follow.
But, we are making progress in learning how to limit the spread. Unfortunately, the U.S. is basically nowhere in the testing and tracing department, but that hopefully will change over the next couple of months. Also, there are many simple common sense practices that will substantially reduce the risk.
Wearing masks in public places is an obvious one. Limiting the number of people allowed in stores and restaurants is another. Presumably, ventilation also matters. This is a worldwide problem. Several European countries have already begun to reopen and others will do so soon. We should be able to learn best practices from each other.
This is not a zero/one story where there is either zero risk or an intolerable risk, the issue is one of reducing the probability of catching the virus so that more people can feel comfortable engaging in normal activities. (Improvements in treatment will also be hugely important.) Unfortunately, Donald “America First” Trump is probably not interested in learning from the experiences in other countries, but the best money forward-thinking governors will ever spend will be carefully monitoring the successes and failures in re-openings elsewhere and finding ways to adopt the successes here. Until we have a vaccine we will not be completely safe, but there is enormous room for reducing risks and that should be the top priority for people in policy positions.
Dean Baker co-founded CEPR in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. His blog, “Beat the Press,” provides commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in Economics from the University of Michigan.