The Coronavirus may be the catalyst that finally brings down Republican- conservative rule

By SJ Otto

If there is one thing the Republicans can’t stand it is any damage to the economy. The Coronavirus has had serious consequences for the country, our economy and the capitalist way of life. It MAY cause irreversible changes and it could bring down the present Republican economic and political regime. A recent article in Vox, “How the Covid-19 recession could become a depression, Coronavirus is a global economic catastrophe,” by Ezra Klein, lays out some serious problems ahead for this country. Let’s look at a few of his predictions:

What we had was an “output gap” — the difference between what the economy could produce and what it was producing. The solution to an output gap, particularly one caused by collapsing economic demand, is simple: fill it with money. Invest in infrastructure projects. Give families cash. If corporations and consumers won’t spend, then the government should spend on their behalf, creating the economic demand necessary to push the economy back to normalcy.

The mistake the US made in 2008 was not spending enough. We underestimated the size of the output gap, and then passed a stimulus too small to fill it. When the Obama administration returned to Congress for more fiscal ammunition, Republicans refused, and the recovery limped rather than roared. This is recent history, and in ways both implicit and explicit, it’s shadowing the immediate response to this crisis.

As we can see here, the Republicans wanted to mend this country on the cheap. They didn’t want to spend the money needed to keep the economy out of the crapper. Chances are they will try this again and this time the damage will be far greater than in the last economic downturn.

But this is not 2008, when the economy was intact but the credit markets were frozen. The real economy is in shambles. Millions of workers are being forced to shelter in place, and the factories and machines they operate are lying quiet. We are losing the use of land and knowledge, because the clusters of human beings necessary to build on them could spread a deadly disease.

As Jason Furman, who served as deputy director of the National Economic Council during the financial crisis, put it to me, this isn’t a financial crisis, where if you can stop the panic, you can unfreeze the economy. “Here, there’s a deadly germ out there and you don’t want to go near it for your sake and your community’s sake. There’s only one equilibrium: It’s economic inactivity until the danger passes.”

Then it goes on to say:

Treasury Secretary Steven Mnuchin warned of 20 percent unemployment before walking it back. On Sunday, James Bullard, president of the Federal Reserve Bank of St. Louis, said unemployment could reach 30 percent, and GDP could drop by 50 percent.

The article goes on to warn of massive unemployment. With many workers staying home to avoid getting this virus, it will obviously put a strain on the unemployment insurance system. This will be a problem that has only been dwarfed by such unemployment periods of the past.

Klein defines as “waves” that will attack this country as a consequence of the virus’s economic fall out.

The third wave, according to (Mark) Zandi, (chief economist at Moody’s Analytics) will be “all these folks who’ve seen their nest egg wiped out. They thought they were set for retirement and they’re not. They’ll go into panic mode.” The shattered stock market will be a disaster for those in or near retirement. They’re watching wealth they worked their whole lives to build crumble in the space of weeks. They won’t purchase that new car, buy that new house, plan that vacation — and unlike some of the direct economic stoppages, which will lift when the virus ease, their reticence to spend will slow economic growth long after the direct crisis ends.

Wave four, Zandi continues, will see businesses cut investment. Corporations that intended to open a new factory won’t; media organizations thinking of launching new publications will hold back; businesses that meant to upgrade their office space in 2021 will decide they’re fine where they are. Another engine of economic growth dead.

As the article below this one states, President Donald Trump is in a hurry to end all the social distancing that health officials have called for. Trump must realize how difficult the economy will be to jump start the longer this country is in the grips of the virus.

The nightmare scenario is that the virus isn’t under control by the summer, and extreme social distancing measures are needed throughout the year — which many public health experts consider likely. Then, Zandi said, the ground could collapse underneath the economy.

Policies to support families through this nightmare are necessary, and should encompass everything from cash grants to paid leave to massively expanded unemployment insurance to guaranteed health care (the Roosevelt Institute has a thoughtful set of recommendations). But we will also need policies that permit the businesses that employ them to survive.

Here we see a serious need for a change in the health care system. This epidemic just might force this country to realize it needs a comprehensive medical system for all citizens. All the nonsense about the money it will cost will finally be overcome. If this doesn’t happen, the economy, that is so important to the Republicans, may never really recover. In many ways this country and its economy is like a house of cards and the Coronavirus is the wind that will blow the cards down.

I want to make certain I’m not misinterpreted on this next point: We need policies to put money in families’ pockets, and we need them now. But we also need to recognize that they won’t be nearly enough. The cash transfers and safety net expansions Washington is considering are exactly the kind of policies we needed more of in 2008. They are necessary now, too, but they are insufficient.

We have to remember that rather that putting people to work, this country is trying to pay them not to work, until the medical emergency passes. Paying people not to work is a painful pill for the Republicans who keep putting a “work requirement” on just about all entitlement programs.

In a more imaginative country, with a more ambitious and capable political system, crisis could become opportunity: This could be the moment to pass a true Green New Deal, taking advantage of cheap money and idle workers to solve perhaps the central problem of our future. If this economy must collapse, perhaps we could build something better, fairer, more sustainable in its place. “I hope this will cause a seismic political change,” says Sen. (Michael) Bennet. “I think this is going to make us realize we need to invest again in America.”

As with part of the conclusion of this article, this is the opportunity to finally get some of the progressive changes this country needs and many of this country’s progressives may come out ahead in the long run. It won’t be easy, but actual change is possible and this kind of natural disaster may be the weight that finally sinks the Republican regime. We must take advantage of this.

Pix by Bucknackt's Sordid Tawdry Blog.