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Mobilize to Save the Economy

Everyone is rightfully scared right now. A deadly virus is spreading across the world, killing people, and devastating whole societies and economies. Despite being slow to react, governments across the globe are enacting social distancing measures to slow the spread and impact of the virus and struggling to get needed medical equipment before current supplies run out. With so many people in the USA living paycheck to paycheck and people across the world living day to day, the necessary shutdown of many businesses threatens to have devastating consequences. We wrote recently about how far stocks could fall and noted that the stock market crash that started in 1929 continued for three years and wiped out 90% of the Dow. The U.S. economy did not recover until mobilization for World War II. What we need to do today as well is mobilize to save the economy.

Mobilize to Save the Economy

The New York Times writes that the expected stimulus bill will not be enough to keep the economy from collapsing.

When the stock market crashed in 1929, the Dow plummeted from its September peak of 381.17 to a low of 41.22 in July 1932. Because so few Americans owned stocks, it took three years for the financial collapse to cycle though the rest of the economy. Unemployment only gradually increased, to a peak of about 25 percent in early 1933. Gross domestic product fell steadily, ultimately declining by about 30 percent.

The economic crash caused by the coronavirus, if anything, will be sharper and steeper. If we set out to deliberately destroy an economy, requesting most people to stay home is a very effective way. The virus itself is disrupting production, but the necessary public health response to the virus is economically catastrophic – and if government doesn’t act massively to offset the damage, the collapse will worsen.

We agree with what they say in that the economy is likely to fall faster and farther now than in the early 1930s. The fact is that all of the jobs programs of the 1930s only provided partial relief. If the government institutes half measures now they will be wasting trillions of dollars and accomplishing less than they could.

USA has outsourced too much of its work, skills, and basic abilities. The American workforce can create masks and ventilators to keep hospitals supplied but they may well need a cash infusion, now, to get started. But, if the government is going to be dumping trillions of dollars into relief efforts, the best place to put the money is into infrastructure projects. Business Insider quotes the American Society of Civil Engineers who say that the USA needs trillions to repair and beef up infrastructure. This sort of investment would put needed money into the economy, create jobs, teach skills, and give people a greater sense of purpose than they have doing things like temp jobs in food service.

The payoff of such an approach would be support for the economy now, a faster recovery, and a more efficient and more competitive America for the future.





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