The smoke has not cleared, the dust has not settled, and not all the votes have been counted. But even before Election Day 2020, the American people had some idea of what to expect for the next four years in the U.S. economy – be it Trumponomics or Bidenomics (or would that be Harrisonomics?). Whether it is grappling with the coronavirus-induced financial crisis or accelerating the recovery in the labor market, the question was always: By how much? Evidently, the world’s largest economy is teetering on the brink of collapse, being held by a rope of fiscal and monetary stimulus and relief. Everyone is told about a new normal, but it seems that this statist recipe contains the same ingredients of the previous normal – just with a doubling of the spices, herbs, and lard.
The Economy, Stupid
When President Trump claimed to preside over the greatest economy in the history of the country, he may have been speaking with a bit of hyperbole. But that does not mean Trumponomics failed to resuscitate an anemic economy. All the measurements – gross domestic product, hourly wages, exports, and consumer spending – pointed to incredible growth before the public health crisis. Will the U.S. return to these times over the next four years? Market analysts and the Federal Reserve warn that the economy will need extraordinary fiscal support for a couple of more years. So, if the country is on life support now, the U.S. might be the walking dead heading into 2024.
Jobs! Jobs! Jobs!
The U.S. labor market was remarkable before the pandemic. The unemployment rate was 3.5%, tens of thousands of new jobs were being created every month, full-time employment returned to the economy, wages soared to all-time highs, and minorities saw tremendous improvements in their labor situation. In the aftermath of COVID-19, the once-robust jobs market is showing signs of renewed life, with creation and the jobless rate coming in better than expected. But how long will this last?
Wall Street Redux
As the ocean of red ink drowned Wall Street, the Fed stepped in and bailed out the New York Stock Exchange. The central bank stopped the hemorrhaging with unlimited quantitative easing, corporate bond-buying, and near-zero interest rates. The leading benchmark indexes erased their losses and even surged to record highs. In recent weeks, volatility has returned to the equities arena, and it is unclear if stocks are headed for another steep downturn. But with the Fed guaranteeing perpetual intervention, it is unlikely that the financial market will experience a sequel to March 2020.
Abandoning the Budget
President Trump and the Republicans failed to take the federal budget seriously when they regained the keys to Washington. This bit them in the behind since the coronavirus decimated the economy and fleeced Uncle Sam’s pockets. As a result, Trump and the GOP created a $3.1 trillion budget deficit, adding to the ever-growing $27 trillion national debt. Treasury Secretary Steven Mnuchin is auctioning off hundreds of billions of dollars in bonds to remove some of the burden on taxpayers, but this will not be enough because Congressional Budget Office (CBO) forecasts suggest trillion-dollar deficits are here to stay for a long time. Well, at least the country has historically low interest rates, right? Right?
The Coronavirus Treatment
Will the coronavirus vaccine magically save the U.S. and global economy? The consensus right now is yes. But there are many factors involved when it comes to inoculating against the highly infectiously respiratory illness that has a 99.97% survival rate, from long-term health consequences to logistics to participation rates. It will not be some magical antidote to everything that ails the U.S. economy.
It was never going to be an easy path to recovery for the United States economy. The pain that the country endured in the fallout of the COVID-19 public health crisis had never been felt before, resulting in widespread bankruptcies, the evisceration of bank accounts, and Uncle Sam finding moths in his pockets. Be it Biden, Trump, or Jo Jorgenson – it is going to take a while for the storm clouds to dissipate and morning in America to arrive. The substantial difference, of course, is how the nation is steered during the turbulence – will it be the same blueprint as the last four years, or a radical leftist agenda?
Read more from Andrew Moran.