The Congressional Budget Office (CBO) has forecast that the coronavirus pandemic will have a lasting negative impact on the US economy, with potential damage amounting to $15.7 trillion, or 5.3% of GDP, over the 2020-2030 period.
The CBO's prognoses for unemployment are similarly discouraging: according to the entity, the US unemployment rate is likely to exceed 15% through September and remain above 11% for the rest of the year.
'80 Percent of US Economy Shows V-Shaped Recovery'
Earlier, more than 50 economists polled by Reuters debated various scenarios of the world's post-COVID economic revival, agreeing that a V-shaped recovery would be the best outcome with a sizeable rebound in Q3 and Q4. Still, a U-shaped scenario in which the lockdowns' impact will last for quite a while was named as more realistic and even an "L" option, when economic growth dives and does not recover for some time, was not ruled out.
"We assume that the various 'letters' for the recovery shape will largely overlap each other, with about 80% of the [US] economy showing a V-shaped recovery based on the time of re-openings, and the remaining 20% showing a combined U or L-shaped recovery, based on the timing of vaccines", elaborates Michael R. Englund, principal director and chief economist for Action Economics, LLC, foreseeing that the US economy may rebound quicker than the CBO predicts.
The economist explains that for about 80% of the economy, social distancing will be fairly easily imposed, because four out of five Americans don't use mass transit, they both work and live in suburbs where offices are accessed by stairs rather than elevators, and they mostly live in single family homes or apartments that for the most part are one or two-storey buildings.
"In the regions of the US that account for the 80%, the lockdowns were more of their experience than the coronavirus itself, and these workers and consumers will quickly return to behaviours close to what they experienced before", he believes, adding that "the remaining 20% will need to make bigger adjustments, and recovery there will be dragged out".
Englund continues by saying that besides this, another factor that may be underestimated is that consumers will find new products to consume, and producers will deliver new products, allowing households to return to prior spending levels quickly, despite a reduction in spending on air travel, hotels, and cinema tickets.
"It’s anyone’s guess what will happen over the coming ten years, and the path depends critically on the timing and efficacy of vaccines; that isn’t known in advance", he highlights. "Any projections that far in the future should just be taken as possible scenarios for risk analysis".
COVID-19 Crisis & US Politics
The CBO forecast is "irrelevant", echoes Kevin Dowd, professor of finance and economics at the Business School at Durham University in the UK, explaining that it is not possible to forecast the impact of the strategies because "those responses are still uncertain and there is everything to play for".
According to him, the problem isn’t COVID-19, but the policymakers' decision to shut much of the economy down. "We have had pandemics before (e.g., Asian flu etc.) and this virus isn’t much different in its impact", the professor remarks.
The responses so far have been "immensely damaging", he observes, adding that they could be much worse yet, "depending in particular on how quickly the lockdown is or isn’t removed".
Having praised Japan and Sweden for their handling of the COVID crisis, Dowd insists that the best response is to raise the lockdown as soon as possible.
At the end of May, all 50 American states started lifting the coronavirus-related restrictions, despite concerns voiced by some public health officials and politicians who warned about a potential spike in COVID cases. As of 3 June, the US COVID death toll had surpassed 106,000.
Still, the major question, according to the professor, is how this crisis will play out in US politics.
"If there were no COVID crisis, I think Trump would win easily", he admits. "The US elite are more corrupt than ever, and Trump despite his many faults represents the populist reaction to that corruption. More of the same, you get the same result. The question then is who gets blamed for all the misery. Again, I think Trump trumps. Plus, the Dems’ candidates against him are, to coin a phrase, a basket of deplorables".