Last week, the Bureau of Labor Statistics officially validated what we already knew: just a few months after the Covid-19 crisis, the United States already has unemployment in the Great Depression. But that is not the same as saying that we are in a depression. We won’t know if that’s true until we see if extremely high unemployment lasts a long time, say a year or more.
Unfortunately, the Trump administration and its allies are doing everything they can to make a large-scale depression more likely.
Before we get there, a word about that unemployment report. Note that I did not say “the worst unemployment since the Great Depression”; I said “a level of Great Depression”, a much stronger statement.
To understand why I said that, you need to read the report, not just look at the headline numbers. An unemployment rate of 14.7 percent is pretty awful, but the office included a note stating that technical difficulties probably made this number underestimate true unemployment by almost five percentage points.
If this is true, we currently have an unemployment rate of around 20 percent, which would be worse than all, except for the worst two years of the Great Depression. The question now is how fast can we recover.
If we could control the coronavirus, recovery could be very fast. It is true that the recovery from the 2008 financial crisis took a long time, but this had a lot to do with the problems that had accumulated during the housing bubble, in particular an unprecedented level of family debt. It seems that now there are no comparable problems.
But controlling the virus does not mean “flattening the curve,” which, incidentally, we did, managed to slow the spread of Covid-19 enough that our hospitals weren’t overwhelmed. It means devastating The curve: Reduce the number of infected Americans, then maintain a high level of testing to quickly detect new cases, combined with contact tracking so we can quarantine those who may have been exposed.
However, to get to that point, we should first maintain a rigorous social distancing regime for as long as it takes to reduce new infections to a low level. And then we would have to protect all Americans with the kind of evidence and tracking that is already available to people who work directly for Donald Trump, but hardly anyone else.
Crushing the curve is not easy, but it is quite possible. In fact, many other countries, from South Korea to New Zealand to, believe it or not, Greece have already done so.
Lowering the infection rate was much easier for countries that acted quickly to contain the coronavirus, while the rate was still low, rather than spending many weeks in denial. But even places with severe outbreaks can reduce their number if they stay on course. Consider New York City, the original epicenter of the US pandemic. USA, where the number of new daily cases and deaths are only a small fraction of what they were a few weeks ago.
But you have to stay the course. And that’s what Trump and the company don’t want to do.
For a time it seemed that the Trump administration was finally ready to take Covid-19 seriously. In mid-March, the administration introduced guidelines for social distancing, although without imposing any federal regulations.
But lately, all we hear from the White House is that we need to reopen the economy, even though we are nowhere near where we should be to do so without risking a second wave of infections.
At the same time, the administration and its allies are apparently against providing financial aid that would allow us to maintain social distancing without extreme financial difficulties. Extending the enhanced unemployment benefits, which will expire on July 31? “About our bodies,” says Senator Lindsey Graham. Does it help state and local governments, which have already laid off a million workers? That, he says, Mitch McConnell, would be a “blue state rescue.”
As Andy Slavitt, who ran Medicare and Medicaid under Barack Obama, puts it, Trump gives up. Faced with the need to do his job and do what it takes to crush the pandemic, he simply gave up.
And this withdrawal of responsibility will not only kill thousands. It could also turn Covid’s fall into a depression.
Here’s how it would work: In the coming weeks, many red states abandon social distancing policies, while many people, following the signals of Trump and Fox News, begin to behave irresponsibly. This leads, briefly, to some increase in employment.
But it soon becomes apparent that Covid-19 is out of control. People retreat to their homes, whatever Trump and Republican governors say.
So we are back where we started in economic terms, and in worse shape than ever in epidemiological terms. As a result, the period of double-digit unemployment, which could have lasted only a few months, continues and continues.
In other words, Trump’s quest for an easy way out, his lack of patience for the hard work of containing a pandemic, may be precisely what turns severe but temporary depression into full-blown depression.
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