Paul Krugman writes that, if there is an axiom that applies in Trumpworld, it's this: Take whatever Trump says and expect the opposite to happen. Three months ago, Donald signed onto a new NAFTA. Yesterday, he reimposed tariffs on Canadian aluminum. By now, such behaviour should surprise no one. But the consequences of that behaviour are catastrophic:
On Friday, we’ll get an official employment report for July. But a variety of private indicators, like the monthly report from the data-processing firm ADP, already suggest that the rapid employment gains of May and June were a dead-cat bounce and that job growth has at best slowed to a crawl.
ADP’s number was at least positive — some other indicators suggest that employment is actually falling. But even if the small reported job gains were right, at this rate we won’t be back to precoronavirus employment until … 2027.
Trump takes joy in inflicting pain; and this pain is going to last a long time. But, what is worse, his Republican enablers are going to make things truly tragic:
I’m not sure how many people realize just how much deeper the coronavirus recession of 2020 could have been. Obviously, it was terrible: Employment plunged, and real G.D.P. fell by around 10 percent. Almost all of that, however, reflected the direct effects of the pandemic, which forced much of the economy into lockdown.
What didn’t happen was a major second round of job losses driven by plunging consumer demand. Millions of workers lost their regular incomes; without federal aid, they would have been forced to slash spending, causing millions more to lose their jobs. Luckily Congress stepped up to the plate with special aid to the unemployed, which sustained consumer spending and kept the nonquarantined parts of the economy afloat.
Now that aid has expired. Democrats offered a plan months ago to maintain benefits, but Republicans can’t even agree among themselves on a counteroffer. Even if an agreement is hammered out — and there’s no sign that this is imminent — it will be weeks before the money is flowing again.
The suffering among cut-off families will be immense, but there will also be broad damage to the economy as a whole. How big will this damage be? I’ve been doing the math, and it’s terrifying.
Unlike affluent Americans, the mostly low-wage workers whose benefits have just been terminated can’t blunt the impact by drawing on savings or borrowing against assets. So their spending will fall by a lot. Evidence on the initial effects of emergency aid suggests that the end of benefits will push overall consumer spending — the main driver of the economy — down by more than 4 percent.
Furthermore, evidence from austerity policies a decade ago suggests a substantial “multiplier” effect, as spending cuts lead to falling incomes, leading to further spending cuts.
Put it all together and the expiration of emergency aid could produce a 4 percent to 5 percent fall in G.D.P. But wait, there’s more. States and cities are in dire straits and are already planning harsh spending cuts; but Republicans refuse to provide aid, with Trump insisting, falsely, that local fiscal crises have nothing to do with Covid-19.
The conclusion is inescapable. Donald is a dork. After all, the man pronounces "Yosemite," YO-SEM-IIIT. And, clearly, dorkiness is a virus. Certainly, the Republicans have no herd immunity.
Image: The HyperTexts
