Listen: So the Economy Is a Disaster

And it’s probably going to get worse.

Wilfredo Lee / AP / The Atlantic

On this episode of Social Distance, James Hamblin and Katherine Wells talk with staff writer Annie Lowrey about why the United States has fared worse economically than other countries during this crisis, and what it needs to do next.

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What follows is an edited and condensed transcript of their conversation.

Katherine Wells: Seven weeks ago, we talked to Annie Lowrey about what this recession would look like. She said, somewhat reassuringly, that even though this economic depression was going to be very rapid and difficult, that it would be really devastating, but temporary, with a quick recovery. I remember that being relieving at the time. Here’s the situation we’re actually in nearly two months later: Businesses are closed. Unemployment claims are at totally unprecedented levels. People are withholding rent because they can’t pay. There’s a “Cancel Rent” movement. My fear is that this is going to be sort of catastrophic and not recoverable. Annie, how have your views on the economic recovery changed in the last seven weeks?

Annie Lowrey: Two things have changed. First, we have not used this time well. These have been seven extremely painful weeks for the economy, and we have not used them well to control the spread of the virus. We have not put structures in place to get us to the other side in the way that I would have hoped. Secondly, we didn’t do enough to support incomes and keep businesses alive when we were demanding that people go into this economically painful shutdown. We’ve passed trillions of dollars of relief, but this was such a big shutdown that we probably needed more. I do think that the economy will bounce back, but I also think that we are experiencing some economic damage that’s going to be permanent. I first thought that this might be a really bad year. Now, I think that we might be looking at a couple years of a really weak economy.

Wells: I was hoping you were going to say, “Things may look bad, but I’m still really confident that we’re gonna get right back to normal.”

Lowrey: If you want to look at it positively, we might be near the nadir or within a few months of the nadir. It might start getting better in the summer and the fall. The last recession lasted for 18 months. This [time], the recession part might only last for six.

Wells: How did we get to a point seven weeks in where people can’t pay their rent, even when we have passed historic amounts of aid? What went wrong?

Lowrey: This was a really unusual recession in that it was so fast and so totalizing. The $2.2 trillion that passed in the CARES Act wasn’t enough for lower-income families. Also, you don’t just need to make families whole; you also need to make sure that businesses are surviving. We haven’t done enough there. When businesses collapse, they lay their workers off. Those workers then spend less money in the economy, which causes other businesses to collapse on top of that, because we still have these outbreaks ongoing and people are still really afraid of this virus. It also doesn’t feel like we’re getting to the other side on the public-health part of it. Thirty million people have lost work in just a matter of weeks. One in 11 Americans. That is a terrifying number.

Wells: Can you talk about who this is hitting hardest?

Lowrey: There are a number of workers who have fared fine. White-collar workers who are capable of doing their jobs at home—and the three of us are included in that category—our lives have changed, but largely our incomes have shored up. Our employers haven’t fired all of us, at least not yet. I was recently talking to Ai-jen Poo, one of the co-heads of the National Domestic Workers Union, and she said something like 80 percent of domestic workers like nannies and housekeepers lost income, and in some cases, lost all of their income. The sector that has probably been hardest hit is food and accommodation services. Restaurants, hotels, and food establishments are just totally decimated. This has been an unequal recession in the sense that lower-wage workers, ones with fewer educational credentials, have been really, really hard-hit. A lot of pain has been concentrated among people without much of a safety net, and we’re a country with a relatively thin safety net to begin with.

Wells: Is this what’s happening in other countries too?

Lowrey: Other countries have done a lot better than we have. The best have tended to be countries that are social democratic with less polarized political systems, and with high rates of unionization and union involvement in government. Denmark set up this program to have the government pay workers’ wages so that businesses could keep them on their books, and the government would just pay the wage. This is a less awkward version of what we tried to do with the PPP program that we ran through the Small Business Administration, which is a mess. Between February and March, Denmark’s unemployment rate only went up two-tenths of a percentage point. There was a way to protect the economy and save more lives, and we messed it up really badly. We could have done better, because other countries, peer countries, did better.

Wells: If the main solution is that the federal government has to step up to stave off devastation, what is the likelihood that happens?

Lowrey: With the CARES Act, the thing that was really motivating for Congress was that the stock market collapsed really suddenly. That was a way for investors to yell at Congress to do something, and it spurred them to action. I think that we are going to start seeing some truly terrifying unemployment, jobless, and income-loss numbers coming out. I think it’s likely that we’re going to get a 20 percent unemployment number at the national level. My hope would be that that would be the kind of spur to action. There is a lot that we could be doing here to help support families economically and to make sure that the damage doesn’t become permanent. It’s not too late. There’s tons that Congress could do this summer to help. If we talk seven weeks from now, I hope that this seemed overly dire and that I was totally wrong about lots of things. I would love to be hugely wrong.