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Economic collapse is over. Recovery is starting. But the shape of the rebound—whether it looks more like a V or an elongated U—is still uncertain. Years of miserable aftershocks could still lead to a second Great Depression, Annie Lowrey argues in a new piece.
The speed of recovery hinges on at least four major factors, Annie explains. Collectively, these terrify economists.
The good news: They’re treatable with policy. “A terrifying future awaits us,” Annie writes, “one that does not have to come to pass.”
1. The household fiscal cliff:
If and when [this spring’s] federal intervention dries up, millions of families just keeping their head above water will sink, as lost jobs and canceled hours force them to stop paying their rent and go into arrears on their debt payments. Hunger, homelessness, forgotten plans to attend community college, babies growing up in stressed households: These are the stakes.
2. The great business die-off:
Already, an estimated 100,000 small companies have shut permanently. On top of that, numerous businesses—airlines, restaurants, live-events businesses, hotels, private schools, oil and gas companies—face severe and stubborn slumps.
3. The state and local budget shortfall:
Every state but Vermont and most cities and towns are required to remain in the black. Right now, sales taxes, real-estate-transfer taxes, income taxes, fines and fees—they are all collapsing, leaving local governments with a budget gap expected to total $1 trillion next year.
4. The lingering coronavirus crisis (and America’s botched response):
The country is reopening with the disease still spreading and maiming and killing, as several states experience a dramatic surge in caseloads. Never getting the pandemic under control means never unleashing the economy. Just look at the casinos in Las Vegas: open, yet half-empty.
Further reading: The U.S. financial system could be on the brink of calamity, Frank Partnoy, a law professor at UC Berkeley, writes.
One question, answered: What does a negative COVID-19 test really mean?