I remembered people who argued that record high saving rates alone were enough to carry the economy out of the COVID-recession and get us back on track in very - “V” - short period of time. What was wrong with that argument?
First and foremost, the record saving was triggered in part by record supplements and stimulus, which quickly evaporated once that support lapsed in August. It helped but not long enough to get us out of the hole that was created by an still unmitigated pandemic.
Second, saving by high-income households is being spent on luxury vehicles, boats, second homes but not in areas that bring back the jobs that were lost to fears of contagion in the service sector. Wealthy households saving from spending on services to goods.
Third, saving remains elevated but is falling because we have been unable to wrestle the virus to its knees with mitigation efforts that would allow us all to congregate in a way that would support the part of the economy that was hardest hit by the virus.
Fourth, few who argue for removing support in a pandemic seem willing to admit the scarring effects the pandemic is having on the structure of our economy. Widespread biz closures, food insecurity, homelessness, loss in educational attainment, loss of health care insurance.
The scarring includes the more than 7 million infected who now have a pre-existing condition that could have long-term consequences for their health, their ability to work and their access to health care. The Supreme Court will determine fate of coverage w pre-existing cond.
Add the headwinds of the loss in revenues for state and local governments, hospitals, education, including institutions of higher education and we are reducing the trajectory of growth for some time (years) to come.
That means it will take the economy even longer to recoup what we lost to COVID let alone what could have been. It took more than a decade for workers to attain bargaining power during last expansion. We can’t afford another delay like that. Congress: Tune out the noise and ACT.
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