“It was the best of times, it was the worst of times,” the oft-quoted opening line from “A Tale of Two Cities,” is an apt description of the American economy. And we know how those times ended — in revolution.
The stock market booms as if America shines more brightly than the Milky Way, yet beneath brisk holiday retail sales millions of Americans sink into despair. While professionals comfortably work from home, have sushi delivered and stay fit on Pelotons, millions whom they choose not to see face eviction, hunger or simply can’t meet daily living expenses.
New college graduates are stranded in their parents’ basements. Millions more on the first rungs of career ladders and middle age workers too young to retire are losing jobs. Many will never be employed at levels that their skills and experience would appear to require.
Oil companies, media giants, airlines and others are permanently jettisoning employees, while software companies, Internet retailers, ghost kitchens and many others thrive.
Within the corporate sector, investors expect the winners will outnumber the losers. Stock analysts estimate year-over-year profits will be up 44% this spring. Investors have calculated that even at today’s seeming lofty prices, stocks will be undervalued.
Rally follows rally, the rich eat cake and those stranded in the old economy don’t eat at all.
At least 100,000 small businesses have permanently closed and jettisoned millions of low-wage workers, especially women and minorities. Many with few decent options for re-employment.
As those services wind down and corporate layoffs in contracting industries accelerate, the pink slips are now more highly concentrated among professional workers — lawyers, bankers, engineers, technicians and managers. They are potentially more mobile than low-wage workers, but mortgages and student debt can make them less likely to endure months of retraining and move families.
Some 4 million to 5 million Americans will be permanently unemployed — even as expanding activities will continue to be challenged to find enough engineers and technicians.
Governors and mayors continue to make lousy decisions.
Restaurants, which we know are COVID-19 incubators, often stay open while schools, which are likely safer for many children than remote learning environments, close. Test scores demonstrate we are doing irreputable damage to their development, and that damage is mostly heavily concentrated among the children of the working class and poor.
If we want a nation of hamburger flippers and angry socialists, we couldn’t have better architects than Gov. Andrew Cuomo and Mayor Bill de Blasio — aided and abetted by New York’s valiant teachers’ unions.
For many of the displaced, the wolves are at the door. The CARES Act and policies implemented independently by states and municipalities assumed the disruptions wrought by the pandemic and shutdown were temporary. Mortgage and rent deferrals and unemployment benefits mostly run out by the end of this year. Homeless shelters and food banks could be the last refuge but those simply won’t have enough beds or free mac ‘n’ cheese to go around.
While Wall Street parties this spring look for an army of demonstrators in the streets if we don’t get the right federal aid to the right places soon.
The states and municipalities are broke. Their revenues are down from lost income and sales taxes, COVID-19 has imposed unplanned, emergency expenses, and they can’t fund new aid to the displaced.
Presidents-elect normally don’t get involved but it is clear, left to their own devices, Mitch McConnell and Nancy Pelosi are not going to come up with a stimulus package. The lame duck White House is too distracted to broker a deal. If Mr. Biden does not intervene in stimulus talks, he faces one heck of a mess come Inauguration Day.
The best strategy would extend state unemployment benefits and boost those with a reasonable federal supplement — perhaps $400 per week — to total no more than 75% of lost wages. And send $500 billion to the states to cover lost revenue and COVID-19 expenses.
Mr. Biden should resist political pressure to directly subsidize restaurants, airlines, cruise lines and others.
Work and consumer habits have changed for good, and many industries are downsizing permanently. As the Paycheck Protection Program and the small business closures that followed demonstrate, bailouts don’t work once the public has turned away.
It’s really best to keep the cities open by making sure public services are funded, put cash in the hands of the truly needy and let the boost in spending pull resources to the growing sectors of the economy to create jobs.
• Peter Morici, @pmorici1, is an economist and emeritus business professor at the University of Maryland, and a national columnist.