How the US Can Dodge A Depression

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S1: I’m wondering if you can describe the book you’re reading.

S2: Is it a doorstop, basically?

S3: Yeah. You feel the weight of it. You feel you feel the weight of history on your lap as you read it.

S2: Jordan Weissmann covers the economy for Slate. So when I asked him what he did over the Memorial Day weekend and he said, oh, I’m reading a 900 page book about the Great Depression, I cringed a little.

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S3: Yeah. I mean, I don’t I don’t think anybody will be shocked about why I’ve decided. It’s a good time to read about the 1930s again. We’re facing the highest unemployment rate since the Great Depression. Officially, it’s fourteen point seven percent. The Bureau of Labor Statistics has actually suggested it could be closer to 19 or 20 percent because of a data collection error when they were gathering statistics.

S1: So the numbers are really bad, but actually they’re probably worse. Yeah, yeah.

S3: And actually, in some ways, that to her mind of the Great Depression, because, you know, back then they didn’t really have modern economic statistics. And so they had to try to combat a crisis while they only had a hazy idea of just how awful it was. They were starting to get into modern surveying techniques. But, yeah, I mean, it was they weren’t working at the same level of information that we have today. And even now, you know, we’re trying to deal with a crisis that’s moving at hyper speed and we don’t quite have data to match it.

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S4: Reading about the Great Depression, Jordan sees this window of time, a time when a lot of people saw how grim the economic reality was and struggled to figure out how to respond. This is the same window he sees us in right now, and he wonders if this time we’ll be able to respond any better.

S3: Recovery is going to depend on two things. One is to we deal with the sickness. Do we deal with the virus? And that’s a question mark. On the other is, are we going to support states and businesses enough?

S2: What’s the next relief bill going to look like today on the show? Is there a way to avoid looking back on this crisis and asking, what if I’m Mary Harris. You’re listening to what next? Stick with us.

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S4: Over the last few months, Washington has spent trillions of dollars trying to shock the economy back to life. Congress has increased unemployment insurance, bailed out the airline industry, pledged money to small businesses. It hasn’t really worked, which may be why the Trump administration has been encouraging states to throw open their doors, get folks back on the job.

S3: President Trump said he was right to shut down the country to prevent the spread of Corona virus, but said it’s also now right to push states to open back up.

S5: People want our country to open up. And something I think that’s important to say, because I’ve been OK at this kind of thing. Our economy, it’s going to come back very, very strong.

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S4: You know, we built Treasury Secretary Steve Manoogian, even testified in Congress last week that if states don’t reopen, they could permanently damage the economy. They don’t got Jordan wondering, are states that are opening up actually seeing any economic improvement? Could this be the thing that keeps the economy from falling off a cliff?

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S3: The question is, what’s going to happen going forward now that Donald Trump and the Republican Party are very intent on reopening the economy, quote unquote, even though it’s not really clear the economy or the country is fully ready to reopen.

S4: So he started digging into the data, starting with Georgia. After all, when Georgia opened back up again, Vice President Pence said the state was an example to the nation that businesses there would help lead the way back to a prosperous American economy. Jordan says the reality on the ground isn’t that simple.

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S3: What we’d want to know about Georgia is like, how are things doing now that they’ve reopened? Like, how are how are things changing? What we know about Georgia is that they are still getting unemployment claims. People still seem to be losing their jobs. Reopening hasn’t entirely fixed the problem.

S1: Yeah, I mean, you did this kind of deep dive into restaurants in Georgia.

S3: Yeah. Restaurants in Georgia and across the south.

S1: Bill, why did you want to look at restaurants in particular? Was it just that they’re a small business that can kind of be a leading indicator? Was it that people have to be close to each other there and like sort of, you know, putting spoons in their mouths? And you are kind of curious that people would want to do that. Why did you want to get restaurants?

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S3: A couple? A few reasons. The nerdy economic reasons are one. Yeah, it’s a little a bit of a leading indicator. We actually have some good real time economic data on what’s happening at them. We have, you know, these companies that run point of sale systems or, you know, track credit card transactions at them. And so we can kind of sense, you know, with a few days lag what’s happening in the restaurant industry. And in a lot of ways, I think it is it’s a it’s a good barometer for people’s willingness to live a normal life again. Right. Because you do have to, you know, go in and sit next to people and or you sit on at least sit outside on a patio nearby, sort of nearby other people. And so that’s that it is a little bit of a normal life indicator. And also just because I personally really like restaurants and I don’t want to go out of business. So I’m interested in what’s happening on that level. But yeah, so I, I kind of looked at this as a group of states. I referred to as like the early birds. It’s like a dozen states. Yeah. It’s like it doesn’t say it’s that at all. Kind of started reopening fairly early. And and we’re making progress and you know, without getting too into details, what you know, when I when I wrote the article, this is like, you know, about a week ago. So it’s not totally up to date. But I know what I was still seeing was revenues were down. You know, they were they’re creeping back up in some states like South Carolina. They were they were bouncing back up a lot. But for the most part, restaurants were still that were open where we’re still making 30, 40 percent less money than they were before the crisis. And about a fifth of them, a fifth to a quarter of them. And it mostly states we’re still closed. All right. I just weren’t reopening. And, you know, Georgia was part of that group. It wasn’t doing exceptionally well to me. What it says is these states are seeing gradual improvements. Things are gradually getting back to normal, but not instant. You’re not seeing you’re not seeing a V like we’re not getting that V shaped recovery. And that’s that’s partly because states, even even these early reopening states, are still putting limits on how many people can walk into a restaurant that time, can sit down in a dining room. They’re putting these 25 percent in Texas or 50 percent capacity caps. You’re also seeing number of retailers. You know, they’re now lodgers let people come storming into the store. We’re looking at these pictures of like beaches that are very crowded right now and we’re thinking of reopening is this completely mad dash. But the bottom line is actually, when it comes to things that people do inside where, you know, the potential for transmission is is highest. You know, business owners aren’t just throwing up open their doors and states aren’t letting them just throw open their doors to everyone. This is a gradual process. It’s going to take a while for economic life in the country to get back to normal as a result.

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S1: Yes. Interesting because back in March, at the very beginning of all this, I remember you and I talking and you just saying there’s this massive problem with addressing the economic issues with this disease, which is people don’t want to leave the house. And you can pump as much money into a problem as you want. But if people don’t want to leave the house, that’s going to get in your way. And I saw her animus making really similar points, saying we’re conflating the story, the economic story with the story of the lockdown. And they’re not the same thing. They’re related, but they’re not the same thing.

S3: This is the thing we kind of Republicans and Democrats are really fighting about in the end right now. It’s is the economy in trouble because we locked it down? Or is it in trouble because of the virus? And I think the bottom line is it’s a little bit of both. Right. Like, clearly opening things back. It’s it’s it’s not just one or the other. Like, very obviously, states that have reopened early are starting to see business creep back faster than the states that did not. You know, people are going back to restaurants in Georgia. People are in in South Carolina. There’s there’s no doubt about that. But is life going back entirely to normal? No, absolutely not, because people are afraid of the virus, because state officials are still afraid of the virus and aren’t going to allow business to return entirely back to normal because customers don’t necessarily want to get sick. There are there are a lot of the viruses effects are still going to put a damper on everything. You know, there’s a limit of Colma and Column B. But anyone who thinks that reopening or liberating the economy like Donald Trump likes to say is just going to be a magical fix is wrong.

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S1: Or other countries finding themselves in the same spot that we’re in right now when it comes to unemployment? Or have they done something better and less messy than we did?

S3: I think less messy is probably true. So a lot of countries are not. I mean, other European countries are not seeing the same levels of unemployment. Right. In part, that’s because a lot of these countries have done things where they are directly paying companies to pay their workers. They’re subsidizing wages there. You know that the most famous plan is in Denmark, where essentially they said if you were going to lay people off, go to the government and don’t lay them off. And instead, we will give you money to cover 75 percent of their salary, you know, and keep them as long as you keep them on. And so that became like the Denmark plan. It was like if you’re going to lay people off. No, no, don’t do that. Do you not do that?

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S1: Well, can we talk about how that differs from what the U.S. did? Because I feel like the U.S. took an approach where we did kind of a version of that, like we offered businesses these loans. Right. To keep their workforce on. But then we also did the unemployment insurance where we sort of got people on the back end to where if you already lost your job, we had that going on as well.

S3: Yeah. So the U.S. did something a little different and we tried to attack the problem from lots of different angles. Right. With this thing, the paycheck protection program where we gave small businesses and medium sized businesses loans, forgivable loans to keep their workers employed, which was sort of like the Denmark plan, but with private banks involved because we’re the United States of America. And we also had these these big six hundred dollar weak unemployment benefits for people who did lose their job. And part of the reason we took that approach is first that we were kind of getting started late, like people were already losing their jobs by the time we were passing the Keres Act. We needed to act quickly to help them, but also because nothing in America works, which gets. So it was hard and need we need to. Well, no, but. So this is really a problem. We needed to attack it from multiple different angles because no one was quite sure which would be most effective for what would work. Would the paycheck protection program, you know, get up and running like its designers hoped, or would there be problems with it? You know, state unemployment systems already looked like they were kind of buckling by the time that bill passed. Would people quickly get their money if they didn’t? Well, we also had these twelve hundred dollar checks that were going out. Course, no one was quite sure how fast the IRS could deliver those. So we just kind of threw a lot of money at the problem from different angles, hoping some of it would get to people somehow.

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S1: So we made the money machine go BRX, but then we sent all the money through a Rube Goldberg contraption to get it out the door.

S3: We made it go. We kind of made it go burb, but like it just sort of sprayed money everywhere, just like there wasn’t a basket to catch it and it was just like it was America. You know, those like chambers where the money just gets blown around and you have to grab it. America is that poor sucker in the chamber that the money was just flying everywhere.

S1: So. So D.C. is talking about fixing this mess partially because they’re on a deadline. The unemployment insurance, that extra 600 bucks a week. People are getting it set to run out in July. And there’s no guarantee that people will actually be back to work in July. But when I look at the debate that’s going on, it looks like people are mostly going back to their corners. Republicans are worried about too much spending and a huge deficit. They’re worried about, you know, an unemployment benefit, giving people an incentive not to work. And then you have Democrats who are saying we need to give people unemployment because they don’t have jobs yet. They don’t of jobs and it may not be safe. And I’m curious what you think about this debate.

S3: A lot of the rhetoric is a little disconcerting because it’s, you know, Mitch McConnell and Donald Trump saying, like, we’re not going to do unemployment insurance anymore. We’re going to get rid of that. And we just want liability protections so that businesses don’t get sued. And, you know, we don’t think we need to pump that much more money into the economy. And Democrats are on the other side saying more more money printing, more BRX like, you know, that’s. But I think if you if you look if you look a little more closely at what’s happening and some of the press reports, there actually are signs of the two sides negotiating and maybe being able to hash out an agreement. And some of them are encouraging. Right. There is also there was an article in today’s Wall Street Journal that actually gave me a bit of hope. Why the there has been this idea since the very beginning of this crisis floating around that, you know, instead of all these complicated loans or relying on, you know, unemployment insurance, we should just have the IRS directly pay businesses to pay their workers. Right. Like, that would be the simplest thing to do. You know, have our own version of the Denmark plan. We actually had sort of a very a very small version of that in the original Keres that there is like this thing of the employees. Tax credit. But it was tiny, like it wasn’t a ton of money. It was very limited. Not a lot of people paid attention to it. And in the months since, we’ve kind of tried everything but this idea of just paying businesses to pay their workers or when we have tried versions of it, it has been very complicated. We all know about the problems with the paycheck protection program and the, you know, the ordeal that is pain for everyone who has touched it. We know that unemployment systems have been down. States have been overwhelmed. And so you’ve seen members of both parties kind of come back to this idea, like, should we just directly pay businesses? Should we just subsidize wages and and not worry about it? You know, whether we make it look like a loan or a grant or whatever. And so there’s ls talk. Do we just pay businesses? Should we just do that? And you know, I was I’ve been wondering I’ve been talking to people on the Hill every once in a while about whether or not ideas like this would maybe really have a chance in the Senate. And there was there was this Wall Street Journal article about it today. And there was one quote that gave me hope. There was one particular representative, Kevin Brady of Texas, who is basically the ranking member on that. Is the ranking Republican on the House Ways and Means Committee. And was really, really sort of a when Republicans ran the House, he was really a power broker. He was one of the architects of the of the Republican tax cut bill in 2017. He actually said he’s interested in this. So you’re starting to see actual name line Republicans say, yeah, I no, this is this is a real possibility. And part of it is because they see it as a way to get to support the economy without giving people like this giant six hundred dollar a week unemployment check.

S1: Right. So it’s a way to a way to support people without that sort of moral issue of where paying people not to work, which makes us feel bad as Americans.

S3: It’s so I mean, it’s also it just that it is a way to encourage company businesses to reopen. Right. And if you’re some people who are really, really worried about just the public health aspect of this, which, you know, I don’t think they’re wrong to be worried, kind of get a little queasy because they’re like, well, do we really want to be encouraging businesses to reopen and yanking support away from people who don’t want to go back to work? I think we’re sort of at a point where businesses are going to have to reopen. It just we’re not going to see a repeat of April’s shutdown at least anytime soon. It’s just like that’s where we are, right? Like states are reopening.

S1: Yeah, I think it’s like a combination of like people want to get out. It’s warm. They’ve been inside for a long time. And this economic pressure. People want jobs.

S3: Exactly. It’s just like I don’t think we have the will as a country to try and have a do over and have like let’s try is locked down thing again. But this time it’ll be effective. Like, we’re just not there. Things are reopening. And so if you’re you know, if you’re worried about what’s going to happen to businesses in this, you know, as I put it, it kind of a half functioning economy, like if if if you’re worried that businesses won’t be able to survive the recovery. This is the kind of bill you want to see to ensure that they do, because it’s going to cover a lot of their expenses as things kind of gradually return to normal. It’s the kind of support that actually could prevent, you know, a mass die off of, you know. I think I think it could help prevent a mass die off of, like, neighborhood restaurants.

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S1: That gives me some reason for optimism. But here’s my question about that. Is it too late? We’re already at somewhere between 15 and 20 percent unemployment. We don’t really know. And so those jobs are gone. I mean, there is a well thought last week saying a lot of them might not come back.

S3: I don’t I don’t think it’s too late. We don’t we don’t know. This is again, like, again, I hate to say, like there’s so much uncertainty, though, because we don’t know how many those jobs aren’t necessarily gone. Right. It’s better to think of a lot of those jobs is on ice, which was intentional. Right. Like, we wanted people to stop going to work. We wanted businesses to kind of shut down for a bit while we tried to contain the virus. The question is, you said how many them will come back. And that depends on how many of these businesses disappear. Right. Like how many businesses just don’t reopen their doors and can’t rehire their workforce if enough. If most businesses just can come back, can, you know, open for, you know, welcome people back into the, you know, start buying clothes or, you know, back for dinner, then they can rehire their workers, especially if there’s some subsidies from the federal government to help pay their wages. And we could see a pretty quick recovery in jobs. We might not get back to five percent unemployment. We might be stuck in a while closer to like, you know, by, who knows, 10, eight, something like that. But we could see a pretty quick bounce back. But if a lot of businesses just go bust and then those jobs are gone. Right. It’s going to take there’s going to someone else is going to have to open a new business to hire people. And that’s going to mean it takes more time. And that’s sort of why I’ve been obsessed with this idea of we need to keep businesses alive through this period of, you know, economic hibernation. We we need to keep them alive and fed while they kind of go to sleep. And it’s otherwise otherwise this otherwise, a lot of those jobs are gone for good.

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S1: So we’re in a high stakes experiment to see if economic cryogenics works.

S3: Yes. Yeah. So far, I mean, but like really sloppy cryogenics where we’re like, oh, we didn’t freeze that part of the body. Well, like, it looks like his fingers getting gangrene or is kind of kind of rotting off. Oh, God. We’re gonna have to. I think he just lost a leg. That’s. But it’s like. But we may have kept the brain intact.

S4: Jordan, thank you so much for joining me, Mary.

S3: As always, it’s been a pleasure.

S4: Jordan Weissmann is Slate’s senior business and economics correspondent. And that’s the show. What Next is produced by Mary Wilson, Jason de Leon and Danielle Hewitt.

S6: I’m Mary Harris. I’ll catch you back here tomorrow.

S4: One more thing, if twins, right, and DC ends up funneling money to businesses. Remember this? They’re doing it for one reason.

S3: Yeah. It functions as a refundable tax credit because that’s, you know, Washington just like that’s Washington’s kink likes. That’s like one. That’s a go. That’s it. Washington’s into it. Like it’s maybe just for tax credit. Yeah. Yeah. Refundable tax credit.