At the dawn of the coronavirus outbreak in the United States, Americans’ concerns largely centered around public health, and understandably. Public officials claimed 2.2 million Americans might die from the coronavirus within a short period of time. Thankfully, that model appears to have been debunked, and COVID-19-related fatality estimations have since precipitously trended downward.
Despite this, most state economies, including Georgia’s, were effectively shut down for some time. As Americans learned that COVID-19, while dangerous, wasn’t as fatal as once believed, the deteriorating economy became the focus of their fears. Again, this is more than understandable, especially as some pundits make comparisons between the COVID-19 recession and the Great Recession and even the Great Depression. However, there are slivers of hope even in the face of the economic doom and gloom.
State revenues have been lagging, which has forced Governor Brian Kemp to ask agencies to slash their budgets by a whopping 14 percent, and unemployment rates have been skyrocketing. Indeed, Georgia has the country’s sixth highest where nearly 40 percent of the workforce has filed for unemployment. What’s more, many companies are facing bankruptcy, and Americans aren’t spending like they used to. Rather, they have been hoarding cash at levels not seen since the early 1980s. In fact, around 40 percent of Americans are going to save their $1,200 stimulus checks, and who can blame them? In uncertain economic times, everyone wants to pad their rainy-day account.
Given this dismal deluge of data, it may seem strange to say that there are reasons to be hopeful, but there are. First, regardless of comparisons to prior economic collapses, the current situation is much different than the Great Depression and Great Recession. Indeed, before the current downturn, policymakers willfully paused much of the economy to flatten the curve. Time will tell whether that was a wise decision or not, but what’s done is done. Nevertheless, most governors, including Governor Brian Kemp, have largely un-paused the economy.
Yet simply because the government flipped a switch and allowed the economy to resume doesn’t mean that it will revert back its record highs. The COVID-19-related economic shutdowns have caused serious damage, and nobody knows the full extent of it. Some companies have been shuttered for good because they couldn’t bear the economic stress, and myriad families have struggled to weather the storm. Even so, with the government’s metaphorical flip of the switch, many Americans can go back to work – greatly reducing the unemployment rate – and help the economy lumber back into action. That wasn’t the case in the Great Depression or Great Recession.
Further, by reopening the economy and removing many restrictions, Americans can try to ease back into their normal routines and spending habits – naturally stimulating the economy. It won’t happen overnight, but it will return once consumer confidence increases. While the current Consumer Confidence Index reveals serious concerns, over the weekend, I saw something much different.
My girlfriend and I decided to venture into town where we were shocked by what we saw. Strip mall parking lots were packed with customers, and there were even long lines to get into stores where masked consumers, including yours truly, were making frivolous purchases – probably shedding much of the cash that they had recently saved. We even decided to dine-in at one of our favorite local restaurants. After a couple months of extreme social distancing, this was a welcome experience, aside from one of the restaurant employees muttering, “I’d rather be at home collecting unemployment.”
Unnecessary spending – whether at a strip mall or restaurant – is one indicator of economic stability. Of course, it isn’t the only indicator, but my experience fueled some cautious optimism. I understand that this is only anecdotal evidence and unfortunately many people and businesses may not entirely recover after losing one to two months of income, but at least the recovery can start. It’s impossible to predict how long or painful the recovery will be, but to me, it looks like it may have already begun.
If the government doesn’t impede workers’ abilities to earn a living and consumers feel confident enough to spend their hard-earned dollars, then perhaps matters won’t be as bad as some have predicted in the long-run.
Marc Hyden is the Director of State Government Affairs at the R Street Institute, and he is a long-time Georgia resident. You can follow him on Twitter at @marc_hyden.