For the last two years consumer spending has been driving economic growth in the U.S. Significant declines in unemployment and moderate increases in median wages were combined with a brilliant outlook for the future, fueled by a range of new technologies and extended outreach for bringing in consumers. Consumer confidence drove growth in spite of weak business investment, a confused outlook for international trade, ever increasing regulatory gridlock and political polarization. The coronavirus attacked this confidence in multiple ways: in terms of immediate health concerns, in country after country, in terms of public policy measures to counter the infection, and in leading to public measures that hit hard at the consumer sector, particularly at the retail level.
We’ve seen with financial crises of confidence that the confidence is lost quickly, but only gained back slowly. We are faced now with a crisis of confidence that focuses on the public sector as being the only game in town. But the public sector -- the government, both federal and state -- is in a state of disarray. The only reasonably quick way of rebuilding public confidence is through a joint effort, involving compromises between different government agencies, and the federal and state governments, as well as between the branches of government.
Rapid and effective action against the infection must also be coordinated to build confidence in the public sector. Can the relevant parties rise above the immediate differences of opinion? Can this happen rapidly enough to stem the increasing loss of confidence in the government and relevant parties? One thing is certain: the economic recovery will be slow and painful unless some degree of cooperation is reached soon at the national level. In the meantime, we must do our best at the state and local levels to demonstrate the right stuff.
Andrew Hook, economist
Ironton
