Economy

'It’s the economy, stupid!' With those now famous words, the Democratic strategist James Carville summarized the 1992 election between President George H.W. Bush and Arkansas governor Bill Clinton. Carville captured a fundamental reality. From 1932 to today, only three incumbent presidents have lost their reelection campaigns: Herbert Hoover in 1932, Jimmy Carter in 1980 and H W Bush in 1992. Each man fell thanks to economic woes. As of March 1, 2020, Donald Trump’s reelection campaign was also all about the economy, stupid. Trump’s 'Keep America Great!' economic record had been very strong. The stock market had hit record highs, with the S&P 500 reaching nearly 3,400 and the DJIA almost topping 30,000 in mid-February.

Who is the proposed new $3 trillion stimulus package designed to help? If enacted, the bill — which narrowly passed through the House yesterday, with a break in both party lines — would follow from the $2 trillion package passed in March. But it’s not getting past the Senate, at least not in its current form. Despite broad consensus that the first stimulus wave for businesses and families was a necessary emergency measure to help get America’s economy through the COVID crisis, this next round has become increasingly political, looking more like election postering than a thorough plan for the next phase of the pandemic.

Just how bad will the Covid economic hit be? Today’s figures for the first quarter of 2020 show Britain's economy shrunk by two per cent, but that takes into account just a few days of lockdown (and suggests that the recession started some time before). The March figure is more like it: despite only formally being in lockdown for eight days in March, the UK economy contracted 5.8 per cent that month alone. As Capital Economics puts it ‘in just one month the economy has tumbled by as much as it did in the year and a half after the global financial crisis.’ Yet some responses to today's figures reveal a worrying degree of optimism about the future.

Late last December, Democrats were heading into the homestretch of their presidential primary optimistic that although they faced an internal battle about their party's position on healthcare, they could easily outrun President Trump on the issue. Healthcare proved to be a winning issue during the 2018 midterms when Democrats took back the House, catching Republicans flat-footed on a policy issue they had failed to present a new, cohesive idea on since 'repeal and replace Obamacare'. Democrats hoped they could replicate this success in 2020, as Trump repeatedly floated the possibility of a new Republican plan on healthcare but had yet to actually unveil one. The strategy seemed good on its face; healthcare was constantly polled as the top issue for voters in late 2019 and early 2020.

Can the UK expect a V-shape recovery? The Bank of England has this morning published data revealing very deep V, suggesting a complete economic recovery in a matter of months: a 25 per cent plunge in growth in Q2, followed by a 14 per cent and 11 per cent boom in Q3 and Q4. That would be the sharpest collapse in 200 years followed by the sharpest recovery in 300 years: more of a bungee jump than a V. That’s the good news. The bad news is that it’s an ‘illustrative scenario’ rather than a forecast. Source: Bank of England Monetary Policy Report May 2020 It’s not just lockdown: living with the virus takes a big economic toll The Bank’s decision to hold interest rates at (an ultra-historic low) 0.

The Democrats are taking their stand on the coronavirus crisis in an untenable position. It is like building a defensive redoubt in a valley surrounded by hills in the hands of the enemy (like the French at Dien Bien Phu in 1955, as President Eisenhower warned them). Whether this is tactical stupidity by the president’s enemies or strategic genius by the president or — more likely — a bit of both, is not clear except to insiders. Readers will recall that the Democrats charged out of the gate on the issue of taking science seriously and reacting comprehensively; the president picked up the gauntlet, brought prominent scientists forward, and 'flattened the curve'.

Just days after the Office for Budget Responsibility announced its economic forecasts in March, the reality of Covid-19’s impact on the UK economy sunk in, and its projection was rendered completely obsolete. A month later, with a clearer picture of the toll the virus and lockdown have taken, the OBR today released its new coronavirus analysis, showing a staggering 35 per fall in real GDP in the second quarter, and an unemployment spike of up to 10 per cent – that is, 2 million additional people out of work.

Is the Trump White House fired up? Not exactly. White House spokesman Hogan Gidley tried to douse the speculation that Anthony S. Fauci is about to be sacked for his incautious remarks on CNN’s State of the Union about the merits of an earlier shutdown: 'This media chatter is ridiculous. Dr Fauci has been and remains a trusted adviser to President Trump.'The problem is that the White House has issued similarly indignant statements in the past, only to watch Trump’s wrath turn pustular on Twitter. Any future transgressions are not likely to be forgiven. For now, Trump, who prevented Fauci from responding to a question about hydroxycholoroquine a week ago at a news conference, has sent a warning shot in Fauci’s direction.

More and more people, I suspect, are padding about muttering lines from Psalm 13: 'How long, O Lord,...How long must I take counsel in my soul/ and have sorrow in my heart all the day? How long shall my enemy be exalted over me?' These are good questions. As of April 9, 2020, however, we do not have a reliable answer. You might think that the reason we don’t have an answer to these questions is because we don’t really know the insidious strength of the enemy, the new coronavirus that, with the help of the Chinese back in December and January, has made its way around the world, sickening hundreds of thousands, from Prime Minister Boris Johnson on down. I think that is only part of the answer.