If the present coronavirus pandemic has exposed one thing in its wake, it is the fragility of our economic interconnectedness and the whirlwind events across the globe can spawn in our own backyard. Whether this crisis will be brought to an end tomorrow or come next Christmas, historians 250 years from now may look back upon this moment as the dawn of a new era.
To say that this author resides in the center of the storm would be an understatement. My business closed its doors almost two weeks ago, as has the vast majority of companies in my town. I’m deferring my mortgage payments and any other bills which can wait. All but a handful of employees have been placed on unpaid leave and are currently filling up the lines to the unemployment office. The bit of cash I have left on hand is rapidly evaporating into thin air, as utility bills and invoices from vendors keep piling up even if some will offer me leniency.
Needless to say, the same goes for millions of other businesses in my state, across the nation and worldwide. Somebody less eloquent than yours truly might suggest we’re all screwed if this continues much longer.
Not since World War II has the entire world economy come to a complete government-induced standstill to the extent it has today. I will refrain from delving into the question of whether the current lock-downs are a proportionate measure in fighting this threat — though I have some thoughts about this — and rather attempt to answer the question of what their long-term economic and political consequences will be. After all, the damage has been done by now.
The first casualty of this mayhem beyond the death toll from the coronavirus is of course the Trump economy. Every common-sense observer understands it was roaring until three weeks ago, much to the chagrin of the media and Democrats, whose odds of taking back the presidency were rather close to zero and who could therefore be heard telling their fantasy “tale of two recoveries” to anybody with a willing ear (there weren’t many).
It has to be said, though, that the rise of our national debt in times of plenty was concerning. It was close to $20 trillion when President Trump took office and north of $23 trillion today, while instead it should have gone south during that period. In all fairness, few conservatives have rung the alarm bells about this topic since January 2017, in stark contrast to the Obama years. Where will our national debt stand after Congress is done bankrolling every American for as long as this crisis lasts?
The day of reckoning will come for the United States, and it may come soon. As the present lock-downs are crippling the worldwide economy and therefore the U.S. tax base, we will all wake up to the realization that spending north of 80% (and climbing) of our federal budget on Medicare, Medicaid and Social Security is no longer a tenable proposition. The fact that we will have to default on our government debt — and make no mistake, that moment will come too — won’t help matters economically.
A lot of folks will be very angry about this, and they will have their passions fueled by pandering politicians on both the left and right eager to place their (re-)election prospects above the financial health of the nation. It’s doubtful whether Trump is the right person to fight this battle, though he’s surprised us before. In any case, the national debt adds a dark dimension to our present challenge that even the Great Depression and Great Recession lacked.
Politically, therefore, the times ahead will be turbulent too. Members of the millennial generation will now enter the second deep recession in their lifetime, and the severity of prior recessions may well pale in comparison to 2009 and 2020. Much as I like to mock millennials for their insufferable sense of entitlement, their predisposition for socialism and Bernie is somewhat understandable, if misguided and foolish.
This possible cocktail of economic circumstances — a severe recession and a debt crisis — has the potential to realign our society politically, and not for the better. President Trump’s braggadocio about “winning” won’t last forever, if it even survives November under these circumstances. If the Democrats are able to pull Joe Biden across the finish line ahead of Trump, our next president will at least be somewhat of a moderate who, in his heart, doesn’t buy into socialism, identity politics, and all the other far-left claptrap. But who will be the nominee four or eight years from now? Self-proclaimed socialists are taking over the Democratic Party and may be ruling the country a decade hence. This may prove the final nail in the coffin for our Constitution and beautiful experiment in liberty. Humanity never learns.
The last, long overdue, recalibration the present crisis will jump-start is to our relationship with China. It’s safe to say that the days are gone in which we aimed our starry eyes at the “economic miracle” taking place in that country while hoping said miracle would lead to a grassroots movement for political change. The Chinese Communists drew a different lesson from 1989 than Francis Fukuyama and the Germans.
Not only has it become clear that the COVID-19 outbreak, as well as previous similar outbreaks, originated in the wet markets in China; the Chinese government also bungled its initial response, to the detriment of us all. But more important in the long run is that the outbreak laid bare a structural strategic weakness in the West’s economic relationship with the Asian giant. If the knowledge that China produces the vast majority of medicine and medical equipment for the U.S. market has been out there all along, it has now been pushed plainly into the limelight. (Only recently did I learn that the last aspirin factory in the U.S. closed its doors in 2002.) China’s recent threat to weaponize this dominance hasn’t helped to allay our fears.
It’s obvious that the COVID-19 pandemic presents a tremendous opportunity to bring the production of medical supplies back home, a goal that blends in seamlessly with Trump’s aim to stick it to the Chinese and revive American manufacturing. As the great Victor Davis Hanson keeps reiterating: Kindness is not an effective strategy with the Chi-coms, for they see it as a weakness to be exploited rather than an extended hand to be reciprocated. Three decades of artificially undervaluing the Chinese currency, dumping of goods below cost on the world market, and theft of intellectual property rights underscore this point.
In all likelihood our relationship with China will become even more strained than it has been in recent history. Its colonial ambitions in places like Africa and Latin America, as well as its vast arsenal of nuclear weapons, certainly bring back memories of the Cold War, but who knows where this will end? Economically we hold the upper hand, since it is the Chinese who are dependent on us to purchase their goods and who hold trillions of dollars of our debt, not the other way around. The current crisis has been a PR nightmare for China on all fronts. That said, its government is not going to take the abuse lying down.
The one silver lining surrounding this whole mess is that everybody is now talking about China. This debate is long overdue. For the rest, I fear that considerable economic and political turmoil will be our fate moving forward. The bill is coming due for our profligate spending habits of the past 50 years. Not to mention our lurking appetite for socialism.