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Thursday, Oct 22, 2026

Trump’s magic touch? America Failed at COVID-19, but the Economy’s Okay. Why?

Trump’s magic touch? America Failed at COVID-19, but the Economy’s Okay. Why?

The U.S. entered the coronavirus recession with a few structural advantages. Its success may not last for long.
Here is a remarkable, underappreciated fact: The U.S. economy has performed far better than that of many of the country’s peers during this horrible year. The International Monetary Fund expects the U.S. economy to contract by 4.4 percent in 2020, versus 5.3 percent in Japan, 6 percent in Germany, 7.1 percent in Canada, and nearly 10 percent in both the United Kingdom and France.

This fact is not a result of the United States managing its public-health response better than those countries, allowing it to reopen from lockdown sooner and for consumption to roar back. Indeed, many of those peer nations have had significantly better outcomes, as measured by COVID-19 caseloads, hospitalizations, and death rates. Nor is it a result of the U.S. preserving more jobs. The unemployment rate here is far higher here than it is in Japan, Germany, or the U.K.

America owes its macroeconomic good fortune to Washington muscling through a giant and successful stimulus in the spring—a policy victory that Congress and the outgoing Trump administration are doing their best to cram into the jaws of defeat.

The United States came into the coronavirus recession with a few structural advantages, including a highly diversified economy. Countries dependent on a single hard-hit industry-Spain on tourism, for instance-have tended to falter regardless of their health or macroeconomic response. The U.S. is also lucky not to have to rely on exports for growth.

World Bank data show that sales abroad account for 12 percent of our gross domestic product, compared with 18 percent in Japan, 32 percent in Canada, and 47 percent in Germany. This means that the collapse in global trade during the pandemic has hit other countries far harder than the U.S.

Another structural advantage is that Washington prints the world’s reserve currency, which means that it tends to suck in global capital flows when uncertainty is high, “as in a pandemic,” Mark Zandi of Moody’s Analytics told me. That pushes up American asset values and lowers American borrowing costs.

The U.S. labor market is also more flexible than those in other countries, Zandi noted. “Americans are more willing to adopt new technologies, to move for a job, and [to] make big changes in how they live and work.” That makes absorbing big, strange shocks easier.

The United States has been better not just in form but also in function, with regard to combatting the economic fallout of the pandemic. It has had best-of-class monetary policy: This spring, the Federal Reserve, the country’s most capable technocratic institution, calmed the financial markets with an alphabet soup of special programs while dropping interest rates to zero and flooding the markets with cash.

Yet Washington, improbably, has truly distinguished itself with fiscal policy, at least earlier in the year. The U.S. has fewer, stingier, more complicated, and more conditional safety nets available to people than many other advanced economies-less generous “automatic stabilizers,” in economic parlance.

But when COVID-19 hit, congressional Democrats negotiated a series of enormous, highly effective temporary stabilizers with Republicans who were ready to go big, among them Treasury Secretary Steven Mnuchin.

In the $2.2 trillion CARES Act, Congress provided forgivable loans to small businesses; sent $1,200 checks to most Americans; added gig workers to the unemployment-insurance system; and put a $600 weekly top-up on unemployment checks.

“We’d never seen such a rapid and massive amount of stimulus being doled out by Congress, ever,” Gregory Daco, an economist at the international forecasting firm Oxford Economics, told me. “Contrast it with what happened in the global financial crisis” that precipitated the Great Recession in 2007. “It took three times longer to get a stimulus package half the size.” Indeed, the U.S. provided fiscal support equivalent to roughly 12 percent of its GDP, data from Moody’s Analytics show, one-third more than Germany and twice as much as the U.K. Other than Australia, no large, wealthy country did more to support its economy.

The investment paid off. The U.S. increased millions of low-income families’ earnings over the spring and summer, and increased the amount of money in American pockets overall. This meant that while the economy experienced a sharp, miserable contraction, as businesses closed down, trade halted, and fear took over, it has bounced back better than many of its peers. The U.K., Germany, Canada, and France are all doing worse—in some cases far worse—in terms of output.

Still, the U.S. is not exactly the North Star leading the world out of the death, destruction, and devastation of 2020. Some peer countries did better in macroeconomic terms—countries that did not bungle their public-health responses and managed to add good amounts of stimulus as necessary, too. Australia, South Korea, and Taiwan have saved lives, jobs, and output, all together.

Moreover, Washington shored up output without shoring up employment, a queasy policy legacy for the 10 million Americans who had jobs a year ago and do not today. The Paycheck Protection Program created in the CARES Act did help many small businesses keep employees on their books in the early days of the pandemic. But many small firms are ailing now; the hospitality industry has been decimated; and state and local governments are shedding workers. Other countries elected to directly subsidize employment, paying businesses to keep workers on the books, though often at lower pay.

America’s strong GDP number also masks the brutal inequality of the recession. Young workers and low-wage workers have been hit particularly hard, meaning that the people least capable of bearing any financial pain are being asked to bear the majority of it, especially since the initial federal unemployment-insurance bonus ended.

The decision in many states to not open public schools for in-person instruction has also hurt parents, especially women, hundreds of thousands of whom have dropped out of the labor force to supervise their children’s online learning. “Working mothers and single mothers are having a miserable time in this recovery,” Michelle Holder, an economist at the John Jay College of Criminal Justice at the City University of New York, told me. She also noted that the recession has amplified deep racial disparities, with a large share of Black and Latino workers losing jobs and many leaving the labor force entirely.

The United States’ relative GDP success might not last much longer, either. The country is facing not just a slowing recovery but also a potential reversal. Eviction moratoriums and student-loan-payment deferrals end on December 31. The Federal Reserve is in a public spat with the Treasury Department, which is trying to end and reclaim the financing for some of the Fed’s special-support programs.

The financial benefits from the $1,200 in helicopter money and the additional $600 in unemployment checks are fading too. Credit-card and debit-card usage is decreasing. Restaurant reservations are down. Measures of consumer mobility, like surveys of miles driven and flights taken, are dropping. Layoffs are increasing, and unemployment-insurance claims are stuck above 1 million a week.

The situation is made yet more dangerous by the intensification of the pandemic. “We’re in a scary exponential phase of the virus,” Daco told me. “That means higher hospitalizations, more deaths, more restrictions on activity, more fear, and therefore less consumer spending, less business investment, and a slowdown in economic activity.” Any advantages the U.S. had are dwindling. “We’re looking at a double-dip recession and deep scarring” if Congress does nothing, says Diane Swonk, the chief economist at Grant Thornton, an accounting and advisory firm.

The U.S. is still winning the global recovery, at least in GDP terms. But Congress seems uninterested in repeating its springtime success. Republicans are negotiating for an insufficient stimulus, with Democrats holding out for a bigger one that might never materialize. And not even the widespread deployment of a vaccine in 2021 will make workers whole again.
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