COVID-19 and the Future of the United States as a World Leader | Mercatus Center

Many observers and a few demagogues have argued that the United States entered this trying period from a position of strength; they claimed that the economy was stronger than ever. That was a delusion based on the stock market reaching record highs and unemployment hitting record lows. Americans have already seen how fragile the stock market was the wealth accumulated in the last three years of market rise has now disappeared. And unemployment was pushed artificially low by having larger numbers of people in retirement and disability. The proportion of the population in the workforce since 2015, about 63 percent, remains substantially lower than it was from 1990 to 2010, about 66 percent; accounting for this difference, unemployment is about the same as it was for most of the period since 2000. GDP growth, a better indicator of the economy s strength, has generally been weaker about 2 percent per year, despite strong monetary and fiscal stimulus, in the form of record-low interest rates and record-high government deficits. In sum, the United States entered this period of extreme economic stress with an artificially inflated stock market, historically low labor force participation, and slow economic growth rates.

It would be indulging a second delusion to assume that the economy will automatically bounce into a strong position once the nadir of the current crisis has passed. Instead, the United States needs to accept the reality of its weak condition if its policies are to lay the foundation for rapid economic growth after the pandemic recedes. Critical to that task will be addressing the country s demographic, health, and migration challenges with novel policy solutions.

via www.mercatus.org