Larry Kudlow and Ben Harris presented NCSL Base Camp 2020 attendees with two very different visions of the current state of the economy in what sometimes seemed like two different countries.
“I’m kind of the optimist right now in a very, very difficult story in a brutal pandemic contraction that is not yet over. But we are getting a rebound in the economy as the states and cities gradually open up. From different surveys, I’d say about 80% of businesses have reopened,” said Kudlow, director of the U.S. National Economic Council and an advisor to President Donald Trump.
“The numbers coming out of this pandemic contraction look pretty good,” he added. “My job is not done, but as you know, unemployment has fallen to 8.4%. There are still a lot of people not working and we have to be concerned about that. We are providing assistance and maybe more assistance as those (Congressional) talks continue.
“I will say that, look through the data for the last four months, you do see a very strong V-shaped recovery. Housing is very strong, automobiles very strong, retail strong, manufacturing surprisingly strong. We had a very deep inventory decline in (the second quarter) and it seems to me to meet the demand for cars and retailers, we’re going to get an inventory rebuild which is going to be a very powerful force for economic growth.”
Ben Harris, economic advisor to Joe Biden, speaks with Alabama Senator Arthur Orr (R) during NCSL Base Camp 2020.
Ben Harris, long-time chief economic advisor to Vice President Joe Biden, went deeper into the alphabet.
“I wish a V-shaped recovery were true,” he said. “It’s really more of a K-shaped recovery. A lot of people are really hurting and don’t see light at end of the tunnel. We have almost 30 million on unemployment insurance, 4 million dropped out of market entirely, 29 (million) families with children report not having enough to eat or being food insecure, 50 million Americans already exhausted their savings.
“Some industries are still getting slammed. Manufacturing is down 700,000 jobs. The scary thing is it is not coming back the way we thought we would and for many people things are getting worse. Savings accounts are exhausted, we’re seeing small businesses reporting they are running out of cash. Small businesses are going to have to start closing doors.”
He said it’s the first time in his memory that we’ve seen health outcomes so closely tied to economic outcomes.
“There’s no way our economy can get back on track until we fix the pandemic,” Harris said. “We have to make it safe to go out into the economy. We have the answers to that: Push through a vaccine as soon as possible, wear masks, social distance. But until we get to that we’re not going to see that V-shaped recovery.”
Kudlow reinforced the administration’s push to aggressively reopen the economy.
“The issue is trying to get the economy to reopen as much as possible in a safe and secure manner,” he said. “I noticed in the papers this week that a couple of large New York banks are directing their staff to come back to work in the city rather than working from home.
“A lot can be done offsite but a lot that works better when you’re sitting around a table face to face. It’s the same thing with education. The president would be willing to provide further assistance, particularly to the education side.”
Kudlow spoke on a day when the president urged Congressional Republicans to “go for the much higher numbers” in stimulus negotiations and Kudlow referenced optimism from White House Chief of Staff Mark Meadows.
Harris agreed with earlier NCSL Base Camp 2020 speaker Mark Zandi in pushing for an aggressive stimulus for states.
“If you go back to 2010, coming out of that recession, it was the first recovery where states and local governments weren’t an active part of that recovery,” he said. “Because of decisions made by Congress, you saw jobs at the state and local levels fall by 750,000. This is not the fault of state leaders, it’s the fault of Congress that decided not one more penny after 2010. It meant very tough choices for states: increasing tuition, enacting tax increases, enacting steep spending cuts.
“You don’t get out of a recession by laying off police officers and firefighters. You get out of a recession by relying on the federal government to do what it uniquely empowered to do, which is borrow in ways states can’t. It’s a tragedy the states aren’t getting the fiscal support and leadership from the federal government right now and I worry very much about falling back into another recession if it doesn’t turn around very quickly.
“You need more money, more leadership, more support.”
Mark Wolf is the editor of the NCSL Blog.
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