Like the disease itself, the impact is full of mysteries.
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Covid-19 is a weird, mysterious disease, so it makes sense its economic impacts are pretty weird and mysterious, too.
For one thing, its effects aren’t evenly distributed. It has been absolute hell on airlines, hotels and rental-car companies. But it has been heaven for, say, online grocery sellers, as anybody routinely fighting for delivery slots can tell you, and as this chart from Ben Schott illustrates:
The net effect, though, has been a quick, deep recession, with subtle notes of depression on the finish. Nobel-winning economist Paul Krugman is optimistic we can avoid a depression, he tells Noah Smith, though he warns a too-quick reopening could extend the pain. But even this econogenius struggles to characterize the nature of the truck that just ran us over. “Is this a demand shock or a supply shock? Yes. And no,” he explains. Got it!
How about all that stimulus we’ve thrown at the economy? Good luck figuring that out, too. Tim O’Brien and Nir Kaissar run an inventory of everything Congress has done so far, summed up in this helpful chart:
Has all this spending saved the economy? As the great Paul Krugman once said: Yes. And no. We still have too little insight into how huge buckets of it are being spent. Not enough has gone to health care or state and local governments. And the amount allocated to households will run short soon.
In fact, though all the chatter these days is about how the economy might bounce like a dead cat in the third quarter, we will almost certainly need more stimulus. Unfortunately, old ideological differences are starting to slow the government’s response time. So Narayana Kocherlakota suggests three econo-boosters that would please both Keynesians and non-Keynesians. Karl Smith, similarly, proposes keeping some of the padded unemployment benefits Republicans now want to ditch, but adding a bonus for people who get back to work. Can Congress agree on such things? Another mystery.
