America Failed at COVID-19, but the Economys Okay. Why? – The Atlantic

Another structural advantage is that Washington prints the worlds reserve currency, which means that it tends to suck in global capital flows when uncertainty is high, as in a pandemic, Mark Zandi of Moodys 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 countrys 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 economiesless 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.

Wed 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 Moodys 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 worsein some cases far worsein terms of output.

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America Failed at COVID-19, but the Economys Okay. Why? - The Atlantic