In the world of the bureaucratic mandarins currently spinning seemingly endless new restrictions on what we can do, where we can go, and what we can buy – everything is abstract. You can categorize people, label occupations as essential or non-essential, shut down whole broad swathes of the world’s largest economy and it all seems to make sense.
After all, your job is essential. Your paycheck keeps coming. Worst comes to worst; you work from home in your pajamas and think about how tough you have it.
Unfortunately, the great majority of Americans don’t live in that world. They live in one where when they don’t work they don’t get paid. They live in one where the landlord still expects the rent even when you’re out of work. They live in one where the supermarket still demands payment for the groceries you need to feed your family.
In Washington and in state capitals around the nation, the “experts” are debating questions of when or if to open the economy. Those are big questions. No one is suggesting the pandemic is make-believe or that public health considerations should be ignored. One wonders, though, if all these “experts” appreciate the tradeoffs being made because every decision to lockdown or restrict economic activity is another hammer blow to the economy of this great nation.
A recently released study by the Federal Reserve Bank of St. Louis indicates that 47 million Americans could lose their jobs in the second quarter of this year as a result of the fallout from the pandemic and the measures that were taken to control it. If so, this will send the unemployment rate to 32%. The unemployment rate at the height of the Great Depression peaked at 25%. The unemployment rate in the United States before the impact of the pandemic was felt was 3.5%.
The Neiman Marcus Group has announced that it will file for bankruptcy -becoming the first major American department store chain to collapse as a result of the economic fallout from the pandemic. All of its stores are already closed. Most of its 14,000 employees were furloughed some time ago.
Huge numbers of Americans have made it so far by charging their daily expenses on credit cards. This is a dangerous and unsustainable practice. Many of these individuals are already reaching the point where they cannot make payments on their credit cards. Companies such as Capital One, Discover Financial Services, and Synchrony have already been forced to allow borrowers to pause credit card payments for a month or longer. Some companies are also waiving late fees and interest charges. Such moves are only temporary reprieves, however. They buy individuals time, but not much. Investors know that. Shares of Discover and Synchrony have lost half their value already this year.
Across the country, food banks are hard-pressed to keep up with the explosive growth in the number of individuals relying upon their services. Many are simply running out of food to dispense. In New York City one-third of the food banks have been forced to close for lack of supplies. Before the pandemic 1 in 7 Americans relied on food banks. That number has now likely tripled.
The problem is not a lack of production. Farms are dumping produce they cannot sell in many cases. The problem is that the consumers who need food don’t have the money to buy it and overwhelmed charities cannot move fast enough to distribute food even when producers donate it.
Thirty-one percent of renters did not pay their rent the first week in April. Just for emphasis, let’s restate that statistic in another way. Almost one-third of all American renters didn’t pay rent on time this month.
This is only the beginning. More families will run through their savings in the weeks ahead. More people will turn to food banks and fail to pay their bills. Eighteen percent of low-income Americans went into the pandemic with no savings at all. Thirty-four percent of them had only enough money to survive for three months.
And, then, the ripple effects will really begin to be felt. The landlord who doesn’t get rent payments will default on his loans or be unable to keep the heat on. The bank that doesn’t receive mortgage payments will go under. The grocery stores that are seeing their customers vanish will fold. Unemployment will surge as the feedback loop of a collapsing economy gathers strength.
Nieman Marcus is only the beginning. Companies considered in danger of going under already include Nordstrom, Kroger, Best Buy, Lowe’s, and Rite Aid. Bankruptcy courts are expected to be overwhelmed.
It may seem easy in the abstract world of bureaucrats, spreadsheets, and policy pronouncements to differentiate between the essential and the non-essential. It may seem easy to focus only on curbing the coronavirus and decree that we will do whatever it takes to slow its spread. Turns out it’s not that easy.
Turns out a lot of things are essential. Food is one of them.