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Biden Looking to Repeat Obama’s Mistakes on the Economy

 by Ray Keating

The Keating Files – December 13, 2020

 

Barack Obama was dealt a bad hand on the economy – to say the least – when he was elected in 2008. Unfortunately, his policy agenda proceeded to make matters worse, deepening the Great Recession and undermining the subsequent recovery. Obama’s vice president and now-President-elect Joe Biden didn’t learn from Obama’s errors, and apparently is ready to repeat the mistakes of recent history. 

Similar to Obama, Biden has been dealt an extremely bad hand on the economy, i.e., the pandemic, and the resulting troubles in terms of illnesses, deaths and economic woes. But again, looking ahead, Biden’s policy agenda, if implemented, would make matters worse.

 

No matter what one’s view of the government’s COVID-19-related shutdowns and aid efforts might be, the fact is that on the other side of this pandemic, the U.S. faces enormous economic challenges. Those include restarting economic growth, and dealing with the costs of a vast expansion in government spending and debt. 

 

The fact is that the consequences of this explosion in government can only be dealt with constructively in an environment of strong economic growth. On the policy front, that means a tax, regulatory and trade agenda that strengthens the foundation for economic growth, at the same time as government spending is being reined in and capped.

 

President Obama’s agenda of more government spending, higher taxes, and increased regulation wound up increasing the costs of and creating disincentives for entrepreneurship and private investment. In turn, the subsequent economy underperformed, with economic growth running at about half of what it should be during period periods of recovery and expansion.

 

And now we see President-elect Biden likewise presenting an agenda of expanded government, higher taxes, and increased taxes. For example, Biden’s tax plan features higher individual income, payroll and capital gains tax rates on upper-income earners, that is, on entrepreneurs and investors, and a higher corporate income tax rate. 

 

And then there’s Biden’s call for increased regulation – in particular, more government mandates in labor markets – and a spending agenda chock full of new programs and spending plans. 

 

Biden either fails to understand basic economics, or chooses politics over economics (or both). Economic common sense makes clear that raising costs, reducing potential returns, and diminishing incentives for starting up, expanding and investing in businesses will undermine economic, income and employment growth.

 

Reducing resources and incentives for entrepreneurship and investing in new businesses always rates as bad policy. But given the sweeping destruction of small businesses during this pandemic, and how vital small businesses are to growth, innovation and job creation, it’s even more dangerous, troubling and absurd right now.

 

There’s also a good chance that a Biden administration would continue with at least parts of the worst aspect of the Trump economic agenda, i.e., trade protectionism. After all, it’s important to keep in mind that prior to Trump, the Democrats ranked as the anti-free-trade, pro-protectionism party. The only real difference is that the Democrats tend to dress up protectionism in prettier language than Trump (not exactly hard to do). And the earliest, post-election signals are not good, as President-elect Biden has hesitated on talking about rolling back Trump’s destructive anti-trade measures, and even noted that he might keep the tariffs around that American businesses and consumers are paying on Chinese imports. 

 

Keep in mind that the 2008 presidential campaign of Barack Obama and Joe Biden was strikingly similar in tone on trade to the Trump agenda. Once in office, Obama stepped back from his protectionist rhetoric, but Trump moved aggressively in a protectionist direction. The Trump trade agenda has taken a toll on U.S. economic growth, and if Biden does not turn the U.S. in a free trade direction, then trade policy will continue to serve as another drag on economic recovery.

 

The economic road ahead promises to be rough. It will be made worse or better by the policies implemented. The U.S. needs a pro-growth agenda of tax and regulatory relief, free trade, and spending reduction and then restraint. However, President-elect Biden is focused on an anti-growth agenda of increased tax and regulatory burdens, more government spending, and at best, a foggy future on trade. 

 

Don’t be surprised if the post-pandemic economic recovery badly underperforms under Biden, just as was the case under Obama.

 

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Recent pieces by Ray Keating…

 

“Rebuilding Conservatism #2: Free Trade Rocks and Protectionism Sucks”

 

“Rebuilding Conservatism #1: What is Conservatism?”

 

“Bing Crosby – Christmas Crooner, Top Entertainer, Top Entrepreneur”

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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  His new book Vatican Shadows: A Pastor Stephen Grant Novel is the 13th thriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com. 

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

You also can order his book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. 

 

One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club.  Check it all out at https://www.patreon.com/pastorstephengrantfellowship

 

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast 

 

Check out Ray Keating’s Disney news and entertainment site at  www.DisneyBizJournal.com.

Rebuilding Conservatism #2: Free Trade Rocks and Protectionism Sucks

 by Ray Keating

The Keating Files – December 10, 2020

 

(Editor’s Note: Much damage has been inflicted on conservatism, conservative thought, and the conservative movement in recent years. The effort to heal and rebuild conservatism promises to be a difficult, but necessary undertaking. The Keating Files will regularly weigh in to help that process. This is our second “Rebuilding Conservatism” column, and it comes from the opening to my book Free Trade Rocks! 10 Points on International Trade Everyone Should Know.)

 

As an economist, let me make a couple of things clear when it comes to international trade. First, protectionism sucks. Second, free trade rocks. I know – not exactly highly technical stuff from the economics profession. But both points are true. So, let’s get started backing up these bold claims.

We’ll start by talking taxes. Most politicians understand that people don’t like to pay taxes. However, many folks don’t seem to get all that bothered when someone else gets hit with a bigger tax bill. There’s an old ditty that dates back to the early 1930s that goes, “Don’t tax you. Don’t tax me. Tax the guy behind the tree.”

 

It’s pretty standard fare for politicians to push the idea of taxing others – especially higher taxes on high-income earners or the “rich” – in order to then promise government goodies for everybody else presumably paid for with the resulting additional revenues. It’s class warfare, and it happens to be lousy economics.

 

Another group sometimes targeted for higher taxes is foreigners. Indeed, higher taxes can become an even easier sell if they are called tariffs – that is, taxes on imports – and politicians mistakenly or misleadingly argue that other countries wind up paying those tariffs.

 

While higher tariffs have popped up here and there during the post-World-War-II period, they largely were exceptions in a long-run move toward lower tariffs and freer trade. Both politicians and the public seemed to recall the role that high tariffs played in igniting the Great Depression (more on this later). But, of course, in politics, lessons eventually get unlearned. 

 

The first glimmers of tariffs making a serious comeback arrived via the losing presidential efforts of Pat Buchanan and Ross Perot in the 1990s – Buchanan in 1992, 1996 and 2000, and Perot in 1992 and 1996. Later, during his 2008 presidential campaign, Barack Obama struck a hostile tone toward free trade, and then in 2016, Donald Trump made protectionism a centerpiece of his run for the White House. 

 

Unlike Obama, who largely backed off his anti-trade campaign rhetoric after taking office, President Trump did the exact opposite. He pushed protectionist measures with an array of U.S. trading partners, including Mexico, Canada, China, South Korea, and Japan. One selling point by President Trump as he ramped up a trade war with China was that China, or Chinese businesses, would pay the tariffs he was imposing, not U.S. consumers or businesses.

 

In reality, the cost of higher taxes always spreads well beyond the groups targeted. For example, increased taxes on upper-income earners have negative effects on the private investment that is essential for economic, income and job growth. So, lots of people and the economy tend to suffer as resources are siphoned away from productive, private enterprises, and handed over to elected officials who dole out resources according to political incentives. As for tariffs on goods from China, for example, they wind up being paid by U.S. consumers and businesses who face increased costs and reduced choices.

 

There is the added political factor that consumers, at least, tend not to see the direct impact of tariffs clearly. In that way, tariffs are like regulations imposed by government. The effects are significant, but they are dealt with by others, such as by the businesses that must wrestle directly with increased costs. Compare these more-hidden costs to when government takes money directly out people’s paychecks via an income tax increase, jacks up property tax bills, or hits consumers with higher sales taxes at the cash register. Workers and consumers – and yes, voters – see those costs quite clearly, and respond accordingly.

 

When it comes to tariffs, one might change that old-time ditty to: “Don’t tax you. Don’t tax me. Tax the guy across the sea.” In reality, we all pay the price of higher tariffs in assorted ways.

 

But in getting at the basics of what free trade is, five fundamentals need to be summed up at the outset as to why free trade rocks!

 

First, and this obvious point is often missed, it’s critical to keep in mind that governments, for the most part, do not trade; instead, individuals and businesses do. There’s no difference between trades taking place across town, across the nation or around the globe. Trade happens between individuals, between businesses, and between individuals and businesses. Those trades would not occur if the parties involved were not made better off by such voluntary transactions. Trade, by definition, makes people better off.

 

Second, thanks to freer trade, competition is expanded and resources are allocated more efficiently, and therefore, consumers experience a wider choice of products and lower prices. 

 

Third, entrepreneurs, businesses and workers experience greater opportunity with freer trade, as more markets are open to their goods and services.

 

Fourth, as individuals and businesses specialize in those areas where they have a comparative advantage – that is, their largest advantage – and then trade with others, economic, productivity and income growth are boosted.

 

Fifth, international trade is increasingly important for the U.S. economy and to U.S. economic growth. Again, we’ll explore this more in an upcoming chapter, but for now, it’s simply worth noting that in 1955, real total trade (that is, exports plus imports) equaled only 6.3 percent of U.S. GDP. As of 2018, total trade had risen to 32.3 percent of the economy.

 

To sum up, free trade reduces costs through enhanced competition and lower trade barriers; expands choices and lowers prices for consumers; keeps U.S. firms competitive; opens new markets and opportunities for U.S. goods and services; expands economic freedom; and feeds economic growth.

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Other articles in the Rebuilding Conservatism Series…

 

“Rebuilding Conservatism #1: What is Conservatism?”

 

__________

 

Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  You can order his new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

Also, choose your 2021 TO DO List planner today, and enjoy the pre-order sale! Perfect for you and as Christmas gifts. Choose between The Lutheran Planner 2021: The TO DO List Solution, The Film Buff’s Planner 2021: The TO DO List Solution, and The Disney Planner 2021: The TO DO List Solution. Get more information at https://raykeatingonline.com/t/todolistsolutionplanners

 

The new book Vatican Shadows: A pastor Stephen Grant Novel is the 13ththriller/mystery in the Pastor Stephen Grant series. One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club.  Check it all out at https://www.patreon.com/pastorstephengrantfellowship

 

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast  

 

Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.

Never Waste an Emergency to Expand the Size of Government?

by Ray Keating

The Keating Files – August 4, 2020

It’s hard to find anyone these days not on board with the federal government shoveling big bucks out the door, given that government, reacting to the COVID-19 pandemic, has shut down large swathes of the economy. But that doesn’t mean the consequences of such actions will magically fail to materialize.

Make no mistake, whether or not you’re okay with staggering levels of federal spending, aid and loan programs, the bill will come due. And it will be huge. Actually, we’re already paying through lost output, lost businesses, lost investment, lost entrepreneurship and lost jobs. That’s what happens anytime government sucks massive amounts of resources out of the private sector – whether via taxes or borrowing – and then reallocates those dollars according to politics. Again, whether the current federal spending binge is justified or not, the costs are unavoidable.

Unfortunately, the ills could linger long into the future if politicians do what they usually do after major emergencies.

Consider some key examples from the past century-plus. 

Before World War I, from 1901 to 1916, for example, federal government outlays ran, on average, at just less than 2 percent of the economy. During U.S. participation in World War I and its immediate aftermath, federal outlays jumped to 3.2 percent of the economy in 1917, 16.6 percent in 1918, and 23.4 percent in 1919.

The economic growth – largely driven by major tax relief – and spending restraint that came in the 1920s during the administrations of Presidents Warren G. Harding and Calvin Coolidge, resulted in a reduction of the federal government’s take. Federal government outlays had declined to about 3 percent of the economy in the late 1920s. While that was an impressive reduction in the size of government, federal outlays as a share of the economy still stood at a third higher than prior to World War I.

Government failing to return to its pre-emergency levels would be the rule, rather than the exception, for the coming century.

Consider the Great Depression and World War II. Presidents Herbert Hoover and Franklin D. Roosevelt sought to fight economic woes with more government, that is, with unprecedented levels of taxes, regulation and spending (along with Hoover and Congress’ protectionism on trade). By doing so, these two presidents and Members of Congress created the Great Depression. They all failed to grasp that it was government causing the pain. And then came fighting the scourges of the Nazis and Japanese imperialism.

Consider a couple of moments during and after this period. After the Depression had dragged on for about a decade, federal outlays stood at 10.1 percent of GDP in 1939. That was more than three times the pre-Depression level. 

During World War II, spending naturally skyrocketed, with outlays climbing to a peak of 42.7 percent of GDP in 1944, and then declining to 14 percent at the end of the forties. That 14 percent level was markedly higher than where it was just before the war.

By the end of the Korean War in 1953, outlays once again had climbed, hitting 19.9 percent of GDP. Subsequently, federal spending backed off some, running around 18 percent of the economy at the end of the 1950s and into the mid-1960s. Again, that was down from the Korean War peak, but still notably above the pre-war level.

The Sixties eventually saw the War on Poverty and the Vietnam War. Federal outlays were pushed up to the 19 percent range, and then there was no effort to pare things back. Instead, federal outlays topped 20 percent of GDP, and staying around the 21 percent to 22 percent range (once more, give or take in years here and there) into the mid-1990s.

Economic growth and reductions in defense outlays actually brought federal spending down for a few years, coming in below 18 percent in 2000 and 2001.  That was noteworthy given where spending had been for more than three decades.

After the attacks on 9-11, however, federal outlays again grew as a share of the economy, exceeding 19 percent of GDP.

The 2008-09 mortgage and economic mess saw federal spending spike to 24.4 percent of GDP in 2009. The subsequent, gradual decline brought outlays as a share of GDP down to 20.2 percent in 2018 and 21 percent in 2019. So, outlays persisted above that 20 percent mark – again, federal spending seemed to reach a new, higher level. 

And now we have the enormous increase in federal spending tied to the pandemic. For example, the Congressional Budget Office reported last month that through the first nine months of fiscal year 2020 (covering October 2019 to June 2020), federal outlays increased by breathtaking 49 percent compared to same period last year.

Through the first nine months of FY2020, outlays came in at more than $5 trillion. For all of FY2019, federal outlays registered $4.4 trillion. Considering that further large increases in federal spending no doubt will be registered during the final three months of the 2020 budget year, and given the shrinking of the economy, it’s within reason that federal spending as a share of GDP could top 30 percent this year.

As vaccines and therapeutics make it to the market and the economy starts to seriously recover, what will happen to the size of government in this country? Initially, we can expect spending to fall from unprecedented heights. But where will it settle? 

Do politicians stay true to form, with spending persisting at levels higher than where it was prior to the pandemic? Cynical advocates of big government might ask, “Why waste an emergency by failing to expand the size of government?” If such sentiments prevail, the economy will suffer from slower economic, income and job growth.

Or, will some economic sanity take hold, with government spending retreating to levels perhaps experienced prior to 9-11, and thereby, leaving more resources in the private sector where they will be used more productively, with the economy then growing more robustly? Of course, for such sanity to prevail, it will require that politicians, and many voters, actually learn from history and economics. That sounds like a tall order, but there’s always hope.

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Ray Keating is a columnist, economist, podcaster and entrepreneur.  You can order his new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

Keating also is a novelist. His latest novel is  The Traitor: A Pastor Stephen Grant Novel, which is the 12^th  book in the series. The Kindle price has been cut to $2.99 for each book. Big sale on signed books and sets at https://raykeatingonline.com/t/book-of-the-month.

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast  

Free Enterprise in Three Minutes with Ray Keating – Episode #67: The Central Role of the Entrepreneur

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History Channel Presents Opportunity to Consider U.S. Grant’s Accomplishments, Including During His Presidency

by Ray Keating

The Keating Files – May 26, 2020

I’ve long admired Ulysses S. Grant for his perseverance; dedication to his family; accomplishments on the battlefield during the Civil War in defense of the United States (and the Declaration of Independence and U.S. Constitution) and on behalf, ultimately, of freeing the slaves; and some noteworthy achievements as president.

I’ve also long believed that Grant’s reputation suffered at the hands of an assortment of historians who were sympathetic, apologetic, justifiers and/or moral-equivalency peddlers for the Confederacy. Make no mistake, Grant was quite right when he declared, “There are but two parties now: traitors and patriots. And I want hereafter to be ranked with the latter and, I trust, the stronger party.”

The first night’s two hours of the History Channel’s three-night Grant documentary were quite good, and I look forward to the next four hours. (I’ll try to write a review after seeing the full six hours.)

For now, I would like to focus on the presidency and highlight two key accomplishments by President Grant and a Republican Congress after the Civil War. The following is an excerpt from an essay in my new book Behind Enemy Lines: Conservative Communiques from left-Wing New York:

Not only do supply-side economic ideas formally date back to at least the dawn of modern-day economics – for example, with Adam Smith and An Inquiry into the Nature and Causes of the Wealth of Nations (1776), and Jean-Baptiste Say and A Treatise on Political Economy (1803) – but it follows that supply-side economic policies have been around for some time as well.

Briefly consider what happened during and after the U.S. Civil War. As wartime measures, President Abraham Lincoln and Congress decided to abandon hard money – that is, issuing “greenbacks” that were not convertible into gold or silver – and imposed the first income tax in U.S. history. The Civil War income tax went into effect at a flat 3 percent rate in 1862, and was later increased to a progressive rate structure, with a top rate of 10 percent.

Under President Ulysses S. Grant and a Republican Congress after the war, the income tax was reduced to a flat 5 percent tax, and subsequently in an 1870 act, the rate was cut further, and the income tax sentenced to be terminated at the end of 1871. For good measure, Grant and Congress moved the U.S. back towards a gold standard, after the greenbacks had led to inflation during the war. As noted in a 2011 Congressional Research Service report (“Brief History of the Gold Standard in the United States”) on the history of the gold standard:

After the war was over, Congress determined to return to the metallic standard at the same parity that existed before the war. To do this, the market exchange rate of greenbacks for gold had to be brought back to its old level. This was accomplished by slowly removing the greenbacks from circulation. This was an off-and-on effort, with notes removed, held steady, and even returned to circulation. In 1875, it was decided to reduce their number to $300 million. In 1878, however, their number was frozen at about $347 million, where it remained for a century.

Parity between the greenback and gold dollars was achieved in 1879, returning the United States to a metallic standard. The government stood ready to pay its debts in gold, accept greenbacks for customs, and to redeem greenbacks on demand for gold.

The combination of eliminating the income tax and returning the U.S. to sound money – a very supply-side thing to do – resulted in a long period of robust economic growth. Focusing on the monetary aspect, supply-side thinker Lew Lehrman (in his book Money, Gold, and History)explained: 

“It is also true that the price level gradually declined during periods of diminished rates of discovery of the monetary metals – causing real wages to rise. Such a period was the late 19th century in the United States, known to some historians as ‘The Great Deflation.’ The average annual decline in the price level during this period was one to two percent. But this fall in the price level was associated with one of America’s greatest periods of economic growth – three to four percent annually. Compared to the Great Depression of 1930-1933 – caused by monopoly central banking, protectionism, trade barriers, and the official reserve currency roles of the dollar and the pound – the monetary deflation of 1870-1900 was but a gentle decline amidst a remarkable economic expansion, productivity and wage growth.”

Indeed, historians, along with many economists, have a difficult time wrestling with the fact that economic growth can occur without inflation, not to mention growth with deflation. It is not unusual, for example, to see deflation confused with economic contraction. But consider the period of the 1870s, with the income tax eliminated, and a shift to sound money. From 1870 to 1880, while the price level declined:

• real annual GNP growth averaged 5.3 percent,

• the number of employed grew by 38 percent,

• farm output expanded by 61 percent,

• and manufacturing production grew by 68 percent.

By the way, federal government spending was 14 percent lower in 1880 compared to 1870, as was federal debt.

I would argue that the foundational steps taken by Grant and Congress on the tax and monetary fronts provided a sound policy foundation that helped bring about unprecedented growth and innovation in our economy that lasted some six decades.

It’s also worth highlighting that Grant worked to achieve a balancing act with Reconstruction, as noted by Joan Waugh, a history professor writing for the Miller Center:

As President, Grant was determined to follow Lincoln's policy of reconciliation with the South rather than one of retribution or appeasement. He also wanted to make sure that the federal government preserved the sacrifices of the war by sustaining a strong Union while at the same time protecting the newly freed slaves and preventing former unreconstructed Confederates from regaining power in the South...

Grant wanted to meet the needs of the newly freed slaves and, at the same time, entice white Southerners into a Republican Party dedicated to creating jobs and solid businesses in the defeated region. However, it proved impossible for him to achieve these two competing goals. When he used federal troops or legislation to defend the rights of blacks, whites assailed him as a tyrant trampling states' rights. Yet it went against his personal and political goals to abandon the freed slaves and the Republican Party in the South. In the end, Grant had little chance to take his good intentions and make them into effective policy. 

Indeed, whether he read Adam Smith or not, Grant obviously grasped Smith’s point that he made over two decades before The Wealth of Nations was published: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice...”

Upon his death and for a fair time afterwards, Grant was widely admired. Now, once again in the twenty-first century, Grant deserves to be recognized as one of the greats in American history for his accomplishments on and off the bloody fields of the Civil War.

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Ray Keating is a columnist, economist, podcaster and entrepreneur.  You can order his new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. Keating also is a novelist. His latest novels are  The Traitor: A Pastor Stephen Grant Novel, which is the 12^th book in the series, and the second edition of Root of All Evil? A Pastor Stephen Grant Novel with a new Author Introduction. The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcastand the Free Enterprise in Three Minutes Podcast 

Free Enterprise in Three Minutes with Ray Keating – Episode #63: Are We in a Recession or Depression?

At first glance, that’s not an easy question to answer because the definition of a recession isn’t exactly crystal clear, and it gets murkier when defining a depression. But Keating tries to clear things up.

The COVID-19 Crisis: Our Crushed Economy

Part I of a Projected Three-Part Series

by Ray Keating

The Keating Files – May 15, 2020

Make no mistake, the coronavirus pandemic and resulting government shutdowns of large parts of economy have had devastating effects across our economy, and the impact will not be quickly reversed. In fact, with misguided policymaking after COVID-19 has come under control (hopefully via vaccines and/or therapeutics), our economic ills could be further extended.

It pays to keep in mind that whenever the economy goes seriously off the rails, some kind of government action usually can be identified that either caused the mess or made it worse. In our current situation, the rapid spread of this virus, the threat to the lives of individuals, and the actual resulting deaths had their own negative consequences for the economy, and then governmental efforts – largely necessary though far from perfect (anyone who expects something even close to efficiency from government in anything doesn’t understand government) – have resulted in harsh economic consequences.

This column is not meant as an argument against what the government has done, nor as some kind of support for all that government has implemented. It’s also not meant to align with those arguing irresponsibly for an immediate, mask-less reopening of the economy with little concern, it seems, for ongoing efforts against spreading this virus. What follows is a look at key indicators describing our grim state of economic affairs.

First, real GDP (i.e., inflation-adjusted gross domestic product) in the first quarter plunged by 4.8 percent, with all major categories of economic activity declining dramatically, including consumer spending, business investment and trade. During the post-World-War-II era, there were only seven quarters when the economy declined by larger percentages.

Second, information coming in about the start of the second quarter points to an even larger drop in GDP. For example, retail sales plunged by 16.4 percent in April. That was the biggest monthly decline in a dataset going back to 1992. Industrial production – that is, the real output of the manufacturing, mining, and electric and gas utilities – tumbled by 11.2 percent in April. That was the largest monthly decline on record in an index that dates back 101 years. The drop in manufacturing production was even larger at 13.7 percent – again, biggest decline on record.

Third, jobs are disappearing at a frightening pace. Initial weekly unemployment claims over the first eight weeks of the COVID-19 crisis tallied up to 36.5 million. The story from the April employment report arguably was even worse. Perhaps most distressing was the fact that the employment-population ratio in April fell to the lowest level ever recorded in a dataset going back to 1948, plummeting from 61.1 percent in February to 60 percent in March, and then to 51.3 percent in April. 

Fourth, entrepreneurship is suffering as well. For example, the number of unincorporated self-employed individuals – an important measure of small business and startup activity – declined in April to its lowest level since January 1980. 

For good measure, the Census Bureau recently reported that business applications for tax IDs – one measure of business formation (though far from complete) – took a dive of 4.5 percent in the first quarter of this year. In addition, high-propensity business applications – which are businesses with a high likelihood to turn into businesses with payrolls – fell by 5.4 percent in April. These measures of entrepreneurial activity promise to fall further in the second quarter of this year.

Indeed, there’s nothing positive going on in the U.S. economy currently. We’re likely to see the steepest decline in economic activity during the second quarter of this year (that is, the current quarter) since the Great Depression.

After reviewing these grim numbers and trends, it’s critical to understand that these aren’t just some cold statistics detached from reality. Instead, they quantify reality. These numbers reflect or communicate real economic hardship for tens of millions of Americans across the nation. At the same time, these numbers do not negate the realities of mounting coronavirus deaths, and the understanding that the number of deaths could have been much worse, and still threaten to get worse. More on that in Part II in this series.

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Ray Keating is a columnist, economist, podcaster and entrepreneur.  You can order his new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. Keating also is a novelist. His latest novels are  The Traitor: A Pastor Stephen Grant Novel, which is the 12^th book in the series, and the second edition of Root of All Evil? A Pastor Stephen Grant Novel with a new Author Introduction. The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcastand the Free Enterprise in Three Minutes Podcast