After experiencing an unprecedented collapse due to the coronavirus pandemic and subsequent societal lockdowns, the American economy appears poised to make a major rebound during the third quarter of 2020 – which ends next week.
Such a bounce back could bolster the reelection prospects of U.S. president Donald Trump, who is relying on a rapid recovery to help sway the dwindling percentage of undecided voters ahead of the November 3, 2020 presidential election.
The odds are stacked against Trump … assuming you believe the polls, anyway.
How big a boost is the incumbent likely to get? According to the latest GDPNow estimate from the Atlanta Federal Reserve, gross domestic product during the months of July, August and September is projected to expand by a whopping 32 percent. Meanwhile, IHS Markit – which measures GDP on a monthly level – is calling for a 28.7 percent third quarter bounce.
Even better news for Trump? The official “advance estimate” of third quarter GDP growth from the U.S. Bureau of Economic Analysis (BEA) will be released on October 29, 2020 – just five days before the election.
A huge positive number less than a week before voters cast their ballots could prove pivotal … assuming they are able to see evidence of this bounce back in their daily lives.
In other economic news, the Federal Reserve announced this week that American households’ net worth expanded by 7 percent between April and June of this year – reaching a record $119 trillion. Unfortunately, much of this wealth gain appears to be concentrated among the über-wealthy – with the top one percent of Americans possessing 31 percent of the nation’s largesse.
According to Opportunity Insights – a group which advocates for income equality – the top third of American jobs have fully recovered from the coronavirus pandemic while the lowest third of American jobs remain 16 percent behind pre-pandemic levels.
“Those are things that hold back our economy,” Federal Reserve chairman Jerome Powell said last week. “If we want to have the highest potential output and the best output for our economy, we need that prosperity to be very broadly spread.”
We concur … which is why this news outlet has repeatedly rejected crony capitalism (and disproportionately high tax relief for the wealthy) and embraced broad-based relief for middle-income and low-income workers.
In fact, we expressed concerns back in the spring that the initial Covid-19 stimulus bill included far too much in the way of corporate welfare – money that would have been better spent shoring up middle-income Americans and small businesses hit hardest by the fallout from the pandemic.
These numbers would seem to bear out our concerns … although the economic devastation wrought by the virus and its subsequent shutdowns is clearly not quite as apocalyptic as originally feared.
Nonetheless, Powell has been urging additional stimulus, while other Federal Reserve members – including bank of St. Louis president James Bullard – have said additional transfer payments are not necessary.
Worth considering? Earlier this year, Powell admitted he was wrong – and Trump was right – about the Fed’s monetary policy. Specifically, the chairman admitted that he and his fellow central bank members unnecessarily hamstrung growth by tightening access to credit during the first two-and-a-half years of Trump’s administration.
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