Post-Election Gridlock Could Scar the Economy

Post-Election Gridlock Could Scar the Economy

Kelsey Kremer/The Register

Even after the election, the nation could face a prolonged stretch of political gridlock that further delays another coronavirus relief package even as the economy faces additional pain. 

The Washington Post’s Jeff Stein reports that a number of economic sectors are preparing to be hit by the surge of Covid-19 cases and the arrival of winter, with some 40% of restaurant owners across the country saying in industry surveys that the expect to go out of business by March without more aid. The travel and hotel sectors also face severe strains. 

At the same time, millions of Americans “are also at risk of having their power and water shut off with unpaid utility bills coming due, while protections for renters, student borrowers and jobless Americans will expire by the end of the year” unless Congress can pass additional relief legislation. 

“I don’t think the biggest risks are common or national-level. The biggest risks are specific geographies and specific parts of the population,” said economist Ernie Tedeschi. “But the pain for those segments could be very deep.” 

Michael Strain of the American Enterprise Institute, a right-leaning think tank, told the Post: “All signs suggest that we’re in for the worst of this at the same time the situation in Washington is also becoming its worst and most horrible.” 

What will Trump do? “Among the biggest mysteries hovering over this uncertainty is what Trump and his aides will do after Election Day, particularly if he loses to Democratic nominee Joe Biden,” Stein writes. “There are almost three months between the Nov. 3 election and the next inauguration on Jan. 20 — approximately the period of time when both public health experts and economists fear the coronavirus will strike the nation with renewed ferocity. As colder weather pushes people indoors, the Trump administration has not outlined a plan for how to deal with an expected surge of cases and hospitalizations. … Several former White House officials and numerous Republican aides on Capitol Hill said they believe it is possible the president loses interest in the stimulus package once it has no utility for his 2020 presidential campaign.” 

Another wave of job losses: “We are about to see a second wave of job losses — this one more likely to permanently push millions out of the labor force, lower wages and leave long-lasting scars on the economy,” writes Dion Rabouin at Axios. Rabouin notes that a number of large corporations have announced thousands of layoffs recently. “Rather than a panic-driven effort to cut costs and stay above water, these job losses are largely a result of companies reducing headcount after mergers and acquisitions or as part of a longer-term strategy,” he adds. 

The bottom line: As Axios’s Dan Primack sums it up, “With less than 24 hours until Election Day, there's one truth that applies to every federal elected official running for re-election, from President Trump to the furthest backbencher in Congress: They failed to produce the economic stimulus that almost everyone agrees is needed, including a second wave of PPP loans.”