Why the prognosis for the U.S., as for its president, remains worrisome.
Aclear- cut Joe Biden victory in November appears more likely following U.S. President Donald Trump’s COVID-19 diagnosis and his unhinged debate performance. But the prognosis for the country, like Trump, remains worrisome. Both suffer from ailments caused, in part, by the pandemic, but exacerbated by underlying conditions — and there is no surefire vaccine available.
Trump’s political theatre aside, the United States has a very sick economy and society. Its stock markets have been fairly strong, but are not a valid indicator. The reality is that governments have opened the floodgates of spending to keep consumers and workers whole. There is no real recovery.
Tourism, restaurants, entertainment and retail are unsustainable until there is a foolproof vaccine, which is still many months away. Jobs figures are at Depression levels. And Yelp’s latest “Economic Impact Report” estimates that 60 per cent of the businesses that closed will never reopen.
Worse than the pandemic are America’s other plagues.
Trevor Noren, the executive director of the global investor research firm 13D, delineated them at the recent Global Business Forum in Banff, Alta.
The biggest concern is growing inequality. The incomes of 127 million Americans have been dropping steadily under Trump, while the richest have enjoyed stock market gains. The assets of America’s 643 billionaires have risen by US$ 685 billion ($ 909 billion) and the 12 richest are 40 per cent wealthier than they were pre- COVID. Today, the richest 10 per cent own 84 per cent of stock market equities.
Trump’s trickle- up tax cuts have exacerbated the concentration of wealth and power. And such conditions have, historically speaking, led to revolutions. This year, the United States is not immune from such a drastic remedy, played out via the ballot box or in the streets.
Social unrest is growing among disadvantaged groups of people, especially African- Americans and millennials. Unless the government steps in with drastic policy changes, this trend will continue unabated, according to Noren. For instance, during the pandemic, 60 per cent of Black households have experienced financial hardship, food insecurity, housing problems or loss of income, compared to 36 per cent of white households. And millennials, backers of the progressive movement, make 20 per cent less than their parents made at the same age.
Added to those challenges is the fact that automation has dramatically accelerated during COVID, which indicates that many of the people who have been put out of work over the past six months will not be called back to work, even if there is a recovery. Dislocation is another concern: people have been fleeing megacities, thus disrupting real estate markets and local economies.
Fortunately, such adversities are resulting in a growing public consensus that Trump has been an unmitigated disaster. Since his hospitalization, three out of four Americans say they don’t believe Trump took proper precautions against the virus. Now, 57 per cent disapprove of Trump’s response to the pandemic, which is up about three points from a poll that ran late last week, before he became infected.
What appears to be happening is that the disaffected are joining forces with the disadvantaged, which should result in a Democratic sweep next month. The caveat, of course, is that no one believes that Biden and the Democrats have a foolproof plan to cure what ails America. But at least their prescriptions address all of the symptoms.
Meanwhile, the incumbent is hemorrhaging credibility. An Oct. 5 poll commissioned by NBC and the Wall Street Journal showed Biden with 53 per cent support, compared to Trump’s 39 per cent.
If this holds, it points to a strong Democratic electoral victory, a possibility that is contributing to stability in the markets. As Trump’s outlook worsens, investors believe that more stimulus will be approved to help consumers and workers, and that the uncertainty, and disruption, of a close election on Nov. 3 will disappear. Let’s hope they are correct.
WORSE THAN THE PANDEMIC ARE AMERICA’S OTHER PLAGUES.