Connect with us

Hi, what are you looking for?

Trillions - 19FortyFive

Coronavirus and Trillions in Debt: How Will the U.S. Economy Cope?

Jerome Powell Inflation
Image Credit: Creative Commons.

With the latest jobs numbers out today looking a little better, well, if you want to call under one million new unemployment filings ‘good news’, I asked Desmond Lachman, former managing director and chief emerging market economic strategist at Salomon Smith Barney now at AEI, some quick questions on the direction of the economy in the age of Coronavirus and the dangers of higher and higher U.S. debt levels.

With the jobs report today looking a little better at least compared to the last several months, do you see the employment picture in the U.S. getting better over the long term?

Over the long-term, one must certainly expect a steady recovery in employment as the economy recovers from its unusually deep pandemic-induced slump that has seen unemployment rise to record levels in the post-war period. However, in the near term, the economic recovery could be delayed by a second wave in the pandemic and by failure to provide the economy with adequate fiscal stimulus. If that were to occur, we could see unemployment stuck at a stubbornly high level for a long while. Once we get an effective Coronavirus vaccine, I would expect to see a strong recovery in both output and employment.

U.S. debt is growing dramatically thanks to COVID-19. How much debt can the U.S. reasonably absorb before we see slower economic growth and questions globally concerning U.S. economic vitality and debt sustainability?

The U.S. public debt is now on a clearly unsustainable path that is mortgaging our children’s economic future and that is endangering the dollar’s role as an international reserve asset. However, in the immediate future, I do not see the high level of public debt and the large budget deficits as a constraint on economic growth since the government is able to finance itself at record low-interest rates. My expectation is that the trouble will start for the U.S. economy when the Federal Reserve has to start normalizing monetary policy when inflationary pressures eventually emerge. However, I think that is somewhat down the road.

Written By

Harry J. Kazianis (@Grecianformula) is Editor-In-Chief of 19FortyFive and President of Rogue States Project, the think tank arm of the publication. Kazianis recently served as Senior Director of National Security Affairs at the Center for the National Interest. He also served as Executive Editor of its publishing arm, The National Interest. Kazianis has held various roles at The National Interest, including Senior Editor and Managing Editor over the last decade. Harry is a recognized expert on national security issues involving North & South Korea, China, the Asia-Pacific, Europe, and general U.S. foreign policy and national security challenges. Past Experience Kazianis previously served as part of the foreign policy team for the 2016 presidential campaign of Senator Ted Cruz. Kazianis also managed the foreign policy communications efforts of the Heritage Foundation, served as Editor-In-Chief of the Tokyo-based The Diplomat magazine, Editor of RealClearDefense, and as a WSD-Handa Fellow at the Center for Strategic and International Studies (CSIS): PACNET. Kazianis has also held foreign policy fellowships at the Potomac Foundation and the University of Nottingham. Kazianis is the author of the book The Tao of A2/AD, an exploration of China’s military capabilities in the Asia-Pacific region. He has also authored several reports on U.S. military strategy in the Asia-Pacific as well as edited and co-authored a recent report on U.S.-Japan-Vietnam trilateral cooperation. Kazianis has provided expert commentary, over 900 op-eds, and analysis for many outlets, including The Telegraph, The Wall Street Journal, Yonhap, The New York Times, Hankyoreh, The Washington Post, MSNBC, 1945, Fox News, Fox Business, CNN, USA Today, CNBC, Politico, The Financial Times, NBC, Slate, Reuters, AP, The Washington Examiner, The Washington Times, RollCall, RealClearPolitics, LA Times, Newsmax, BBC, Foreign Policy, The Hill, Fortune, Forbes, DefenseOne, Newsweek, NPR, Popular Mechanics, VOA, Yahoo News, National Security Journal and many others.

Advertisement