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Gordon L. Weil formerly wrote for the Washington Post and other newspapers, served on the U.S. Senate and EU staffs, headed Maine state agencies and was a Harpswell selectman.
The effort to defeat COVID-19 has amounted to a world war.
The coronavirus has attacked almost all countries and hit tens of millions of people. It has damaged national economies and thrown people out of work. But thanks to new vaccines, what has become World War III may grind to an end in 2021.
People can now begin to focus on what comes next. As the U.S. learned when World War II ended in 1945, we cannot simply return to what was normal. The aftermath of that major war might show how this country will restart the economy and recover. There will be a “new normal.”
As after World War II, there may be pent-up consumer demand that causes a rapid growth in retail sales and travel. With renewed pay, consumer purchasing could do much to restore the national economy, which is heavily dependent on it.
Perhaps the two most important goals are having a job and restoring social contact. Social interaction may involve the workplace, restaurants, events and travel. Achieving these two goals will contribute to a sense that the world has returned to normal.
This recovery would be of special importance to Maine, which is heavily dependent on spending by vacationers. If the effects of the vaccine are felt by spring, the recovery next summer could go far to boost employment.
The federal government has gone into trillions of dollars of debt to support individual incomes, and it now needs an offset to that debt. After World War II, the U.S. replaced huge war-related debt with tax revenues. Increased economic activity boosted government income and could do so again.
Joe Biden will seek higher taxes on the wealthy. If he succeeds, he could fund needed programs and prevent further growth in the national debt. But that won’t help average people as much as better training and jobs, health cost containment and research and development in energy and other growth industries.
After World War II, returning veterans received government help in gaining access to education through the GI Bill of Rights. Now, an increasingly technological economy requires training people for more skilled positions. Like the GI Bill, that would take money.
While all of these developments might mirror the post-1945 economic situation, they would take place in a different world. After World War II, the U.S. emerged as the dominant economic and political power. Now, it shares influence with China.
Biden and Donald Trump share a wary opposition to an increasingly powerful China. They have both advocated decreased reliance on low-cost Chinese imports, now essential to the consumer economy, in favor of increased U.S. production.
While such a policy may make sense, it would also inevitably raise prices. China relies on lower cost labor and limited environmental protection, neither of which can work in this country. More “Made in America” means higher prices.
One factor arising from the COVID-19 shutdowns may cushion price increases. It seems likely that online sales will survive and continue to increase. They impose lower costs than the overhead of brick-and-mortar stores that are normally passed on to customers. But small business could suffer.
After the war’s end in 1945, government spending declined. In contrast, government services have been reduced in recent years because of tax reductions. However popular that may be, the public may be reaching the point of favoring some increases in government programs.
For example, the need to provide health insurance for all Americans has become more popular as shown by attitudes toward the Affordable Care Act. Both increased support for Medicaid and the public option under the ACA seem likely.
COVID-19 has shown the need for better preparedness. Spending on readiness for a new coronavirus had been cut. Though just when the need will again arise remains unknown, government should be better prepared to save lives in the next crisis by more spending on research and stockpiling.
There is also an urgent need for outlays on basic public facilities. Trump wanted a $1 trillion public works effort, but nothing happened. Spending on roads, bridges, and hospitals has been deferred, though it is usually at the core of the government budget.
Perhaps the most basic concern is about personal income levels. A growing economy should boost pay. But only the wealthiest have gained substantially from economic growth. The battle over increasing the minimum wage continues.
What will happen is only speculation, but two points are clear. The stock market and the economy are not the same thing. While the costly battles of World War II and against COVID-19 were being fought, the market soared.
Also, the sudden loss of pay has shown that everybody should have a “rainy day fund.” Spending is essential for the economy; saving is essential for the individual.