As the United States continues to struggle with the impact of the pandemic, large sectors of the service economy continue to flounder, such as hotels, restaurants, schools, tourism, and airlines. Such disruptions put an abrupt end to the expansion of the U.S. economy after its recovery from the 2007-2008 global financial crisis.
Since the outbreak of COVID-19, millions of hardworking Americans have experienced a wide range of hardships. Besides job losses, pay cuts, and reduced working hours, they have also had to cope with the death of loved ones as the pandemic continues to surge unabated, with no scientific solution in sight.
Although the nation expects the candidate who wins the presidential election in November to turn things around, it's not at all clear what the outcome will be because both candidates promise entirely different scenarios. While it’s tempting to prognosticate who will win and why it’s only wild speculation. But what is possible to discuss in this current events post is what we need from a president.
In a nutshell, we need a president who will decide on a new stimulus package to revive the economy, who will work with science to slow down the surge of COVID-19, and who will unite both political parties to reduce the debt crisis in America.
With that in mind, let’s look at how the pandemic has currently affected American families, small businesses, and the national debt to get a better idea of what we need from a resourceful president and a Congress and Senate that can work together for the common good.
The Pandemic’s Impact on American Families
Because of the high volume of lost income from reduced working hours to job losses, millions of American families have racked up their credit card debts since the beginning of March. Although millions filed for unemployment benefits, delays or denials of these benefits have forced them to rely on their credit cards to pay for necessities such as housing, utilities, and groceries.
The new normal of relying on credit card debts to survive has made the average amount of personal debt far worse than before. Although the government provided $1,200 to citizens after they filed their taxes as well as extended employment assistance, this small amount of government aid in relation to the cost of living has made little difference in reducing the amount owed. Far more economic support for working Americans is necessary to encourage consumer confidence in the economy.
An insufficient injection of cash into the economy has forced average working Americans to fend for themselves.
In response, some consumers are turning to debt consolidation, a debt restructuring method to get their credit card debt under control. Personal loans from lenders provide instant debt relief because they merge many high-interest credit card payments into a single low-interest loan. Paying lower interest then makes it easier for people to pay down their debts since they will now pay more on the principle rather than just on interest and late fees. This option has worked especially well for credit card debts.
In response, some consumers are turning to refinance, home equity loans, and home equity lines of credits to pay down their debts.
And in response, some consumers are turning to viable federal government programs for economic relief, such as consumers still paying off their student loans.
The Pandemic’s Impact on Small Businesses
On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act popularly referred to that as “the CARES act,” provided $349 billion to prevent small business closures expected after the pandemic. Although this appeared to be a substantial amount at the time, small businesses exhausted the funds in two weeks. Consequently, the government had to add another $310 billion for PPP loans to work as intended.
These forgivable loans allowed many small businesses to keep their doors open. After the lockdown caused a loss of paying customers coming to shops, restaurants, and offices, many small businesses relied on payroll protection loans to stay in business. These loans not only allowed them to keep employees when there was almost no revenue coming in but they also allowed them to cover other business expenses.
As long as a required percentage of the loan was still used to cover payroll, expenses such as commercial rent and personal protective equipment (PPE) were considered legitimate business expenses.
The Pandemic’s Impact on the National Debt
The national debt reflected the biggest cost of the pandemic and economists estimate the federal government has added $2.4 trillion to it.
The federal government spent billions to increase unemployment assistance, billions to prevent small businesses from closing, and billions to rescue industries. In fact, the amount spent was larger than the gross domestic products (GDP) of most nations.
Is America Heading for a Real Debt Crisis?
Current thinking in economic journalism is that America appears to be heading for an ever-worsening debt crisis because a large segment of the population is struggling to pay their bills, because businesses are floundering, barely able to cover basic expenses, and because the national debt will be more than 104% of the GDP.
Yet, despite such alarming numbers, a true debt crisis is unlikely to occur in the United States. A real debt crisis — as opposed to just a debt crisis — only occurs when a country cannot meet its debt obligations. A real debt crisis results in bankruptcy. This occurred in Iceland, Mexico, Russia, and Argentina. It would also have occurred in Greece if the European Union had not bailed it out. But America is not at this point because the fiat currency system provides a safety net until the government can create economic policies that will reboot the flagging economy.
So, many opportunities still exist for the new president to commit to a budget that will bring the debt down and pass a new economic stimulus bill that will rescue American families falling ever deeper into debt. Many opportunities also still exist to reduce unemployment by supporting entrepreneurship. And, finally, many opportunities still exist to revive consumer confidence and spending. New economic policies, of course, will be necessary to revive faith in the dollar and the economy, but if both political parties work together to fix the broken economy, enormous change is possible.
In closing, ending the deadly virus with firmer health regulations and a vaccine, creating a new economic plan to revive jobs, and paying for the pandemic relief spending is not out of the question. A new spirit of hope, optimism, and possibility can turn things around after November.
Yes, the math does not look good, but things are far from hopeless. Many economic solutions are still available to turn things around for the better. This is not pollyannaish thinking. America has had a long history of recovering from economic crises. Not that long ago, when the financial crisis occurred around 2008, things looked bleak and hopeless, but Americans pulled together and revived the economy. What’s more, the emergence of amazing technology such as Artificial intelligence, the Internet of Things, and self-driving cars are just around the corner to stimulate the emergence of highly profitable new industries.