After teaching high school economics for 15 years, I can explain what causes a recession. Simple— decreased demand. When consumers buy fewer goods and services, suppliers have to cut back as profits disappear. Businesses lay off workers. Those now jobless have less income, and they buy less. That adds up to many lost restaurant meals, movie tickets, and concert or sporting events not purchased. Those establishments then lay off some staff, and there goes the whole ball game (i.e., the overall economy), so to speak. It’s now a downward spiral. A contraction. A recession.
But why do people initially cut back spending and demand? Fear is a culprit, and that’s fueled by the media. Past recessions have been caused by global events, overproduction, too much debt, or when money gets too expensive (i.e., high-interest rates discourage borrowing and spending). The 2008 crisis was largely in housing. Banks practically threw money at people, and many took on more debt and more house than they could truly afford. It eventually came to a bust.
It need not have been so bad. Even when unemployment hits 9-10%, still 90-91% of people are working. But the media signals through their negative reporting that “Your job may be cut next.” People shudder. They close their wallets.
Today, the fundamentals of the U.S. economy could not be stronger. Companies cannot even find staff to hire with our 50-year record low unemployment rate. Business is booming. Paychecks are fat. The stock market hit highs in February 2020, the likes of which we’ve never seen.
Enter Coronavirus. Here’s the definition from the World Health Organization: “Coronaviruses are a large family of viruses that cause illness ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS).” Though not new, the current strain, COVID-19, is novel. It, too, causes flu-like symptoms. While it’s more easily spread, 80% of those, who contract it will have virtually no or very mild symptoms. The young, middle-aged, and healthy have little to fear any more than seasonal flu, which killed 61,000 Americans last season and over 12,000 so far this season. Why no hysteria over that? The elderly and immunocompromised should always be extra vigilant with hygiene with any circulating viruses.
The liberal media barely mentions the above. A cruise ship circling at sea or histrionic words like “Trump-virus” are better visuals and headlines to gain audiences. Calling for large scale shutdowns of the economy is no more warranted than telling people not to drive their cars because there were 38,800 vehicle fatalities in 2019. If we all stayed home last year, there would have been no car crashes, and almost 40,000 more people would be alive. Of course, without cars, our lives, our freedoms, and the entire economy would be so severely disrupted we would scarcely want to live.
If there’s one thing you can take to the bank, it’s the strong correlation between presidential elections and the economy. When an incumbent president has a recession in year 3 or 4 of his term, he’s out (Carter, George H.W. Bush). If the economy is doing well, voters stick with whoever is in office, and party matters not (Reagan, Clinton, George W. Bush, Obama).
Anyone looking at the economic data during the first two months of 2020 would easily conclude a Trump landslide. Even those who say the links between the two variables might have weakened, some would forecast a Trump reelection. What single event would make voters want to change course? Answer— a recession. Now you know why the Democrat candidates and media are secretly rooting for a downturn soon, and by needlessly scaring Americans over a virus strain that is not Ebola but more flu-like, both are hoping to get a Democrat elected in November.
Jeff Szymanski works in political communication for AMAC, a senior benefits organization with over 2.1 million members.