BRANDON J. WEICHERT | THE WEICHERT REPORT
Don’t let anyone fool you about this: the United States (and the world–including China) is experiencing the second Great Depression. Recently White House Defense Authorization Act Coordinator Peter Navarro took to Fox & Friends to declare that the United States was not, in fact, in the Great Depression again. For the record: Navarro has been spot on with most of his economic policy suggestions and has been one of the few voices of reason and sources of strength when it comes to China.
Yet, his recent interview was, shall we say, the equivalent of whistling past the grave. As I have told audiences for the last couple of months: if the president expects to win reelection, he cannot keep bringing up the economy as a source of pride. The economy is dead. Trump and Navarro are correct: China, at least in part, killed it. But when Navarro attempts to distinguish the difference between this Great Depression and the previous one, I simply must intercede.
Speaking on Fox & Friends, Navarro described the Great Depression as:
A ten-year process that came out of the end of World War I and [it had an] inflation and deflation cycle, it [had] catastrophic applications of currency; it had fiscal and monetary policy, and it lasted for a very long time.
To differentiate between the Great Depression and the current, new Great Depression, Navarro said:
Here’s what we have today: we had a, President Donald J. Trump, built up the strongest and most beautiful economy in three-and-a-half years, and then the Chinese Communist Party dropped a virus on the world that, within 60 days, has temporarily shut us down. And all we need to do here is focus on the mission. The original mission of Donald J. Trump, which is to bring manufacturing onshore, to having the American people make things here, and we will move forward in a way where we can rebound. Now, it’s going to be a long process because of the structural adjustments that are going to take place as we adapt to the virus socially and culturally and economically. But this Great Depression pity party stuff I saw yesterday [on the Sunday news shows] this ain’t [sic] that!
He’s right. It’s actually worse than the Great Depression. Which, of course, is a big problem for the president heading into an already contentious election year. The structural reforms to our socio-economic system that Navarro has long supported are apt. But, this is one of the cases of the United States being up against the clock.
Can the country really adapt itself to the new paradigm before things get worse?
At a minimum, the total diversification of the world’s supply chains away from China and to other developing areas–or better yet, back to the United States–will take at least a few years (and that’s if there is a full-throated, dedicated effort). In the meantime, what do we do?
What does China do as we gut them economically (this was something I asked a block chain expert on the air last week when he started castigated my claims that we’re going to need to be prepared for an actual shooting war with China in the near-term)? Beijing isn’t going to simply just sit by while we attempt to implement this economic and trade strategy that directly harms Chinese interests. What’s more, as David P. Goldman has argued recently, the diversification of the world’s supply chain just might be what the CCP and China’s President-for-Life Xi Jinping wants.
After all, China has already been working hard to create an alternate version of the internet; Beijing has already built up their indigenous technological and innovation capacities that can rival America’s; China is spearheading the development of 5G internet; and China also is about to successfully complete their Beidou Global Positioning System (GPS) which will rival America’s long-time dominance. This will also allow for China to gain a dominant position in the lucrative Asian markets (since most Asian countries rely heavily on Chinese telecom giants these days rather than Western ones). The push to decouple (our only real long-term strategy) might just be what Beijing wants as much as those of us on the Right desire…and that might prove to be our undoing in the long-run. As the president might say, though, “we’ll see.”
And once we are totally decoupled (which I suspect will happen in one form or another over the next decade), the United States will have to be prepared for a long-term strategic competition that is unlike even the Cold War (which is why I often hesitate to use the term “new Cold War” when describing the Sino-American relationship). It is much more akin to the Quasi-War. Still, this does not address the key point of this post which is to say, we most assuredly are in another Great Depression. In fact, it is the worst economic crisis in this country’s history.
When Trump Administration officials, like Navarro, take to the airwaves and refer to 20 million Americans being out of work as a “pity party” they appear as dilettantes. And if there’s one thing Americans loathe more than losers, it is dilettantish elites who sound more like Marie Antoinette rather than Andrew Jackson. The current US unemployment stands at 14.7 percent (around 20 million people) and is only expected to increase. The economy has crashed. Meanwhile, economists like the New York University’s Stern School of Business professor, Nouriel Roubini, have consistently warned audiences over the last few months that some of the worst aspects of the economic damage from the current downturn might not be experienced until the decade’s end.
And just like the previous Great Depression that Navarro described to Fox & Friends, the current one also sees expansive monetary policies being enacted that will likely lead to deflationary and/or inflationary cycles in the coming years. Also, Navarro is clearly laboring under what I believe to be the political delusion that there will be this grand, V-shaped recovery. I hope that is the case. But it will likely be a harder, longer U-shaped recovery.
I heard a commentator recently say that the Trump Administration will have to “put Humpty-Dumpty back together again.” Yeah, well, for those who don’t remember the story of Humpty-Dumpty, he couldn’t be put back together again.
Navarro is correct to highlight the need for structural changes to our socio-economic and political order. On-shoring and diversification of the supply chain are, of course, key. Greater protectionism is necessary. Many of Trump’s loudest proponents from 2016–the Right-wing ideologues–are upset about Trump’s actions to close down the economy. They either believe that the novel coronavirus (COVID-19) from Wuhan, China is entirely a hoax or “just like the flu.” It is neither.
In fact, the pandemic is the most pernicious disease we’ve ever encountered since the Spanish Flu. And as data now suggests, those who are fortunate enough to recover from this terrible affliction face a lifetime of follow-on illnesses, prompting one commentator to compare the after effects of COVID-19 to “this generation’s Polio.” The ideologues believe the economy is more important than managing the disease via social distancing. They erroneously think that the economic situation somehow be better than it is if we simply acted as though the disease was not in existence.
Consider this, though: the Spanish Flu caused major economic disruptions in the United States, according to a 2007 report from the St. Louis Federal Reserve. Businesses were shut down; quarantines were enacted; there is even photographic evidence of people back then walking around with masks, much as I and others do today.
When Philadelphia reopened their city to enjoy a summer parade (against the wishes of medical professionals) the day after the parade, the Philadelphia hospital system was inundated sick people and illness propagated everywhere, setting back disease prevention efforts and damaging the economy further. The idea that we are in a situation where we could have proceeded as though everything was A-OK and not had an even worse economic and social situation is absurd. There would’ve been severe damage in either case.
Now with potentially premature openings, we’re not only going to be enduring Great Depression 2.0, but we will also be experiencing Spanish Flu 2.0 at the same time. And, if the Trump Campaign insists on referencing Trump’s “strongest and most beautiful economy” as Navarro stated in his recent interview, then they run the risk of just angering the tens of millions of Americans who have lost–and will lose–their jobs in the coming months (to say nothing of their health, should the pandemic afflict them).
What the Trump Campaign needs to do is stop referencing on the economy. That’s not even why he won in 2016. He won because of his immigration and trade policies. That he could run the economy well was a distant third. Since being elected, though, Trump has moved away from the themes got him elected and focused exclusively on the quasi-neoliberal argument that the economy–specifically, the stock market–is the sine qua non of his political success.
I warned audiences in 2018 at my column at The American Spectator, that Trump cannot allow himself to become too tightly tethered to the stock market (because, as the law of gravity proves, what goes up must eventually come crashing down). And now that the market is overstimulated by easy helicopter money in response to the pandemic, the market is again on the rise while unemployment and misery throughout the country is exponentially increasing.
If Trump believes he can simply rely on the market numbers (which are by no means guaranteed to remain where they are or increase over time) to sustain his campaign for reelection, he is in for a rude awakening. And anyone who thinks that senile Joe Biden will be a better leader to have in both responding to Chinese aggression and managing a more robust economic recovery is wrong. Trump must make the case that he is this generation’s FDR. Yet, he has ceded that high ground to Joe Biden, who is hilariously making the case that he is, in fact, FDR.
And do you know what? If the Trump Administration wants to win, it needs to not only enhance its strategic posture in the Indo-Pacific against China; it must not only make the hard case against China, but it also must accept the reality that the economy is broken. Rather than fail in trying to put Humpty-Dumpty back together again or idiotically referring to the suffering of tens of millions of Americans as a “pity party,” the Trump team must embrace the new normal and implement sweeping socio-political and economic reforms in the same aggressive manner that FDR did. And each time Congress dithers, either party, the Trump team must publicly castigate the legislative body for failing to enact the legislation necessary to get us through this crucible.
The Trump team must acknowledge that we’re in Great Depression 2.0 and recognize that the old ways of doing things are over. If Trump loses, the country is lost. Whatever comes during a Biden presidency will not be good for this country.