The coronavirus has dominated all of our lives in recent months. Radical paths were taken by politicians in the form of lockdowns to contain the pandemic. But we should recognize that even if the coronavirus is a (major) challenge for us, we always have to keep a holistic view of world events. Just as there are epidemiological factors to consider in this crisis, there are also economic, social, cultural, political and other health factors at play. It is precisely these other factors that are so often forgotten in the panicky reporting, in the constant, manic tracking of the current infection numbers, that we want to take a look at in our series “The Costs of Coronavirus Lockdowns” in the coming weeks.
Fiscal policy is one of the two main tools, alongside monetary policy, used to influence economic activity. When a crisis hits, the typical fiscal policy approach is an increase in government spending. As it is likely that government revenue will fall during a crisis due to greater economic inactivity, the government coffers run dry. In turn, this prompts governments to release the valve on deficit spending. The approach that governments all over the world took as a response to the Corona crisis is no different.
In the U.S., the Department of the Treasury reported a $3.1 trillion budget deficit for 2020. This is a record-breaking number. In the first six months of the fiscal year (October through March), the deficit was running “only” 8% above the previous year’s rate. It was the second half (April through September) that saw the deficit shooting up, eight times as high compared to the same period in 2019. The deficit was so large, it amounted to 15.2% of GDP, almost twice as high as the deficits as a share of GDP reached during the Great Recession and the largest in peacetime history. Who is supposed to ever pay back all this money has not been answered yet.
More Statistics in Our Costs of Coronavirus Lockdowns Series:
Children Hurt Not by Corona – But by Lockdowns: children’s mental-health-related visits to the emergency departments in the U.S. increased by approximately 24% and 31% for children aged 5-11 and 12-17, respectively, compared to the same period in 2019. (CDC)
Record-Breaking Budget Deficit in the U.S.: the U.S. government spent $3.1 trillion more than it collected in 2020. Who is supposed to ever pay back all this money has not been answered yet. (U.S. Department of the Treasury)
Drug Addiction Intensifies: the number of people dying from drug overdose in the U.S.rose by 17% in the last twelve months. This only includes reported cases until May 31, 2020. (CDC)
Governments Grow in Size: in Austria, Germany, France, and Italy government spending has risen dramatically in 2020. (European Commission, Statista, and Handelsblatt)
Stillbirths on the Rise: more than 200.000 additional stillbirths could occur just in the next 12 months, concentrated in low- and middle-income countries. (UNICEF)
The Poor Pay the Higher Lockdowns Price: lockdowns and restrictions have proven to be something that disproportionally affects those already poor, whereas those wealthier are less hurt. (PEW Research Center)
How Women Are More Hurt by Lockdowns Than Men: between the first and second quarter of 2020, on average, women suffered a 6.9 % decline in wages, compared to the 4.7% decline suffered by their male counterparts. (International Labor Organization)
No Work in Europe Thanks to Lockdowns: The sharp decline in labor market participation and the 32 million people under the short-term work schemes hide the real numbers of the unemployed in the European Union, which most likely averaged a two-digit number. (ECB & Eurostat)
Printing Money in Times of Corona: Monetary policy effectiveness has its boundaries. As the Fed has created 39% of all the “dollars” in the economy in 2020, those boundaries might have been reached. (Trading Economics)
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