For starters, stop burning down our economic house - Press-Enterprise

Remember the coronavirus lockdown? Seems so long ago and yet, we’re still mostly in it. But from today’s wall-to-wall coverage of the unrest wracking our cities, we can draw a useful parallel to the lockdown that bears on Southern California’s economic recovery.

Recent comments you’ve read about or seen on TV often feature someone who heartily backs protests but denounces rioters for “burning down their own houses.”

Now apply that parallel to our status as essentially home-arrest subjects. We’re participating, most willingly and some quite enthusiastically, in burning down our economic house, as a couple of examples show.

A Congressional Budget Office forecast for the upcoming 10 years, for example, paints a fairly grim picture. Taking into account the depth and duration of the lockdown, CBO says its earlier forecast of U.S. economic output through 2030 is too high — by nearly $16 trillion.

Brian S. Wesbury, chief economist at First Trust, cites a University of Chicago paper noting a serious flaw in government efforts to help. Nearly 7 of 10 who are eligible for unemployment checks are getting benefits that exceed their lost earnings, the study showed, and half of those receiving benefits are receiving 34 percent more than their lost earnings.

That wacky feature will endure through July and will likely stall efforts to reopen some businesses — a classic example of good intentions gone awry (and yes, some may say this is an intended consequence). CBO may have to update its forecast yet again.

This is the milieu in which the Inland area, a backwater to the coastal glitterati that run this state, is trying to recover from the lockdown. True, our workforce isn’t as well-educated as those in most other areas of the state, especially along the coast, but we do have some factors in our favor.

At a recent virtual state-of-the-region event, economist Manfred Keil told his audience he believed the area’s economy had already hit bottom. Keil pointed out that the jobless rate for the Inland area — although at 14.4 percent in April much higher than the 4 percent figure for March — still was better than the state as a whole (15.5 percent).

Keil, chief economist for the Inland Empire Economic Partnership, said the country has lost all the jobs it created beginning with the economic recovery that began in 2009, but added the Inland area’s jobs situation is about at its September 2015 level. The brisk logistics business, Keil said, explains the relatively more positive Inland employment picture. The IEEP is already running working groups made up of area leaders looking at steps needed to aid the area’s recovery.

Christopher Thornberg, head of UC Riverside’s Center for Economic Forecasting and Development, would endorse a quicker pace of reopening. “We’ve already bottomed out,” he said.

To address the sluggishness still evident in the economy, Thornberg said, government “needs to loosen controls faster. Government requirements have not prevented the spread of the virus; it’s people’s behavior.”

Some bright spots noted by Thornberg: Continuing jobless claims have fallen two straight weeks, and Federal Reserve figures show that after personal income fell early on, it has overall trended upward recently thanks in part to government subsidies.

And savings rates have risen sharply, Thornberg said, adding significantly to disposable incomes at a time when consumer spending is declining. “Spending was dropping faster than the loss of personal income.”

As to the virus, the health authorities still don’t know some important things but even so, they know a lot more than when the virus first hit. Wesbury, the First Trust economist, highlighted recently published CDC data showing 93 percent of COVID-19 fatalities are among people 55 and older, many with pre-existing conditions. The public health authorities did not know in much detail how the virus would affect various age groups when it first swept into the country.

So for a second wave, if indeed one is coming, you can bet health officials will put big resources into facilities serving elderly people and into aiding people and families who interact with elderly people or the people who serve them.

Elsewhere, we can better evaluate the effect of widespread bans, edicts and orders on economic health and should quickly ease off the ones no longer needed. Also, somebody somewhere is trying to figure out how to raise taxes and should knock it off. Vastly fewer paychecks begets vastly less “revenue” to government. Governments must learn to deal with it.

Reach Roger Ruvolo at rruvolo@att.net

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