Treasury Secretary Steven Mnuchin said on Sunday that he thinks the United States economy will bounce back to the position it was in before the coronavirus pandemic in a matter of “months,” a sunny prediction at odds with many economists who see the US as entering a historic economic downturn.
When asked by CNN’s Jake Tapper on State of the Union if he thinks the economy will rebound to pre-coronavirus levels of strength in months or years, Mnuchin said he believed it would be the former.
“I think it will be months. I definitely don’t think it will be years, we are going to conquer this virus, we are going to have terrific breakthroughs,” Mnuchin said. “Not just on the testing but on the medical front — we begin to have virals [sic] — there are things that are being developed for vaccines which will take a little bit longer.”
Treasury Secretary Steven Mnuchin on an economic rebound: "I think it will be months, I definitely don't think it will be years. We are going to conquer this virus, we are going to have terrific breakthroughs" #CNNSOTU pic.twitter.com/OuNv53kY7f— State of the Union (@CNNSotu) April 19, 2020
Tapper then questioned Mnuchin’s optimism about the economy in light of the fact that major corporations like Facebook have canceled events through the summer of 2021, and considering the Congressional Budget Office’s forecast that the pandemic will affect unemployment through the end of 2021. The treasury secretary replied with more confidence about a return to normalcy.
“This is an unprecedented time, we’ve never been in a situation where we’ve closed down the economy and I think, rightfully so, people are being cautious. On the other hand, as we get comfortable reopening the economy, I think we’ll see a big rebound,” Mnuchin said.
The comments from Mnuchin, who prior to being appointed to his position worked in finance and had no policy qualifications for his job, are not in line with mainstream economic prognostications about the unfolding situation or predictions from scientists and the medical community on how long distancing may be necessary.
Due to the continued need for social distancing that could last for over a year, a historic surge in unemployment, and the specter of the collapse of countless businesses around the country, many economists see a recovery as far off and likely to be a protracted process.
Gita Gopinath, chief economist at the International Monetary Fund, has said that global economic activity is not expected to fully recover even by the end of 2021 based on current trends. “The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes,” she wrote in a recent blog post.
She said IMF projections predict this will be “the worst recession since the Great Depression, and far worse than the Global Financial Crisis.”
Many top economists say the US and the world are already in a recession. Olivier Blanchard, senior fellow at the Peterson Institute, told the Financial Times there was “no question” that global economic growth “will be negative” for the first six months of 2020.
Recessions mark the period during which an economy is contracting; even when they end, there is an extended period of time during which economic activity and employment levels recover to pre-recession levels.
That recovery period can be very long. Ten years after the global financial crisis that started at the end of 2007, there were many indicators that the US economy still hadn’t fully healed. Participation in the economy remained depressed in 2017 (some economists say it was still depressed ahead of the current crisis), and household wealth like savings and investments hadn’t recovered from the crash. The hangover from the crisis contributed to slower overall growth for the following decade.
Economists also worry that the US and other countries are not doing nearly enough to prevent a worst-case scenario from happening. Most experts believe the government needs to pursue a much, much more aggressive testing regime to reopen the economy. Without proper public health measures, sound economic policy, and a well-coordinated reopening, some economists fear a downturn that could surpass even the Great Depression in severity.