Treasury Secretary’s Reassurances Rang Hollow


Far be it for a casual observer of the economy in Des Moines, Iowa, to countermand the U.S. treasury secretary, but did he really mean it when he said in a television interview that the nation was not in a recession? Did Steve Mnuchin in fact intend to say that at the precise moment he was speaking, we were in good shape, but that a pandemic-sparked recession was waiting in the car as he exited the studio parking lot?

You can’t indefinitely close bars and restaurants and shut down production lines and not disrupt the economy. You can’t vacate sports arenas, music halls and fully booked convention centers and not expect billions of dollars to evaporate. Airlines are grounding fleets, and casinos (sorry, Prairie Meadows) are closing their doors – cutting off dollars that keep them afloat. Wiping out trillions of dollars of value of investment portfolios has, overnight, unpaved the road to economic prosperity.

Even as Mnuchin spoke, Goldman Sachs was forecasting a 5% decline in GDP in the second quarter. ING cut even deeper, at 8%. A recession is typically defined as two consecutive quarters of falling GDP.

Since I was born, in 1950, we’ve had 10 recessions. The worst was 2007-09, both in length (18 months) and GDP decline, of 5.1%. Let’s hope we don’t eclipse those numbers.

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