Is The Great American Dream Over?

Is The Great American Dream Over?
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By Jack Kelly

The Business Roundtable, an elite group of America’s top CEOs, offered its Economic Outlook Survey, which provides insights into the future for the United States economy and job market. 

The group’s vision for the future is not too bright. Over 130 CEOs completed the survey and gave their views—which were dark and discouraging—of where they think the country is heading toward with respect to plans for spending money and hiring over the next six months.  

Roughly 30% of the CEOs believe that business will not recover from the Covid-19 pandemic until after 2021. These are the folks in charge of major iconic corporations, such as Apple, Walmart, GM, JPMorgan, AT&T and other top companies. So, they have a solid view of what’s really going on. Doug McMillon, chairman and CEO of Walmart and chairman of Business Roundtable, said in a statement, “Our battle against Covid-19 is far from over, and our top priority remains the health and safety of our employees, customers and communities we serve.”

The CEOs assess that there’s still great uncertainty. As the U.S. economy attempts to reopen, we face new cases of Covid-19. While many states have continued to go forward with reopening efforts, some such as Florida, Arizona and Texas have rolled back their plans following spikes in Covid-19 cases.

Plans for spending, hiring and sales expectations over the next six months all fell to the lowest point since the financial crisis in 2009 and predicted that the GDP will contract.

 The Business Roundtable has advocated for Congress to take action. In a letter sent to Speaker Nancy Pelosi and other congressional leaders, they called for a comprehensive package, including continued unemployment benefits assistance, employee hiring and retention incentives to companies, investments in worker training, liability protection for employers that act responsibly to protect health and safety, provide additional funding to support rapid expansion of testing capacity, deployment of widespread contact tracing and the buildout of public health systems and other measures.

The dour outlook from America’s top CEOs isn’t surprising. Over 46 million people have filed for unemployment since March and about 50 % of the population is without a job, according to Axios.

The Wall Street Journal reported that banks have pulled back sharply on lending to U.S. consumers during the coronavirus crisis. This rationale is why we’re in such dire straits—the banks can’t tell who is creditworthy enough to make loans to. 

Millions of Americans are out of work, behind on their debt and missed rent and mortgage payments. The Federal Reserve Bank just admonished banks to cut dividends and curtail stock buybacks out of fear that they won’t have enough money to cover all of the bad loans that won’t be paid back due to the horrendous financial impact of our response to Covid-19.

In a sign that we haven’t tackled the outbreak, the state of Arizona is re-closing business for at least 30 days. Doug Ducey, the Republican governor of Arizona, ordered bars, movie theaters, gyms and water parks to shut down. Schools will be delayed in their openings. This unfortunately mirrors what’s happening in other states too. Ducey lamented, “Our expectation is that our numbers next week will be worse.” 

The school closing issue has been tough on both parents and children. Parents had to manage their own work, homeschool the kids or find some sort of childcare, while desperately trying to keep things normal. Many made it through thinking that this will only be a temporary thing. Now, sadly, it seems that it may last longer. Schools and daycare centers may not fully reopen in the Fall due to renewed cases, which will cause a childcare crisis for millions of American workers.

Nonessential businesses were ordered to close and citizens told to stay indoors at home. This had a huge impact on the economy. Most businesses either didn’t earn anything since they were closed or only saw a trickle of revenue. The only companies that seemed to profit were a handful of big tech companies, such as Amazon, Microsoft, Apple and Google. 

With the lack of earnings, there’s less tax revenue flowing into state coffers. This translates into less money for the states. California, recognizing billions in lost tax dollars, acknowledged that it needs to enact draconian job cuts to public employees and substantially raise taxes on its residents. 

On Monday, Governor Gavin Newsom signed a budget closing the $54.3 billion deficit with tax raises, school funding delay and cuts to services. This will cause a downward spiral. Californians already pay high taxes. Many of its cities are overcrowded, the highways congested and Covid-19 is rising again, causing officials to close beaches and businesses. 

Budget cuts will reduce the amount of teachers, firemen, police officers and other public employees. Services will deteriorate. Crime will increase. It’s reasonable that many people will flee to other states that offer less taxes and better services. With businesses and people leaving, California will need to raise taxes even higher and lay off more teachers, police and firemen. This will continue to erode the quality of life for those that remain.

It’s time to hunker down and be prepared. We’re heading for a long slog ahead of us. Barring some miracle, it could take at least a year, most likely years, to turn things around. That’s assuming that things will turn around and America won’t fall into decay and become a faded version of our once proud glory.

 

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