Figures for the period April-June 2020 show that the US economy has contracted more than at any time since 1947 – and that is only because that is when record-keeping in the States in a comparable way began. In fact, the rate of contraction was three times higher than the previous record which was set back in 1958. Back then, the economy shrank by 10%, in the last quarter it plummeted by 32%, a drop of earthquake-sized proportions (the German economy for example 'only' contracted by around 10% in the same period). Reduced spending on a range of areas explains the fall but, in a way that is both ironic and worrying, drops in healthcare spend were particularly marked. Given the way that the pandemic would seemingly drive up demand for healthcare, this might appear counter-intuitive but there is one reason in particular which might explain the drop. The high cost of healthcare insurance often forms an important part of employment packages and with millions of workers joining the ranks of the unemployed (15 million of them since February) many have lost their employment rights. Therefore at a time when healthcare is most needed, there is a clear and present danger that it has become unavailable to many.
Americans are looking for concerted action on the part of government. According to the BBC, Neil Bradley – chief policy officer at the US Chamber of Congress – was quoted as saying that 'the staggering news of the historic decline of the gross domestic product in the second quarter should shock us all. This jarring news should compel Congress to move swiftly.' This comment seems eminently sensible but the key question to ask is will it? American politics has become increasingly partisan over the course of the past two decades, often leading to a hiatus because the House of Representatives, the Senate and the Presidency are controlled by elements from different party political groups and affiliations. This has led to great difficulties being caused for such things as setting government budgets as competing power blocs take opposing views. When this has happened from time to time over the past decade or so there has been a great deal of inconvenience caused and much muttering as to the causes of the hiatus. In normal times a lack of concerted political action is extremely inconvenient and stressful. In the time of a pandemic it could be disastrous.
The American political system to those who have studied it appears to be one that relies heavily on a number of checks and balances which are built into it. The system appears to function best when politicians are taking relatively moderate political standpoints and there is the possibility of working through a process of constructive compromise and conciliation. It appears very questionable to some observers whether it is at all designed to cope with the political extremes which have typified the course of events over a number of successive presidencies, ranging from Clinton and George W Bush to Obama and Trump. The difficulties of working together are escalated even more by the fact that this is a presidential election year and the clock is running with only just over three months to go before voters cast their ballots. Opinion polls increasingly suggest that President Trump is behind but as we know these are not always a reliable indicator of how things eventually turn out. Nevertheless, a President fighting for his political life may not be in the right mood for compromise.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.