by Edwin A. Sumcad –
he infusion of $2.2 trillion into the U.S. economy in response to Coronavirus is the largest kind of Marshall Plan (MP) ever made to a country anywhere in the world. It is the modern version of the European Recovery Program (ERP is smaller) for countries in Western Europe whose infrastructure has been levelled to the ground and the economy almost totally wiped out by World War II.
For quite some time, the Marshall Plan in Western Europe has been historically referenced to by development economists as a “large-scale economic rescue program.”
Right now our megabucks response to the pandemic is similar to Europe’s Marshall Plan in the United States. The U.S. “relief-rescue-stimulus” package of such magnitude ($2.2 trillion) passed by Congress and signed into law by President Trump on March 27, 2020, targets our economy badly damaged by Coronavirus, for immediate relief and recovery. In this comparative analysis, the Coronavirus pandemic and WWII are referenced to as causes for the destructions of the U.S. and European economy which needed to be repaired and restored back to their normal pre-pandemic and pre-WWII conditions, and from there go for a new economic development and growth.
I denominated this new Marshall Plan in the U.S. as a “relief-rescue-stimulus” monetary legislation passed by Congress and signed by the President into law, to relieve the suffering and difficulties of the population impacted by Coronavirus and to save the dying, rescue the pandemic-ravaged economy back to its feet and finally in a matter of time rebound and move forward by leaps and bounds.
For purposes of comparison, Europe’s destroyed WWII economy had recovered from total ruin because of the United States’ Marshall Plan. Again, in this comparative analysis, the timeframe for recovery was 3 years. The U.S.-sponsored Marshall Plan in Europe started in 1948 ending in 1951 (actual) while that of the U.S. is projected based on average changes of GDP for the same period of time.
In Europe’s MP, the infusion of $12 billion into the economy which due to lack of appropriate and precise term to use I shall call it “U.S. relief-capital investments” in Western Europe in 1948 (equivalent to $120 billion in 2020) did not only show recovery running up to 40% in the earlier part of the 3-year period of readjustment and reconstruction program but was showing encouraging growth of GDP as well, which confirms the durability of then aging Europe as what the resiliency of its progeny the European Union is showing today.
Using this historical model, my “guesstimate” is that within 3 years the projected 43% recovery of the COVID-19-damaged U.S. economy shall have launched a leap-forward take-off economic development due to a massive emergency “relief-rescue-stimulus” package injected into the economy, compared to Europe’s 1948 MP’s recovery and development aid to several countries in Western Europe. “Guesstimate” based on historical models is used in lieu of specific and scientific growth-rate measurement of changing GDP over time, which by the way, in Macroeconomics is within the study of the Theory of Economic Growth.
The Cobb-Douglas Function that appeared in the “American Economic Review” in 1928 described the relative constancy of the shares of Capital and Labor in the national income from which changes of GDP could be calculated.
But the most famous growth theory development economists frequently used is the well-known Harold-Domar Keynesian model also known as the “equilibrium rate of growth” that shows marginal capital-output ratio in measuring change or economic growth over time.
To use any of those models, actual aggregate input-output data are needed in the calculation and/or mathematical computation of growth rates. But in the absence of those matrix data, historical-based calculation of changes in GDP can be “guesstimated” when projected from averaging the gains or losses of annual or quarterly changes of GDP over time. Here the term “guesstimate” is a ballpark projection of comparative economic growth.
Under ERP, I used the UK-France model in roughly “guesstimating” the comparative rate of recovery from economic calamity that took place in Western Europe and in the United States within a 3- year period. When ERP was started in 1948, 26% of the MP’s total financial infusion went to U.K. At that time U.K. had a $2.8 trillion GDP. At the same time, approximately 18% of the total MP financial infusion went to France with a GDP similar to U.K. France and U.K. are the only two countries in Western Europe that received the largest percentage of the total aid. The U.K.-France model banked on 44% of the total MP “rescue and relief” funding coming from American taxpayers in 1948. On the basis of differential allocation of aid and its impact on GDP, economic recovery can be detected and measured by determining the percentage ratio between the average changes of GDP showing a negative or positive growth over time.
Using Trade Economics’ statistical data, the average increase of U.S. GDP in 3 years from 2016 to 2019 was $1.3 trillion. It is 44.3% of the Coronavirus $2.2 trillion package released in 2020. The UK-France model took 44% of the total MP “rescue and relief” package and the average increase of GDP in 3 years was $48 billion. It is 40% of the $120 billion (2020 value) infusion that went to U.K. and France. Percentagewise, the capitalization of recovery and growth relative to the average changes of GDP and amount of “investment” (rescue and relief package) was almost the same viewed within the same period of time.
As a result, the combined recovery and growth rate projection of the U.S. GDP in 3 years was 4.3% more than that of the ERP. The given timeframe and speed of recovery was held constant in the calculation but the gain noted in the U.S. economy was slightly more. That makes up the difference between the average GDP increase (40%) for Europe and 44.3% for the United States. Take note of that — the size of resources poured into the system could make a difference.
Consequently, I want you to prepare for a “funding relief shock” as U.S. government officials are talking about the next stimulus bill. House Speaker Pelosi and the Democrats have not started yet their ballpark projection of how much more is needed. It is now floated in the air that additional funding will rise up to a quarter of the U.S. GDP. In numbers, it translates to $5.25 trillion still on the running. Mindboggling? Yes, it is.
So let’s stop here for a second and ask this important question that breaks-in and intrudes into the mind of the very disturbed among us, and the millions of cynical but curious segment of the American population: Is it worth it? In an emergency situation while we are dealing with Coronavirus attack, the answer to that question is irrelevant to me. How did the Marshall Plan do wonders (recovery) in Europe? At the moment, to me that’s the question to ask. And the answer is, in my lengthy review of the history of MP in Europe, smartly aplenty, sophisticated and complicated, marked with economic cynicism among the major players in the European MP theater, and philosophical eroticism to those who lust for recognition, fame and power.
That was how MP’s personality standouts in Western Europe fought for recognition that almost scuttled and turned the rescue plan into a shipwreck. But on the positive side, what had been done can be simplified for the general understanding of those who are eager to know.
Reconstruction and rehabilitation started with a reduction of interstate barriers, and MP dropping off a maze of Europe’s existing regulations and then focused on productivity after introducing new and modern business practices and procedures. President Trump had an eye on this economic strategy when he cut down hundreds of existing Obama regulations that stymied economic growth. And look how Trump rebuilt the economy in a record time (in less than 3 years) and made America great again!
In Europe’s case, MP resource allocation saw to it that at least the distribution of aid is no less than 3% of the “combined national income of the recipient countries.” This started off a .5% increase in GDP almost instantaneously. It was a starter of the engine of growth for Europe — it triggered the beginning of growth rates rising in all sectors of the economy. Europe was like a patient waking up from a coma.
I want to quote this published and widely read economic report touting the miraculous results of Marshall Plan in Western Europe: “The years 1948 to 1952 saw the fastest period of growth in European history. Industrial production increased by 35%. Agricultural production substantially surpassed pre-war levels.
The poverty and starvation of the immediate postwar years disappeared, and Western Europe embarked upon an unprecedented two decades of growth that saw standards of living increase dramatically.”
A precursor of what is now the European Union, Western Europe of 1948 was a developed region where MP worked quite well for a badly damaged economy; it works even more in the United States economy run down by Coronavirus because compared to Europe, we have an advance and well-developed push-button economy.
After WWII, Europeans were ravaged by war and with the economy down had no financial muscles for recovery – nothing, except their desire to go back to normal life. Americans do not only have all the resources they needed for recovery but also possessed of that extraordinary American spirit that is always unifying, strong and supernatural in the struggle for survival.
Reduction of economic regulations prominently featured in MP’s recovery program. That’s already in play in Trump’s administration. What I expect Trump will do for economic recovery and growth is to continue to engage in a policy of economic regulatory simplification and reduction for further development in the wake of “traditional economic stimuli such as increases in investment (think of the $2.2T “relief-rescue-stimulus” package), fueled by a high savings rate and low taxes” as what former U.S. Chairman of the Federal Reserve Alan Greenspan said.
As a Keynesian advocate of economic theories of growth and a schooled development economist, I understand and fully agree with Greenspan’s observation on how successful Marshall Plan had admirably worked out well for the revival of Western Europe’s enormously damaged economy.
But in the United States, purveyors of economic collapse are persistently dogmatic in their argument that the damage the Coronavirus is doing to the economy is irreversible. They are good at engineering a plethora of suppositions and assumptions to support their claim that the damage done is already irredeemable.
For instance, there is a downward growth rate projection of 20% for countries all over the world struggling to survive the virus. I was dismayed when I discovered that they were using models that had been proven terribly flawed. The American public heard and knew all those studies and projections through social media, daily television newscast and talk shows where scholars and reputable economists engaged the public with their expertise. But the nature and flow of information about the surge of the pandemic were as erratic and unreliable as the data the U.S. and the world obtained from China about the spread of Coronavirus.
It is appalling to know that as a consequence of using those unreliable models, governments all over the world had made questioned decisions and took rush judgment in taking questionable actions over the life and death of the population threatened by the global pandemic, based on those faulty and outrageously unreliable sources.
To deliver my point of disquietedness and alarm, let’s cite examples and discuss them briefly. The Imperial College London (IC) Coronavirus model published that from 1.5 to 2.2 million Americans, and 500,000 in U.K. will die of the virus. Take note: This projection is conditional, repeat, conditional. It will happen only “if no action were taken to slow the virus and blunt the curve”.
When lockdown and social distancing were declared in U.K. and U.S., they revised their death figures up and down as if they were playing a musical instrument. They reminded me of Luis Armstrong and his jazz, singing and playing the trombone instead of his famous Selmer Trumpet.
For some reasons – reasons that I dread to ponder upon — one of White House’s critical Coronavirus casualty announcements adopted IC’s worst 1.5-2.2 million death toll projection. It was cross-configurated with the lower projection of the Institute for Health Metrics and Evaluation (IHME) at University of Washington – 38,000 to 162,000 deaths. This somehow inflicted a wound of anguish and painful disbelief on the stunned population. This is the latest ballgame played by a circle of “expert advisers” on germs and infectious diseases, orbiting around Trump.
I doubt very much if President Trump has anything to do with it. First, panic-attack is not his show. He is calm and deliberate. Some Trump followers suspected that the scripted gruesome announcement of 2.2 million Americans dying of Coronavirus was forced upon him when he was not given any alternative information to announce. “Experts” put him in a box and he has to read the scripted advisory.
Second, it is not in Trump’s DNA to alarm people with a threat of viral annihilation. He is always optimistic, not pessimistic. He always gives hope and rally people behind him and together he exhorts them not to lose hope and to fight and overcome the challenge of the pandemic. His presidential DNA that I know – and millions of Americans knew — is to calm down people when in panic attack and to comfort them always assuring them that this crisis will soon be over.
In fact record shows that Trump was too eager to see people getting well and returning back to work of which he was pilloried and shamed without mercy.
As if adding insult to injury, IC and IHME had two separate intentions in releasing their grim predictions. IC’s purpose was “to make people realize government intervention is crucial and what would happen without that.” But grapevine sources (obviously anti-Trump) are on the round saying that the purpose was to stop Trump’s “blind optimism” in minimizing the dreadful effect of the pandemic, and for issuing a back-to-work order as early as Easter April 12. IHME’s purpose was different, “to help hospitals plan, how many beds . . . ventilators (are needed) when the peak is likely coming.”
Dr. Anthony Fauci, television’s epidemiologists wizard declared that those projections are unreliable, but he was holding his breath when he said that. He didn’t say that what the American people have been hearing from the messengers of doom although well-meaning if not suspicious, was outright garbage.
Every day the virus fatality figures are moving wild. Maybe because we are just learning more about the virus. But because it is so volatile and fast-changing, those projections had misled governments into taking questionable responses to the virus, delayed and inadequate actions and on the extreme, over-reactions. The number projected on global negative growth of countries affected by the virus is slippery and had to be pegged down to 20%, an arbitrary figure based on imagined worst scenario.
In the midst of this confusion, my advice is simple and straightforward: Topmost priority to consider among others when you are tired, annoyed and had decided to ignore and throw this statistical abashment and confusion out of your mind, is to pay attention to the conditionality attached to the projection like “if no action is taken to slow the virus and blunt the curve . . .” you are in hell . . . you will have this 2.2 million deaths.
The condition attached is false and nugatory. Where in the world would anyone see any country fighting to survive the pandemic but is taking no precaution or taking “no action” to stop the virus? That’s oxymoron at its worst, like in law when the ignorant juror says the accused is guilty of “legal murder”, a contradiction, or an expression contradicting itself.
And why are they saying that the damage done to the economy is irreversible or beyond repair? I have not seen any study that supports that assumption. Is that because I heard street economists say that a collapsed economy cannot be resuscitated by deficit spending (spending $2.2 trillion) because it is flattened by “supply shock”? If that’s what they believe, I think they forgot their basic economics. A massive infusion of capital into the system blunts the negative shock in the supply side of the economy (it spurs production and the supply curve of goods and services slants upward.).
By the way, there is a “supply shock” in the economy when the supply of commodities and services for some reasons suddenly decreases or increases. It could lead to a bigger economic problem called Stagflation.
Stagflation occurs when there is recession and inflation happening at the same time. These are diametrically opposed to each other. Although economists admit that Stagflation is a difficult and compounded problem to solve, the problem is not without solutions. Expansionary monetary policy relative to the $2.2T bailout can stop recession, while contractionary fiscal policy can bring down inflation.
The policy difficulty anti-Trump critics envisioned stems from the fact that the normal response to the components of Stagflation—recession and inflation — diametrically negates each other. The written principles of economics established that there is no recession when inflation is indicative of an expanding economy, and vice-versa, there is no inflation when the economy is flat otherwise described as “in recession”. But they didn’t read the book well when they ignored the fact that governments and central banks can respond to recessions through expansionary monetary policy. At the same time inflation is normally checked through contractionary fiscal policy. In musicology, smart economists are just playing the trombone. The sound that comes out from it is a soothing calm – economic calm if you may.
If critics of the President knew the answers to the economic problems they raised that scare the American public, why do they insist in bludgeoning the President with heavy-handed criticisms like saying that the damage Coronavirus had done to the economy because of Trump’s incompetence and neglect (lack of preparedness, etc.) is irreparable when it is . . . when they knew that what they are saying is not true, bunk, baloney, a ludicrous nonsense?
My answer to that question is commonsense. When we use our commonsense to connect the dots between their criticism and intention, we instantly identify them as radical liberals holding hands with their leftish confederates who obsessed of booting the President out of office are taking a dig on Trump. These are crisis opportunists. To them any crisis is an opportunity for change. Whether it is a crisis they create themselves like opening the borders for illegal immigrants, drugs and criminals to come in and overwhelm the country, or crisis created by Nature like hurricanes and flood, and what we have now – sickness or pestilence.
As what it is now, the current crisis created by Coronavirus is to Speaker Nancy Pelosi and Sen. Chuck Schumer a great opportunity for change. In Congress, they held hostage the approval of the urgent $2.2 trillion package legislation demanding that unless items of climate change from their political agenda were inserted, they would not approve the emergency appropriation bill.
Are they really that heartless and conscienceless? The people out there are dying of Coronavirus and Republicans, virtually held at gunpoint, had to compromise a deal to include some of those items that had nothing to do with the crisis the nation is dealing with in an emergency situation. Without their irrelevant political agenda included, to them no help for the suffering people and the dying economy was forthcoming. They are not helping – they are politicking while people are dying and the economy is sinking. Remember the band playing while Titanic was sinking? The band was playing “Nearer my God to Thee” till the end. Pelosi and Schumer are playing a medley song “Away From God Here I Come” while people freeze to death in the icy water of hell while Coronavirus is sinking the Titanic.
And they are not alone in Congress. Recently a fraud that went viral via social media was performed by two hospital nurses. One of them was crying and telling the public that she quit her job because she was assigned to a Coronavirus patient and the hospital did not provide her a mask for her protection. It was a powerful attack demonizing President Trump, blaming him for shortage of masks, ventilators, etc. hospitals needed. But it was a staged fraud because there was no hospital mentioned or who were those people in the hospital who did not want her to wear mask and why, where and when did it happen, if indeed it happened. Many viewers believed it was a paid acting performance before a video camera. But to find out if what the suspect nurse was saying was true, I repeatedly run the video and I really believed that the younger good-looking crying nurse who allegedly resigned, was genuinely Hollywood and deserving of a nomination for Academy Award.
Recall what happened in New York. Gov. Andrew Cuomo needled President Trump for not responding immediately to his request for 4,000 ventilators while he said patients were dying in New York’s overcrowded hospitals. Trump rushed thousands of ventilators to New York and it turned out that this did not remedy the situation and patients were still dying because those ventilators were not used. It was stockpiled in the warehouse.
Caught with this inhuman shenanigan, Cuomo has this excuse: “Yes, they’re in a stockpile because that’s where they are supposed to be, because we don’t need them yet . . . we need them for the apex, the apex isn’t here, so we’re gathering them in a stockpile.”
Isn’t that outrageous? Did he really do that while patients who needed ventilators were dying? I am tempted to say that Cuomo’s politics kills people.
Patients were dying for lack of ventilators but Cuomo kept those critical items away from hundreds of dying patients who needed them immediately as a matter of life and death, and he didn’t care, for as long as he can throw a punch on Trump’s face by fabricating a lie that President Trump was slow to respond and therefore in his mind incapable of handling the Coronavirus crisis.
But Cuomo’s caper and tomfoolery are in good company with congenital liar Congressman Adam Schiff’s madness. Shifty Schiff is once more starting a congressional oversight committee investigation of the Coronavirus and how President Trump can be held accountable for Americans dying of the pandemic.
And at the same time to find out how Trump is managing the current U.S. Marshall Plan for economic recovery. The macabre justification for his next impeachment attempt: $2.2 trillion Congress approved is too huge of the people’s money to spend and it needs congressional oversight committee investigation and monitoring, so Adam Schiff is back.
Obviously, Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer and deranged Adam Schiff are preparing for their round-2 impeachment move against President Trump. They can’t stop this Trump derangement. Their problem is they believe that what they are doing is always for the good of the American people.
They show a catatonic behavior symptomatic of Schizophrenia in believing that they are those Marvel heroes from the comic book.
They all now speak through Gov. Cuomo, not through presumptive presidential nominee Joe Biden who neither can’t think normally nor speak properly. It is up to Cuomo to rally the Trump-attack brigade behind their new line of presidential coup campaign to eliminate Trump’s presidency once and for all.
Here is the hostage-taking blindfold: Cuomo is coy in denying that he is running for president. But he speaks out the thinking of the left and the Democratic Party. Looking forward, Cuomo is now telling the American public that Coronavirus is changing our American way of life. When this is all over, Cuomo said “We cannot go back to normal . . . we are going back to a “new normal”.
Going back to normal means going back to Trump and the booming economy. They don’t want to go back there. Going back to a “new normal” means change, a new President, maybe President Andrew Cuomo by January 2021. I will not be surprise if he will announce his candidacy for President when the Coronavirus kills 1.5-2.2 million Americans. As opportunist of crisis and tragedy, Cuomo will now say that this death toll is Trump’s fault – a great opportunity to change him – a good campaign pitch.
I believe when Cuomo said that this Coronavirus pandemic had taught us valuable lessons. We should not only change our way of life as Cuomo cleverly articulated, but we should also ask questions and change some of our bad choices and rotten values.
For example, how and why did we elect the notorious Squad to Congress? They are there to destroy the country, change it from good to bad, and from bad to worse. Their presence in Congress is a waste of American tax money.
The Ocasio-Omar-Tlaib-Pressley squad in Congress cannot be more destructive than the Democratic Congress itself. Its crowning achievement so far is only impeach President Trump based on imagined wrongdoing that evaporated in the air, legislative subpoena-issuance abuse, holding oversight committee hearings supposedly in aid of legislation (actually in aid of their anti-Trump Democratic agenda), investigate, investigate and investigate more what Trump and his family were doing in private life. It has done nothing for the country but that, and on the side obstructs legislations and attacks President Trump 24/7 to get back the power they lost in 2016 and once again take control of the country. I say to Cuomo, yes this has to change. We have November, 7 months from now, to prove if he is right, and if he is right, not because of his way it should be but the people’s way it should be. That change Cuomo expects is, I have no doubt, radical, but the only revolutionary weapon to use for that kind of change is the November ballot.
I totally agree that the Coronavirus showed us a landmark of changes in our way of life that is historically profound. Although the pandemic scatters people and pits them against one another, its unifying effect is much stronger: It turns bad people to good, and good to better and the better are showing their best in time of crisis. The good — and the bad changing to good — are together acting as a formidable force in fighting the pandemic. The glue that binds them together is the American Spirit that never dies but instead grows stronger in the face of tragedy as we act as one nation in war and/or our Waterloo, and in cataclysm, man-made or natural as what the Coronavirus pandemic is today. But the downside is, the pandemic had also turned bad people into their worst.
We saw them in Congress, in New York, in CNN, MSNBC, the print and Fake Media, i.e., Washington Post, New York Times and their kind, and in social media’s ambush “journalists” elsewhere, and from nowhere.
Nonetheless, they can do their worst but come what may, this crisis will be over sooner than we think. As I pointed out, our megabucks response to COVID-19 will repair and expand our economy.
And the best is yet to come. #
© Edwin A. Sumcad. Access NWS April 5, 2020.
The author is a lawyer-economist-cum-journalist, and a retired United Nations Diplomat. More about the writer, go to his website at https://edwinsumcad.blogspot.com/2013/10/
At the blog, read comparative presidential advice of staying at the middle of the road by clicking 2008 (1) file, bottom right.