JUDY WOODRUFF: The pandemic leveled the U.S.
economy in the second quarter of the year,
leading to the worst collapse since the Great
Depression.
The gross domestic product, which is a broad
measure of the country's economic activity,
fell by 9.5 percent between April and June,
when much of the country shut down. If that
drop continued over a full year, the economy
would have shrunk by nearly one-third.
Parts of the economy have clearly improved,
but the initial recovery may be slowing. Weekly
jobless claims were up again to 1.4 million.
It is the 19th straight week of one-million-plus
claims.
Let's look now at the state of the economy
with Ken Rogoff. He's an economist at Harvard
University and the co-author of a widely cited
book on financial crises, "This Time Is Different."
Ken Rogoff, thank you for joining us again.
Worst decline in a quarter ever, just how
bad is this?
KENNETH ROGOFF, Economist, Harvard University:
I mean, it's stunning. We're looking at Great
Depression-type numbers.
Of course, we knew we had a very bad quarter,
but we were hoping by now the virus would
be calming down and things would be coming
back. But we haven't tamed it, at least not
nearly to the extent Europe has or Asia has.
And so I think it is still going to be very
difficult for the next six months or more.
JUDY WOODRUFF: Well, let's talk about the
larger picture.
But, before we do, I want to dig into this
a little bit. I mean, everybody knew it was
going to be bad. Everything practically was
shut down in the second quarter of the year.
But what is behind this? What do you see in
these numbers that explain what's happened?
KENNETH ROGOFF: Well, we are all locked at
home. You can't go to restaurants. Entertainment
is shut down. Businesses can't bring people
in.
Frankly, I mean, I'm surprised it's not even
bigger a number. Of course, it would have
been if we hadn't had pretty powerful intervention
from the Federal Reserve and Congress, at
least in the last round.
JUDY WOODRUFF: And, as you think about it,
I mean, you mentioned the restaurants, the
service industry, but it goes beyond that.
I mean, what does this mean in human terms?
KENNETH ROGOFF: I mean, it just incredibly
exacerbates inequality problems.
We have people who don't have a place to shelter
in place that's comfortable or safe. And there
are a lot of other things going on, people
getting other diseases that they're not taking
care of, mental health problems, heart problems,
you name it. This is just a catastrophic situation,
I think certainly the worst thing I have seen
in my lifetime, the worst thing I think we
have seen in generations.
And it isn't over.
JUDY WOODRUFF: And, Ken Rogoff, clearly, this
is connected. And we have talked to you earlier
today. And you talk about how much this is
connected to what's going on with COVID, the
fact that we are seeing a resurgence across
much of the country, including in some places
where it looked like it was getting better.
Can the economy begin to come back while this
virus is still raging in parts of America?
KENNETH ROGOFF: I mean, only up to a point.
We need parts of our economy, not just restaurants,
hotels and bars. There are things like entertainment,
air travel. If people have to socially distance,
there are limits to how much businesses can
do.
I mean, frankly, I'm just stunned we don't
have a national policy on something simple
like wearing masks, which would help a lot.
Contrast us with Great Britain. Their leader
also said, oh, no problem, this is just a
cold.
And, of course, he got it. But then, when
they shut down, they shut down. And the virus
is really in remission there. Here, we kind
of did it halfway, and we're just back to
the starting line. We still need to deal with
it.
JUDY WOODRUFF: So, you're saying that there's
a direct, absolute connection between the
economy and this virus?
KENNETH ROGOFF: Oh, absolutely.
This is a health crisis that spills over into
an economic crisis. And if you don't fix the
health crisis, people aren't going to want
to go out. We're not going to have the economy
come back. It doesn't mean nothing can happen
and we can't function. We will learn to live
with it. But we shouldn't have to.
And you can -- they should do giant stimulus.
They should protect people, but there's nothing
they could do that would help as much as some
basic things, like improving testing, requiring
people to wear masks. Eventually, there will
be a vaccine, but I don't know when that's
going to be.
So, yes, as long as the virus is raging, I
just don't see how the economy can come roaring
back.
JUDY WOODRUFF: So, we see the Federal Reserve,
which has a lot of control over economic activity,
saying it's doing everything it can.
And now we see Congress frozen in place, unable
to come to an agreement. How much does it
matter, Ken Rogoff, whether they come up with
a $1 trillion plan, which is what the Republicans
are talking about, or a $3 trillion plan,
which the Democrats want?
KENNETH ROGOFF: I mean, I think a $1 trillion
plan is predicated on, we're just shooting
up, things are going to get better, we just
have to cushion things for a while. That's
not where we are.
I think you can argue at the margin of how
to spend the money, but the states need help.
Local governments, small businesses need help,
unemployment, the unemployed, et cetera.
No, I think the $3 trillion is much more on
the mark. And I don't know that this is going
to be the end of this. I think it's going
to go on for a while. I think it will be $3
trillion and then $3 trillion again. I don't
know what they're going to agree to.
I have to say, if they expect to get reelected,
they better -- and I'm not just talking about
the president. I'm talking about Congress.
They better come up with something.
But this impasse, when people are about to
run out of support, when there's so many people
who are going to lose the unemployment, extra
unemployment insurance, et cetera, it's -- we're
on a precipice. I mean, I think they will
come up with something. But we're just nowhere
near out of this.
So, the $1 trillion is kind of dreaming that
things are getting much better quickly. They're
not.
JUDY WOODRUFF: And you have said a couple
of times that this -- it's hard to know how
long this is going to go on.
I mean, what are we realistically looking
at, next year, the end of next year? I mean,
what's the soonest this could start to look
healthy again?
KENNETH ROGOFF: Well, the soonest could be,
we get a vaccine, and everyone has it by a
year from now. That would be pretty fast.
But I don't think it's going to be that fast.
I mean, again, you have many experts on this
program who can speak to it better than me.
But, right now, until that happens, we just
don't know. There's enormous uncertainty in
the economy. And people are in a very precarious
position.
And there's certainly not going to be an exit
in September. There's not going to be an exit
in November. It's going to be well into next
year. We're a few months into this only. It
started in March. It's still just the end
of July. We have at least the same again to
go.
I mean, people are naturally going crazy from
the confinement. We need to find a solution,
at least with masks or with something, so
that people can function at some level, compared
to what we have now.
JUDY WOODRUFF: Grim forecast from economist
Ken Rogoff.
Thank you very much, though.
KENNETH ROGOFF: Thank you.
