The Economy Under COVID-19: Notes From the Trenches

There are currently two crises underway simultaneously. The advance of the novel coronavirus is taking a terrible toll in terms of physical and emotional well-being. At the same time, job losses resulting from ‘social distancing’ are sending the economy into a tailspin. To fight on both fronts, governments are advancing rescue packages of never-seen-before dimensions. Every day, the tremendous number of factors in play reconfigure in a new way. These ‘from the trenches’ notes attempt to shed some light along a murky pathway.

Some in the construction industry have been pinning their hopes for revival on an infrastructure spending package. Let’s look at the financing situation. The U.S. fiscal deficit this year is approaching $4 trillion, with three-quarters of that amount being rescue money. The priority order of relief expenditures has been: income supplements; unemployment insurance top-ups; help for large- and medium-sized corporations; specific industrial sector support (e.g., airlines); aid for urban transit systems and for hospitals; and a first round of small business loans, followed by a larger second round.

Not even covered yet are state and local government shortfalls caused by tax revenue swan dives. So, will another trillion dollars be set aside for infrastructure spending? There’s always the possibility that a political-gain motivation, seen by one party or the other, may prevail. But with a new debt mountain looming, it seems unlikely to me.

A suggestion has been made that the most severely pressed state governments should consider bankruptcy as a recourse. Problem is, such a plan of action is not allowed under current law. It would require Congress in Washington to pass accommodating legislation. Will that happen? Seems unlikely to me.

The notion of achieving quick stimulus through infrastructure spending is usually accompanied by a proposal to launch ‘shovel-ready’ projects. Such work is usually in the engineering realm and includes highways and bridges, sewage treatment plants and water delivery systems, rapid transit undertakings and airports.

But there’s another two-word phrase that often attaches to big spending on hurried-up projects when future demand is misjudged, the building of a ‘white elephant’ or two. Seems unlikely to me that any ‘expert’ on the speaking circuit today truly knows the degree to which lifestyle and travel patterns will have changed by the time the novel coronavirus has been consigned to history’s supervillain scrap heap.

There’s one variety of infrastructure spending that has proven its worth many times over during this crisis, telecommunications expansion. Where would we be if it hadn’t already occurred? I say bring on universal next generation 5G as fast as possible.

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – May 1, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.