What's the '25-cent solution' to our COVID recession? “Everyone wears it wherever they go outside. If we had applied the 25-cent solution, we never would have had a recession,” said a Tufts economics professor.
The U.S. economy never would have entered a recession at all this year if we’d only adopted what he calls the “25-cent solution,” says Brian Bethune, a teacher of economics at Tufts University and Boston College who won the Forecaster of the Month contest for September.
The U.S. is a different story. The country still can’t control the epidemic because some people and some government officials and agencies have been resistant to the proven measures: masks, social distancing, testing, tracking and isolation. The macroeconomy is the big-picture, top-down look, focused on economywide measures, such as gross domestic product, aggregate incomes, aggregate demand, and aggregate supply. Viewed through that lens, the economy seems to be in a classic V-shaped recovery, with the sharp decline of March and April followed by the sharp rebound of the summer and fall.
A K-shape describes this bifurcated economy, with one stroke of the K reaching for the sky while the other cannot seem to get off the ground. New systems had to be invented from scratch to provide grants and loans to millions of small businesses. Some of the existing infrastructure, such as the unemployment insurance system, was overwhelmed by sheer number of applications, like a 10-foot sea wall inundated by a 100-foot tsunami.
In the September contest, Bethune finished ahead of 44 competing forecasting teams. Bethune’s forecasts were among the 10 most accurate on five of the 10 indicators we track: housing starts, consumer price index, new home sales, the ISM manufacturing index, and the consumer confidence index.
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