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U.S. Economy Hit Hard By Coronavirus Fallout, Recovery Time Debated

STEVE INSKEEP, HOST:

Here's what passes for good news when it comes to the economy right now. Jerome Powell, the chairman of the Federal Reserve, gave a sober economic forecast to "60 Minutes," but he said at least it's not as bad as the Great Depression.

(SOUNDBITE OF TV SHOW, "60 MINUTES")

JEROME POWELL: It's going to be a very sharp downturn. It should be a much shorter downturn than you would associate with the 1930s.

INSKEEP: A very sharp downturn but hopefully not too long, although Powell does see the pain lasting well into next year. Our next guest has a differing assessment. Kevin Hassett is an economist and a senior adviser to President Trump. Mr. Hassett, welcome back to the program.

KEVIN HASSETT: Oh, it's great to be back. Good morning.

INSKEEP: What is Chairman Powell getting wrong?

HASSETT: Well, you know, I think that Chairman Powell is emphasizing correctly that we are currently undergoing about the biggest negative shock an economy has ever seen. You know, when the GDP number comes out, they take the number and sort of multiply it by four to say it's this percent at an annual rate.

INSKEEP: Yeah.

HASSETT: And people are used to seeing GDP numbers of, like, 2% or - in a really good quarter - 3%. In a recession, it's typical for GDP to decline, like, say, 1%, maybe 2%.

INSKEEP: Yeah.

HASSETT: The GDP that we're looking at in the second quarter is probably going to be something like minus-40% or minus-50%.

INSKEEP: Wow.

HASSETT: And so you're looking at a shock that's humongous. It's absolutely humongous. And, you know, we're already seeing, like, industrial production numbers that we just got - industrial production declined by more in April than in that month when we turned off all the military factories at the end of World War II. And the reason is that the entire country just about shut down to help protect the lives of Americans. And so then the question is just, you know, how quickly can we turn back on?

INSKEEP: Yeah.

HASSETT: And as always, you know, there's a diversity of opinion amongst economists about that. But, you know, the early indicators are - that we're seeing - like the percentages of businesses that are open and things like that, that Americans are actually getting up and running, especially in the states that are open, a lot quicker than maybe some people might have thought.

And if that does end up being the story - and, you know, the nonpartisan Congressional Budget Office projects a pretty strong second half of the year - if it ends up being the story that we do have sort of a V-shaped hit to the economy, it'll be because we had the sort of biggest negative shock ever. But then Congress, really in a bipartisan way, came through and delivered, you know, the biggest positive shock in terms of these three phases of stimulus that we've ever seen. To put...

INSKEEP: So you're hopeful...

HASSETT: Yeah.

INSKEEP: ...That there will be a little quicker acceleration than maybe Jay Powell is talking about.

HASSETT: Yeah.

INSKEEP: I want to follow up on a couple of things.

HASSETT: That's right.

INSKEEP: I've heard people forecast a 30% drop in the second quarter. I think I've heard 40%. You're the first person I've heard say it could be 50%. Do you look at the numbers there in the White House and see it could be a 50% drop in the quarter we're in right now?

HASSETT: Yeah, that's right. I will - well, you know, obviously, it's one of those things that's really, really hard to predict. And one of the things that we've started doing, Steve, is that we've sort of, just for a little while, just to help us think about the numbers, have stopped putting things at an annual rate.

INSKEEP: Yeah.

HASSETT: And so if you put it at an annual rate, then something that - you know, if GDP goes from 100% to 90% - right? - then that's a 40% drop because you take the 10% drop and multiply it by four.

INSKEEP: Oh, I see. Because you lost the quarter. Yeah, I gotcha. Gotcha.

HASSETT: Yeah. You know, and so the numbers - so, obviously, if you add a little bit from there, then you can get a much bigger number once you're multiplying a big number by four, right? (Laughter) So...

INSKEEP: Are you maybe saying - OK.

HASSETT: Yeah.

INSKEEP: Are you maybe saying almost the same thing as Jay Powell, then? You're thinking that the third quarter could be better, but the third quarter would be better than this catastrophic second quarter, meaning it's still going to be pretty bad? You're saying almost the same thing.

HASSETT: Well, yeah. That's right. And that's pretty much - the way to think about it is, in the second quarter, we stopped. And the - early April, by one measure, we have 50% of the businesses in the U.S. were closed - 50%. But that's by count, not by products.

INSKEEP: Yeah.

HASSETT: But still, that's a huge number. And so we stopped, and now we're gradually getting going again. And by, you know, like, the end of the third quarter, I would say we're - probably be pretty much humming. And so the odds of the third quarter being below the second quarter are really close to zero. And so, therefore, you know, at the third quarter, you're going to see a - we're going to have - say, we had a minus-40% to go back to annual rates...

INSKEEP: (Laughter).

HASSETT: ...Then the third quarter has got to be a number that's sort of bigger than plus-10% or something like that...

INSKEEP: Yeah. Now, let me just ask...

HASSETT: ...Just if you're comfortable turning on. Yes.

INSKEEP: You mentioned the money in the relief bill. Has it been hard to get money out the door? And I ask this because the Congressional Oversight Commission, which is looking at this, has said that the government has had trouble getting the money in the CARES Act, the hundreds of billions of dollars, to businesses that want it as quickly as the businesses need it.

HASSETT: No, I don't think so. I think that, for example, this thing they call the PPP, which everybody's probably heard too much about - but the PPE.

INSKEEP: Paycheck Protection, right.

HASSETT: Paycheck Protection act is, basically, you know, you go to your local lender, and then they approve the loan and, you know, with some guidelines by the SBA, these things can go incredibly quickly. You know, they're in the many millions of loans that have been made, and lots of money has gone out the door. Of course, there's the $1,200 checks to people. Last I checked, about almost $300 billion worth of those have gone out to people. And to put all this in perspective, Steve, if you take the stimulus bill from phase one, phase two, phase three and just add together the total cost, then the total amount of stimulus is twice as much as we had during the entire New Deal.

INSKEEP: Sure.

HASSETT: Right?

INSKEEP: Yeah.

HASSETT: So to go through the entire New Deal for the whole - entire 1930s - and I'm inflation-adjusting, too. So it's not a...

INSKEEP: We're a little limited on time here. I want to ask - the president has given different statements about an additional relief measure, which would, if it was like the House bill, include aid for states. Is the president a little reluctant to go there because it would be aid, in some cases, for blue states?

HASSETT: No, no, no. But what the president is insisting on is that we be data dependent. And so what's going on now is we're not so much watching and waiting as we're watching and planning. And so, you know, there are lots of states that are turning on. We can see that the percentage of businesses that are open has gone up to, like, 70%, 75%. And in those states, you know, maybe the stuff that we've already spent - which, again, is bigger than the entire New Deal - will have proven to be enough, and maybe it won't. And so what we're doing is we're forming a policy plan for either eventuality.

So if it looks like this bridge to the other side that we have been building needs to be extended a little bit, then the president's open to thinking about that. And if we get to the other side and then want to think about fixing longer-run problems, then we're making a plan for that as well.

INSKEEP: Kevin Hassett, it's always a pleasure talking with you. Thank you so much.

HASSETT: Same here. Thanks, Steve.

INSKEEP: Kevin Hassett is a White House economic adviser. Transcript provided by NPR, Copyright NPR.

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