On Tuesday Politico posted a story about a possible economic scenario that has Team Biden really worried. John Furman, a top economics advisor in the Obama administration, presented the scenario in early April to a "bipartisan" group on Zoom. It goes like this: Because the economic collapse that began in March of 2020 was caused by a real-world event, rather than one in the fictional realm of finance (housing values, monetary values, asset values), the recovery from the lockdown will resemble those that "economists often see after a hurricane or industrywide catastrophe like the Gulf of Mexico oil spill" (V-shaped), and not the terribly slow and long and agonizing recoveries the never fail to follow the explosion of a stock market bubble (U-shaped).
This is the essence of Furman's scenario, which surprised many in the Zoom meeting because it supported the White House's repeated assertion that the economy will rebound with the same force and warp-speed it crashed. But Furman was Obama's top economic advisor. How can he be saying the exact same things as Trump's economic advisors? The answer to this puzzle shall come right after it's understood that the realism in Furman's scenario is very weak, and for one important reason: the natural disaster in his scenario is nowhere near over.
The pandemic is still raging in the US, Brazil, Russia, the UK, and in many other G7 and G20 countries. And there's serious talk about a coronavirus resurgence before this year is up.
Washington Post, May 26, 2020:
The World Health Organization warned that countries could face a second peak of coronavirus cases, even before a presumed second wave of infections months from now, echoing concerns expressed by opponents of rapid reopening in countries around the world.
The United States is definitely one of those countries.
What Furman is suggesting (a V-shaped recovery in the months just before the presidential election this fall) is as far-fetched as rebuilding a coastal city while a hurricane is still raging, still smashing homes and shops, still felling trees and telephone poles, still flooding the streets and sewer systems.
Furman, like the White House, has somehow concluded that the government closed the economy and, therefore, the government can also open it. But the crash began before any government action occurred. The economy, in effect, closed itself. And even if it were officially reopened, it's hard to believe that the markets would reabsorb in a matter of months a fraction of the 40 million jobs lost since March, especially with dangerously high infection rates stretching well into the following year.
The comparison between a natural or local disaster and the one that has impacted the whole economy (the pandemic) shows that Furman has not read his Keynes. (Furman is a professor in economics at Harvard.) If he had done so, and many of his kind (academic economists) will never do so, he would have known while preparing materials for the Zoom presentation in April, that to leap from the former (the local) to the latter (the whole) is called the "fallacy of composition," which "arises when one infers that something is true of the whole from the fact that it is true of some part of the whole (or even of every proper part)."
And this brings us to the question of Furman's economics, and why it squares with the White House's. Furman might have worked for Obama, but he was on the right of Obama, not the left. This is why his appointment to top economic advisor of the campaign in 2008 disappointed the labor wing of the party.
LA Times, June 11, 2008:
Labor union officials and some liberal activists were seething Tuesday over Barack Obama’s choice of centrist economist Jason Furman as the top economic advisor for the campaign. The critics say Furman, who was appointed to the post Monday, has overstated the potential benefits of globalization, Social Security private accounts and the low prices offered by Wal-Mart—considered a corporate pariah by the labor movement.
Obama, unlike leaders on the right, wanted to listen to "an array of advisors."
Furman and the camp of economists in Trump's White House see a V-shaped recovery in the offing because, fundamentally, they share the same political weltanschauung. Lastly, Furman's 2005 paper on the greatness of Walmart's low prices, "Wal-Mart: A Progressive Success Story" (PDF) is bizarre, to say the least. He argues that the retailer's low prices provide wage workers a kind of backdoor pay increase, and this justifies keeping Wal-Mart's wages low and its benefits minimal. As for the progressive element in all of this? The government pays for the social benefits (health insurance, foods stamps, and so on). This is Furman's economic idea of synergy between the state and the market. Enough said.