Economists are debating the letters V, U, W and L these days, but Creighton University economics professor Ernie Goss, PhD, says the only letters that really matter are MD.
Goss is the former director of the Institute for Economic Inquiry and a professor of economics at Creighton’s Heider College of Business where he holds the Jack A. MacAllister Chair in Regional Economics. He is also director of The Goss Institute for Economic Research in Denver, Colorado, a bipartisan think tank conducting economic research that provides recommendations for public policy.
Which is why, in large part, he is the go-to man for Omaha talk radio station KFAB when it comes to the economy. Goss recently told the KFAB morning show that he anticipates a “V-shaped” economic recovery once current COVID-19 fears calm. By this he meant a quick and powerful bounceback from the bottom to the top.
These days he’s talking more about a “U-shaped” recovery, which means a more protracted slog along the bottom before rising again.
What made the difference?
“I’m going off the models the medical people are coming up with,” Goss says, “and as they get more pessimistic, so the economics get more pessimistic.”
He’s not alone. Publications such as the Harvard Business Review and Fortune Magazine have recently published articles speculating whether the eventual economic recovery will be V-shaped, as was the case with all previous epidemics; U-shaped, as Goss now suspects; L-shaped, which means a long and slow slog along the bottom; or even W-shaped, which suggests a second slump if COVID-19 reappears later this year.
Goss said his fellow economists are doing their best to bring their expertise to bear, but that little can be confidently asserted until the medical picture clears.
“It depends on the medical community, because without a medical solution like a vaccine the economy grinds down to a lower level,” he says,” “If it comes back in the fall and we don’t have a vaccine we could be toying with something like the Great Depression.
“If we continue to have a stay-at-home policy, how many restaurants are going to close — all of them, 80 percent of them? Business meetings, hotel stays, are operating in the perhaps 10 to 20 percent range now.”
The $2.2 trillion stimulus package recently signed into law will have an impact, he said, but the federal government cannot long borrow such startling amounts without the backing of economic activity.
“There are those in the political class who believe the government can fill the gap,” he says. “Well, the government can’t fill the gap for very long because ultimately the government gets its money from the economic activity of private citizens, and if that activity grinds down then the government has to grind down.
“The government lives off the private sector, the private sector doesn’t live off government. The support has to come from those of us who are paying taxes and if there are fewer and fewer of us paying taxes, then [continued federal spending] just can’t happen.”
Goss urges, however, that people not get discouraged. The brutal recession of 2008 was eventually overcome, he said, and this one will be overcome too. But the cure will not be provided by economists.
“Things appeared hopeless during the 2008 Great Recession, but we bounced back,” he says. “The difference is that we didn’t have then what we have now — a medical problem.
“So it’s more in the hands of scientists and physicians —the medical people — than economists.”