The bear market the United States entered after the coronavirus began disrupting the strong economy could be worse than the 2008 recession, according to a former Obama adviser.
Jason Furman, a top economic adviser to former President Barack Obama throughout both terms of his administration, expressed concern about the market plunge that has taken place over the last two weeks because of COVID-19 fears. During an interview with Vox, he said the downturn could be worse than the Great Recession because of a culmination of things.
“At this point, this feels much worse than 2008. Lehman Brothers was quite bad, but it was the culmination of a sequence of things that had happened over 14 months,” Furman said. “This hit all at once.”
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He noted that the onset of the recession in 2008 was much more gradual, and wealthy people were able to continue spending as a buffer to the downturn. The coronavirus poses a unique challenge as people are sure to hunker down and spend less.
“I was in a restaurant yesterday, possibly for the last time for a while. I was in a taxi, possibly the last time for a while. There are entire industries I interact with where I’m realizing: ‘This may be the last time I’m paying you for a while,’” Furman explained. “That didn’t happen in 2008.”
Furman said recovery from the current downturn is dependent on the length of the pandemic. “If two months from now we go back to normal, I think we’d be OK. If this lasts six months or longer — and I think that’s the more likely scenario — all of that just compounds,” Furman said.
He added, “Even if you discover a cure in December, you still have people out of jobs, broken balance sheets, bankrupt companies that won’t be particularly eager to hire.”
Furman advocated the implementation of a type of universal basic income to encourage spending until the markets stabilize.
He said, “My No. 1 choice would be a flat amount per adult, half that per child. A week ago, I thought $1,000 per adult, $500 per child. Now I’d double or triple that. Get them the check within three months or less.”
Obama oversaw the economic recovery that took place after the 2008 recession. The former president oversaw the longest period of uninterrupted economic growth in U.S. history, but he has also been criticized for leading the slowest economic recovery since World War II. Furman was the director of the National Economic Council from 2009 to 2013 and the chairman of the Council of Economic Advisers from 2013 to 2017.
