The arrival of a highly effective vaccine seems like as good a time as any for politicians to consider pausing their massive interventions in the U.S. economy. The Journal’s Peter Loftus, Melanie Grayce West and Christine Mai-Duc report:
The first U.S. Covid-19 vaccinations outside of clinical trials began Monday, kicking off the most urgent mass immunization campaign since polio shots were rolled out in the 1950s…
Pfizer is shipping out nearly three million doses in this first wave, with more expected in coming weeks. Pfizer expects 25 million doses will be available in the U.S. by the end of the month.
Another Covid-19 vaccine, from Moderna Inc., could add to the supply of doses this month if it is authorized, which could happen later in the week. Both vaccines are given in two doses, three or four weeks apart.
…Federal officials expect about 100 million Americans will get immunized against Covid-19 by February or March. The general public could be inoculated in the spring or summer.
Stocks rallied Monday morning on the vaccine news. And for some reason many investors also seem to want another round of debt-fueled Washington spending. It seems likely that at some point there will be a reckoning in the value of the dollar and/or the size of federal tax bills from the 2020 Beltway Covid response. But for now unfortunately the question is whether the response should be expanded still further. Fortunately not everyone is eager to accept Beltway premises.
“Do We Need More Stimulus?,” asks Donald Luskin of TrendMacrolytics in an investment research note today. Mr. Luskin writes:
In client calls this week, we’re hearing a strong consensus that the economy is in a sustainable V-shaped recovery, and that 2021 will be a very good year. We’re not going to say this consensus is wrong. Indeed, it’s what we were nearly alone in predicting all the way back in March and April… Will there be short-term setbacks? Of course, and the formation of a consensus is what usually provokes one…
If anything, our biggest difference from the optimistic consensus is that we’re now thinking past recovery to expansion, and we don’t see it as a stretch that 2021 could be a downright boom.
A downright boom? Mr. Luskin continues making his case:
US households have accumulated $2.5 trillion in personal savings this year, unable or too cautious to spend the prior stimulus money. That’s a moneybomb of pent-up demand equal to 11.8% of GDP, and it will detonate next year when the “third wave” of Covid-19 tops out and 50 million inoculations with the new vaccine are administered through January.
State and local politicians have devastated businesses they consider nonessential, but a lot of money is still sloshing through the economy. We just need to let people use it. Big banks are certainly flush with cash and ready to lend if politicians will allow businesses to operate. And the Journal’s Orla McCaffrey reports that small banks are also in great shape:
Profit at community banks—small, local lenders—jumped 10% in the third quarter from the same time last year, according to the Federal Deposit Insurance Corp. Total loans rose 13.4% in the third quarter, compared with 4.9% for the industry. Deposits surged 16.7%. Noncurrent loan rates have risen slightly this year but are still far below levels seen during the last financial crisis.
Do you think Donald Trump will get any credit for any of this? Of course not.