White House economic adviser Kevin Hassett said the pandemic could drive the U.S. economy into its biggest slump since the Great Depression, with a second-quarter contraction in output of up to 30 percent.
“You’re looking at something like minus 20 percent to minus 30 percent in the second quarter,” Hasset said on CNBC’s “Squawk Box,” referring to the quarterly headline gross domestic product (GDP) figure.
“For second-quarter GDP, it’s going to be the biggest negative number that we’ve seen since the Great Depression,” he added.
Speaking of the jobless number for April, which will be released in the first week of May, the senior adviser to President Donald Trump said he expected it to come in at 16 or 17 percent.
In the past five weeks alone, the number of initial jobless claim filings totaled some 26.4 million, erasing all the jobs created since the Great Recession. The economic boom following the 2008 financial crisis was the longest in U.S. history when lockdowns, sparked by the outbreak of the Chinese Communist Party (CCP) virus, the novel coronavirus that emerged from China in 2019, brought it to a dramatic end.
In earlier remarks on ABC’s “This Week,” Hassett said the nation’s economic outlook was in a “really grave situation.”
“We’re going to be looking at an unemployment rate that approaches rates that I think we saw during the Great Depression,” he said. “During the Great Recession … we lost 8.7 million jobs in the whole thing. … We’re losing that every 10 days.”
Hassett said the severity of the outlook would depend on mitigating actions.
“A lot of it is going to depend on what we do next,” he said. “We have to make sure that we have what it takes to prosper [to give the nation] the best chance possible for a V-shaped” recovery, referring to a sharp rebound in economic activity rather than a slow, U-shaped one.
“Make no mistake, it’s a really grave situation,” Hassett added.
Expressing hope for a V-shaped bounce back, Treasury Secretary Steven Mnuchin told Fox News on April 26 that the economy was going to “really bounce back” in the summer, citing efforts to reopen parts of the country combined with fiscal relief of historic proportions.
“As we begin to reopen the economy in May and June, you’re going to see the economy really bounce back in July, August, September,” he told the outlet.
In his remarks to ABC, Hassett also pushed back on suggestions by Senate Majority Leader Mitch McConnell (R-Ky.) that cash-strapped states consider filing for bankruptcy.
“The state going bankrupt is something that’s not really been anticipated by the founders,” Hassett told ABC.
McConnell said in a recent interview with radio host Hugh Hewitt that he would support the ability of states to declare bankruptcy, which current law prohibits.
“I would certainly be in favor of allowing states to use the bankruptcy route. It saves some cities. And there’s no good reason for it not to be available,” McConnell said.
The Kentucky lawmaker told Hewitt that, in some cases, federal aid to states could amount to bailing out states with a history of fiscal mismanagement.
“My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that,” the senator said. “That’s not something I’m going to be in favor of.
“I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated.
“There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”