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Columbia Business Monthly

Covid-19 Impact Adds Hurdles to Economic Growth

By Kailash Khandke 

"The Tigers of Clemson University came to town to play the Fighting Gamecocks of the University of South Carolina ... Big Thursday drew several thousand fans ... Clemson won 21-14." Big Thursday then was October 24, 1929, the first day of the New York Wall Street stock market crash.  The panic selling continued on "Black Monday," the Great Depression was ushered in, and a decade of prosperity abruptly ended. With that initial intrastate football rivalry parable, Tara Mitchell Mielnik, in “New Deal, New Landscape: The Civilian Conservation Corps and South Carolina's State Parks,” details the effects of the Great Depression on South Carolina and provides an expedient version of the New Deal agencies including the enduring legacy of the Civilian Conservation Corps (CCC). Consider this sobering thought: when the CCC came to South Carolina in 1933, the state had no public parks or state and national forests. 

By the end of their work in 1942, the state had opened 16 state parks, many of which are the haven and recreation we took advantage of amid the Covid-19 lockdowns these last few months.  

While the prospects of college football returning for the 2020-21 season seem uncertain, the prospects for the economy to rebound appear truly grim, with forecasts from economists ranging from a decline in Gross Domestic Product (GDP) in the 2nd quarter of 2020 ranging from a conservative 10 percent to a more staggering 40 percent. As states grapple with opening or closing the economy as Covid-19 rages on, evidenced by the uptick in South Carolina and other southern states, local and state revenues are set to fall drastically.  

There was a time in the 20th century when America was the world's leader in roadways, national parks and infrastructure. Since then even the emerging economies of India and China have surpassed us in superfast rail transportation, broadband and 5-G network capability.  While the 2017 infrastructure report card for the nation earned a D+, South Carolina did not fare much better. More than 900 of our 9,341 state bridges are deemed structurally deficient; 26 sites are on the national priority list for hazardous waste; S.C. ports rank 28th nationally, and the report estimates $220 million in unmet needs for S.C. state national parks. (  

Meanwhile, this past June, South Carolina's congressional delegation wrote to the U.S. House and Senate leadership to expand affordable broadband access via future stimulus funding, likely underscored by the current Covid crisis as schools attempt to reopen, and the fact that just 21.6 percent of South Carolinians have access to 1-gigabit broadband access.

By 1932, unemployment in the U.S. had reached a quarter of the labor force. At its peak, one out of every four Americans who wanted a job could not find one. Compare and contrast this with the Bureau of Labor Statistics' (BLS) latest Employment Surveys. In April 2020, the unemployment rate increased by 10.3 percent, the largest over-the-month increase in the history of the series going back to January 1948. Unemployment, which was 4.4 percent in March, jumped to 14.7 percent in April 2020, before declining this June to 11.1 percent. 

All of the job growth since the Great Recession of 2007-08 disappeared in a single month! Furthermore, with many service industry employees working far fewer hours today than before the pandemic, real wages in the U.S. economy are in a significant decline. Simply put, the current pandemic-driven slowdown has resulted in one-fifth of the labor force looking for jobs, a number eerily similar to the Great Depression.    

Here in South Carolina, while the nation's GDP fell the first quarter of 2020 by 5 percent, S.C. Gross State Product fell by 4.8 percent during this same time, and the state's unemployment rate is 12.6 percent today after a record low 2.5 percent just this past January. Job losses will certainly rise when the $600 weekly state unemployment insurance enhancements expire on July 25, 2020. The S.C. gas tax set to expire in 2022 will not be sufficient for road infrastructure repair as envisioned before the pandemic. Keep in mind that Balanced Budget Requirements (BBRs) bind South Carolina, like many other states. 

In his testimony to Congress on June 17, Federal Reserve Chairman Jerome Powell was emphatic that federal aid to state and local governments deserved their serious consideration. He noted that the 13 percent of the American workforce employed by state and local governments is a substantial part of the economy, and layoffs by state and local governments would affect the overall recovery efforts in their states. He seems to be suggesting that the federal debt will inevitably increase without congressional action. On the other hand, a targeted state-level relief bill would create an income stream for thousands of workers and enable a tax base recovery over the longer term.

None of us could have imagined an adverse supply shock of the magnitude of Covid-19.  Congress is in the midst of discussions of another rescue bill. So far, federal assistance has focused on small American businesses through its Paycheck Protection Program (PPP) that has spent approximately $500 billion of the total $2 trillion stimulus package and rescued 2.5 million jobs, mostly in the restaurant industry. A focused state-level federal assistance program cannot just be about traditional roadways and highways. 

It must be ambitious and emphasize technologically advanced infrastructure that focuses on alternative transportation networks, expansion of S.C. ports so that we can accommodate global supercontainer ships, and the cleanup of federal land and safe disposal of hazardous waste sites. A dedicated expansion plan for broadband access for all South Carolinians could be the 21st century version of the New Deal's Rural Electrification Administration (REA) that put electricity in 11,000 homes in rural South Carolina in 1933.    

President Roosevelt's New Deal and President Eisenhower Federal-Aid Highway Act of 1956 were undoubtedly America's paramount public works projects. They became a vital part of everyday American life, and the multiplier or trickle down effect, in economic parlance, became indispensable to the success of the U.S. economy. Few would deny that FDR's New Deal coupled with the Social Security Act of 1935 paved the way for the golden years of economic growth in post-WWII America. It cemented the lives of thousands of job seekers for years to come.

As manufacturing firms and service companies warn that more layoffs are on the horizon in the months to come, it is worth recollecting the bailout of the big three automobile firms during the 2008-09 recession. While it had its detractors at the time, few would argue that the automobile relief bill secured the economic future of the more than 400 automobile-parts plants in South Carolina, employing 72,000 people directly and thousands more indirectly. 

There is an urgent and legitimate case for a bold congressional relief plan to enable states to weather future economic downturns. Consider the following exchange with my fellow economist colleague as anecdotal evidence."It can't be just about putting dollars in people's pockets, because I know I wouldn't respond in the same way that I did when those things happened in these last two downturns."

Kailash Khandke is the Frederick W. Symmes Professor of Economics in the department of economics at Furman University. He can be reached at [email protected].