Unfortunately, we have ample reason to think this optimistic assumption - like the one driving intermittent rallies in the stock market - is wrong.įor one thing, COVID-19 models that would have permitted a return to business as usual in June have already been proven wrong. It will take quite a while to bounce back, but bounce back we will. Yet making projections requires making assumptions, and the CBO assumes that all of this epidemiological unpleasantness will be behind us in a few short months. Will it happen? Philip Swagel, the director of the CBO, notes the 'enormous uncertainty' facing the country and the world because of the pandemic.

Yet the report also assumes that we can expect a quick v-shaped recovery in which the economy will sharply contract only in the current quarter and begin growing again in the third. Most news reports treated these projections as gloomy, both because they forecast greater short-term economic weakness than many private-sector predictions, and because the CBO anticipates that nationwide unemployment will rise to 16 percent in the third quarter of 2020 and remain as high as 9.5 percent through the end of 2021. The same incorrigible optimism could be seen at work in economic projections issued by the Congressional Budget Office late last week. The market shrugs it off and fastens onto any word of good news, any sign that we've turned a corner. Bad news, like last week's soon-to-expire oil futures sinking into negative territory, can still spark big drops. The Dow is now just 20 percent off its pre-pandemic highs. But in the month since then, it's come a good part of the way back. The Dow lost roughly 37 percent of its value in the month or so between February 19 and March 23. It started falling in mid-February and then fell off a cliff in March, as the magnitude of the pandemic and its economic effects sent traders into a panic. I have begun to worry that our irrepressible optimism is serving us poorly through the pandemic.Ĭonsider the stock market. But 10 years later, it had bounced back, with trillions more created.

The market tanked and trillions were lost. Sure, there have been bumps in the road, like the financial crisis of 2008. Ever-expanding markets, new opportunities for growth, wealth creation beyond the wildest dreams of human beings prior to the postwar world - the possibilities have seemed endless, the horizons boundless. Whatever else it was, the 2003 invasion of Iraq was an expression of thick-headed American optimism about our capacity to bring liberal democracy to an entire region of the world at the point of a gun.īut the Iraq debacle was merely one (albeit very large) event in a broader world that still seemed to bend to our will most of the time, especially in economic matters. But it also tends to blind us to the ineradicably tragic dimensions of life - the unavoidable trade-offs among competing goods that place hard limits on human striving - and sometimes it even lures us into making terrible (and terribly obvious) mistakes. Yes, it's inspired many of our most impressive achievements. I've never been a cheerleader for America's inveterate optimism. That question has haunted me these past two months, as the coronavirus has shut down the world and killed tens of thousands of Americans ( with no end in sight). But what if this national trait no longer suits the reality of the world we now inhabit?