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Economist Ken Rogoff on whether the U.S. has ever experienced a crisis like this one

The coronavirus pandemic is causing immense economic damage. The number of Americans filing for unemployment benefits has surged as businesses nationwide close down and are forced to lay off workers. Has the country ever experienced anything like this? Paul Solman talks to Harvard University economist Ken Rogoff, whose book “This Time is Different” examines the history of financial crises.

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  • Judy Woodruff:

    As the economic fallout from the coronavirus outbreak continues, businesses across the county are being crippled by closings and layoffs.

    The number of Americans filing for unemployment benefits surged last week to a 2.5-year high.

    For a look at how this economic downturn compares to others, Paul Solman sat down with Harvard University economist Ken Rogoff. His book "This Time Is Different" examines the history of financial crises.

    It's part of our regular series, Making Sense.

  • Paul Solman:

    Is this time different?

  • Kenneth Rogoff:

    Well, this is something extraordinary we're facing.

    It is really hard to think of a historical parallel. I have talked about this with my co-author, Carmen Reinhart, and we have to go back to 1918-1919, the Spanish influenza epidemic, which killed, you know, millions and millions of people, to think of something like this worldwide.

    And it's not exactly the same. It was after World War I, when things were pretty bad already.

  • Paul Solman:

    Is this a war?

  • Kenneth Rogoff:

    I think so.

    I really feel like it's an alien invasion. We're being occupied. We're hiding in our houses. We're told not to leave. We're having a sudden stop in economic activity. We are going to see a recession, at least in the short term, the likes of which we have not seen at least going back to World War II.

  • Paul Solman:

    In terms of the U.S. economy, the global economy, how bad could it get?

  • Kenneth Rogoff:

    Well, we don't know how long we're going to be in lockdown. When will there be antivirals? How soon will there be a vaccine?

    We just don't know how the crisis will unfold. We're still in the war, and until we come out the other end, it's hard to know.

    But I think what we do know is, the short-term drop in output and quite possibly in employment could be worse than 2008.

  • Paul Solman:

    Is there any chance that we won't come out of it in a year or two?

  • Kenneth Rogoff:

    If the virus can be conquered, and we can reach a stable situation, I'm very optimistic that we will be able to do that.

    But it will be different for different countries. Italy's in trouble. I mean, they have big pension problems, big debt problems, growth problems going into this. Emerging markets are in trouble. We're actually already seeing emerging markets start to fold under the weight of this.

    I don't know where China will be. That's a big question mark. I mean, everybody thinks China did great, China's conquered this. Not their economy. If they're lucky, getting people back to work in the manufacturing sector, but who's going to buy the stuff once they start manufacturing? The rest of the world's in recession.

  • Paul Solman:

    Are Congress, the president and the Fed responding appropriately?

  • Kenneth Rogoff:

    Let's say they're moving forcefully in the right direction.

    I think their response here to protect the healthy part of the economy needs to be just massive.

  • Paul Solman:

    More massive than what they're doing now?

  • Kenneth Rogoff:

    Oh — oh, $1 trillion is just a starter package on what's going to end up needing to be done here.

    If you're shutting down a $23 trillion economy for two months or three months, the expenses are just massive, workers losing their jobs, businesses going out of business. You can't allow that to happen too far.

    So, no, I think we will see many further packages of different types, not all like this one.

  • Paul Solman:

    Bailing out the airlines, for example, the hotel industry, restaurants?

  • Kenneth Rogoff:

    So, one of the tough things in this — and I don't know how to make that judgment — is how much, who to bail out.

    But, certainly, the hospitality industry, to some extent the airlines, they're bystanders here. They didn't create this. They weren't flying too many routes and about to go bankrupt. So, I think you have to — first, really importantly, the health care sector.

    We have to go in a military, wartime stance, if necessary taking over parts of the private sector for production of mass of respirators, building up facilities. That will calm people down. That will help things pass.

    Then you have to help the directly affected people and sectors. And then the kind of bailout that they're talking about with sending checks to individuals, that's to protect the healthy parts of the economy.

    All of these things need to be done. And the Fed has to come in and the Treasury to provide loans to corporates, to businesses, so they don't go bankrupt, so that we have businesses when we come out of this.

  • Paul Solman:

    You are someone who's worried about governments taking on too much debt. That's now not a consideration anymore?

  • Kenneth Rogoff:

    No, absolutely not.

    I mean, there's never been a concern about our government's defaulting. The concern is being able to borrow massively when you need to. That's the whole point of saving for a rainy day. When it rains, you want to really open up the floodgates.

    And, here, I just — there's no limit. We're in a war. You have to win the war. I would have no problem with the government debt magically going up $5 trillion in the blink of an eye, if we could get out of this in two or three months healthily.

    This is an emergency. You're not worrying about your credit standing right away. I don't think that's going to a problem. And you know what? If we have inflation at the end of this, so what, if that is what we needed to do to win this war. We're trying to protect the American people, protect our interests, protect the future.

    This is really — think like World War II, World War I. It's this — tiny little viruses invading us, but you know, make no mistake, this is like a war, an alien invasion.

  • Judy Woodruff:


    Once again, that was Paul Solman talking to Harvard economist Ken Rogoff.

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