QUEST: Out of the Trough, Into the Unknown

Special Guests: Bob Carroll, Bob Bixby

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On the latest Facing the Future, I was joined by Bob Carroll, co-director of EY’s U.S. National Tax Quantitative Economics and Statistics Group (QUEST), as well as Concord Coalition Executive Director Bob Bixby. We discussed QUEST’s latest economic update and the industry and workforce disruptions brought on by COVID-19.


[Note: Portions of this week’s Facing the Future can be seen in the video clips posted below.]

In QUEST’s most recent economic update, Carroll said, “What we’ve seen recently is the trough of the economic crisis, the bottom of the downturn, it seems has likely occurred in April.”

He said that was the case for both GDP and unemployment, and real time data metrics indicate that as states started reopening in May and June, economic activity really began to pick up.

“We do see a pretty significant uptick in economic activity, and there has been an uptick of cases more recently running in parallel with the reopening, and we’ll see how that plays out,” Carroll added. “It is a really difficult time to be doing this work … it’s kind of unknowable what a resurgence of the virus will look like.”

“This is fundamentally a health crisis that became an economic crisis,” Carroll said. “With a normal flu season, it subsides in spring and then picks up again in the fall; with other major pandemics there was a significant second wave that occurred in the subsequent fall.”

And the uptick in cases will be something we have to watch that will likely have economic consequences, he added.

“A lot of what happens in the second half of the year will depend on whether there’s a second wave,” he said. “If there is not a second wave, then the expectation is fairly strong growth in the second half of the year, in the third and fourth quarter.”


Carroll said quick action by Congress in passing several relief packages that carry through to July focused on providing a bridge to recovery and some breathing room to see what is going on in the economy, to see where the economy has strengths and weaknesses, in order to tailor the next package most effectively.

“I think it is the case that the next round needs to focus to some extent on some additional relief but also on recovery, as opposed to a bridge, now providing a boost to recovery,” he said.

Carroll highlighted policies that have been discussed by policymakers that could go into the next package, like infrastructure investment, support for workers and aid to states. But he concluded that the package needs to evolve some before Congress closes the book on it.

“One of the problems that we’re going to face is the longer the economic dislocation lasts, the more likely it is that those who are temporarily unemployed will … become permanently unemployed, and our ability to lower the unemployment rate quickly will begin to dissipate,” Carroll said. “I think we have to be very, very careful to try to — consistent with public health concerns — restart the economy fairly quickly.”

On the concept of fiscal responsibility in the present climate, Carroll said, “The long-term fiscal imbalance has been a problem for decades, it’s more of a problem now, and this crisis has amplified and accelerated that problem.”

He added that solutions to the problem, at a high level, have remained the same: a reduction in spending, increases in revenues, bending the cost curve with respect to entitlements and controlling the rise in per-capita health care costs.

“This decade we were expecting the debt held by the public to rise to around 100 percent [of GDP]; we’re already there,” he said. “When we get through the crisis … we’re going to have a much larger fiscal imbalance, we’ll have much higher interest costs, and that’s something we’re going to have to figure out how to deal with.”


Hear more on Facing the Future. I host the program each week on WKXL, (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, iTunes, Google Play Music or with an RSS feed. Follow Facing the Future on Facebook and watch videos from past episodes on The Concord Coalition YouTube channel.

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