Can the Coronavirus and the Stock Market Meltdown Break America’s Addiction to Fantasy?

After President Donald Trump’s press conference on the new coronavirus on Friday, he triumphantly sent supporters a signed chart showing the Dow Jones Industrial Average going up sharply as he spoke.

On the one hand, this was hilarious, since on Monday, the Dow had its second-worst day in history. Trump did not send out any signed charts about this.

On the other hand, this should terrify everyone. Even now, the president of the United States is lost in a fantasy world. Even worse, Trump’s fantasy is shared by many Americans. In this imaginary world, we can all get rich if the little flickering numbers on our iPhone’s Stocks app go up. It’s therefore also a disaster if the little numbers go down.

In reality, America’s stock market wealth was always a mirage, one which we now see dissolving in front of us. It’s dangerous for us to hope it will reappear, because it’s a distraction from the real world that we have to focus on more than ever.

The good news — if there is any — is that this is an opportunity. As the stock market inevitably plunges further, we can use this moment to discard our fantasies about it — and then let go of the many other dangerous delusions that plague America, in our thinking about everything from health care to government spending to war and peace.

This will be tough, given that the most powerful people in the country dreamed up these reveries in the first place because they find them so self-flattering and useful. They won’t want us to wake up. But we should give it a shot, because we’re literally dying in our metaphorical sleep.

In reality — the same place where we have bodies and can be killed by the coronavirus — the stock market run-up during Trump’s presidency has been generally irrelevant or even bad for most of us. And its fall will be irrelevant or even good.

It would be one thing if America’s corporations had been producing incredible amounts of the real wealth we need now — say, hospitals with huge negative-pressure isolation wards or factories across the U.S. that can quickly churn out Covid-19 tests, ventilators, and vaccines. It would be almost as nice if they’d been spawning invention after invention, curing Alzheimer’s, decarbonizing the economy, and turning ocean water into something we can drink.

But nothing like that has been happening. American productivity, the most important factor in increasing economic well-being, has been growing quite slowly. In general, the stock market had been careening further and further out of whack with the underlying real economy. It’s just been a financial bubble, like the housing bubble that led to a second Great Depression a decade ago or the dot-com bubble before that.

Individuals can get rich during bubbles by selling to suckers. And those holding the bubbly asset can feel richer than they are, until the bubble bursts. But bubbles can’t make everybody richer, no matter how much the president tweets about it.

So let’s focus on the real world. In the real world, we have to wash our hands. We need to pay anyone who’s sick to stay home. We have to figure out ASAP whether we should cross our fingers and hope private pharmaceutical companies develop a patented vaccine, or if it makes far more sense for the government to directly fund research on the condition that the vaccine be made publicly available. We have to get as many people as possible out of prison for their own well-being, and so that jails don’t become pullulating centers of an infection that spreads to everyone else.

If we can actually pay attention to the real world during this bracing crisis, we might gain the confidence to keep doing it afterward.

The Fantasy of “Paying for” Universal Health Care

One of our most bizarre delusions, manifested in the Democratic presidential primary, is that we can’t have Medicare for All unless we figure out how to pay for it. In reality, Medicare for All would either cost as much as we’re currently paying or save America money.

Between government and private spending, our current monstrous hybrid system spends more than 18 percent of our gross domestic product on health care, twice the average for the other 34 members of the Organization for Economic Cooperation and Development. Even worse, health care costs are going up faster than the economy is growing. That means that if nothing changes, the 18 percent number will continue to increase. This is already a genuine drain on the U.S. and will eventually cause something to break.

The only solution to this problem that any country has ever discovered is universal health care. A unified system that covers everybody has the power and moral authority to bargain with providers and hold costs down. So while Medicare for All would require more spending by the federal government, individuals would spend so much less in premiums, deductibles, and copays that we’d almost certainly come out ahead overall — plus we’d never have to think about paying doctor’s bills again. In other words, in reality, the only question is how we can possibly pay for the status quo.

This total disconnect from the real world was embodied by former South Bend Mayor Pete Buttigieg’s lament that Medicare for All would eliminate millions of private health insurance jobs. Yes, it would — and that’s the point. At best, these jobs are pointless bureaucratic time-wasting; at worst, they involve preventing patients from getting health care. If Buttigieg thinks that’s a good thing, he should propose hiring millions of Americans to play World of Warcraft all day long and occasionally go to emergency rooms and strangle people.

Finally, even if Medicare for All did somehow end up costing a little more than our current system in isolation, it would still be a huge bargain — both in pure financial terms and otherwise. Tons of uninsured people not getting tested for the coronavirus is going to end up costing a lot of actual money. Then there are things that aren’t measured by the GDP, such as how nice it is when your grandmother doesn’t die alone and untreated in quarantine.

The Fantasy of Wall Street’s Importance

Everyone old enough to read this lived through America’s catastrophic bungling of the real estate bubble in the 2000s. A conservative estimate shows there were 20 kajillion articles about the collapse of the big banks in late 2008. But that was always a sideshow, while barely anyone paid attention to the big tent: the effects of the bubble’s deflation on the real economy.

In reality, by the time of the Wall Street cataclysm in September 2008, the depression had already been in progress for almost a year. The real estate bubble had caused an increase in construction activities equal to 4 percent of GDP, at the time about $560 billion. This created huge numbers of jobs for construction workers, real estate agents, and the entire industry. Also, because homeowners mistakenly believed themselves to be richer than they were, they spent more than they would have otherwise, adding another $400 billion in demand and creating more jobs.

When housing prices peaked at the beginning of 2007, unemployment was 4.5 percent. But then the bubble began to collapse. Now the process worked in reverse, sucking out almost $1 trillion in demand from the economy.

That was the problem, not the stock price of JPMorgan Chase. What we needed at that point was to replace that lost demand with a massive expansion of government spending. What we got instead was the Wall Street bailout and the Obama administration’s utterly inadequate stimulus plan. After everything was said and done, it added a mere $150 billion per year to the economy.

Even worse, Barack Obama then immediately pivoted to deficit reduction, slowing the economy further. Unemployment went up to 10 percent. Incredibly enough, when he left office in January 2017, it was still higher than its pre-depression level.

The proof of this vile pudding was in the eating. Franklin D. Roosevelt responded to the Great Depression and World War II by focusing on reality and letting go of America’s fantasies about fiscal probity. People needed jobs, so the government hired them. We needed to beat Nazi Germany, so Roosevelt increased federal spending by 400 percent. This gave the Democrats political dominance for decades. Obama responded to his depression by holding onto fantasies about the centrality and significance of Wall Street, and the brilliance of its titans. The result was the obliteration of the Democratic Party in Washington, D.C. and nationwide, and then President Donald Trump.

Our Fantasy of Our Own Power and Benevolence

Our most treasured pipe dream is that we can maintain control over the Middle East forever. Nicholas Burns, a former Bush administration official who now is one of Joe Biden’s top foreign policy advisers, has explained that “the United States is the major power in the Middle East and will continue to be and is not going away.”

For decades, we were convinced that we’d be able to engage in the ultraviolence needed to maintain this dominance with no consequences for the U.S. In reality, in 2001, 19 men from Saudi Arabia, Egypt, Lebanon, and the United Arab Emirates hijacked American planes and flew them into the World Trade Center and the Pentagon.

This was a sudden intrusion of the most concrete facts imaginable. Yet our fantasy was so powerful, even this didn’t jar us to consciousness. Instead, we made the fantasy yet more elaborate. “Why do they hate us?” George W. Bush asked in an address to Congress nine days after the attacks. The answer: “They hate our freedoms.”

Incredibly enough, the fantasy then became even more ornate. In order to defend ourselves from the freedom-haters, we were going to liberate Iraq and install a small-d democratic government — all led by an American political faction that is manifestly incompetent and openly loathes democracy.

We’ll be paying for this disaster for the rest of our lives. But there was no time to rest because we were then onto the next aspect of our fantasy: that we desperately needed to stop Iran from getting nuclear weapons. Moreover, it was crucial that we continue stopping them until the end of time, even as Iran would continue to be surrounded by aggressive nuclear powers, including us.

In reality, Iran did not have a nuclear weapons program after 2003, and its leaders probably do not want nuclear weapons now. Also in reality, if Iran did obtain them it would certainly be no more irrational than the nuclear-armed United States and Israel.

Nonetheless, Obama accepted the fantasy premise — that Iran had a nuclear weapons program and this was a genuine threat to America — and brokered a deal with the Iranian government on that basis. Then Trump arrived, tore everything up, and added even more brutal sanctions on Iran.

Today, in reality, a staggering Iran, short of money and medical supplies, has been incapable of dealing with the coronavirus. As The Atlantic puts it: “When the final history of the coronavirus epidemic of 2020 is written, it may go something like this: The disease started in China, but it became finally and irrevocably uncontained in Iran.” The Iranian government might have failed even if we hadn’t spent years trying to throttle the country. But we will never know. What we can say for sure is our fantasy about a largely imaginary danger blinded us to an extremely real danger.

What It Takes to Wake Up

In his novel “1984,” George Orwell included sections from a book written by one of the characters, Emmanuel Goldstein. Goldstein is the never-seen leader of the resistance to Oceania’s tyrannical government.

“All rulers in all ages have tried to impose a false view of the world upon their followers,” Goldstein writes. However, “war was one of the main instruments by which human societies were kept in touch with physical reality. … Physical facts could not be ignored. In philosophy, or religion, or ethics, or politics, two and two might make five, but when one was designing a gun or an airplane they had to make four. … War was a sure safeguard of sanity. … While wars could be won or lost, no ruling class could be completely irresponsible.”

America’s rulers in this age have done a great job imposing a false view of the world on us. In fact, even many of them have come to believe in it.

But with the worldwide pandemic we now face, we are going to experience something akin to war. As in war, physical facts can’t be ignored. Let’s face the reality that right now, two plus two absolutely has to equal four — and then not forget that it still does when we come out on the other side.

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