America failed at COVID-19 but the economy's okay. Why?

America owes its macroeconomic good fortune to Washington muscling through a giant and successful stimulus in the spring—a policy victory that Congress and the outgoing Trump administration are doing their best to cram into the jaws of defeat.

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The United States came into the coronavirus recession with a few structural advantages, including a highly diversified economy. Countries dependent on a single hard-hit industry—Spain on tourism, for instance—have tended to falter regardless of their health or macroeconomic response. The U.S. is also lucky not to have to rely on exports for growth. World Bank data show that sales abroad account for 12 percent of our gross domestic product, compared with 18 percent in Japan, 32 percent in Canada, and 47 percent in Germany. This means that the collapse in global trade during the pandemic has hit other countries far harder than the U.S.

Another structural advantage is that Washington prints the world’s reserve currency, which means that it tends to suck in global capital flows when uncertainty is high, “as in a pandemic,” Mark Zandi of Moody’s Analytics told me. That pushes up American asset values and lowers American borrowing costs. The U.S. labor market is also more flexible than those in other countries, Zandi noted. “Americans are more willing to adopt new technologies, to move for a job, and [to] make big changes in how they live and work.” That makes absorbing big, strange shocks easier.

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