JS: What's the outlook for the U.S. economy?
“If you have a plan, you stay the course. You do not change your pivot because of recent events.”
Abby Joseph Cohen: The big question is how long will the pandemic last. If it begins to ameliorate over the next small number of months, then we can feel more comfortable that the economic impact will be more short-lived.
Mohamed El-Erian: The rest of the world is going to be hit very hard, and we are unfortunately going to feel some of that. It's very hard to be a good house in a bad neighborhood. As hard as you try, the neighborhood matters.
Cohen: The U.S. economy was in a stable and steady condition before this situation developed. It was in better shape than China, where there was a deceleration underway, or Europe, where growth was already under 1 percent.
El-Erian: We are the least problematic country out there. In absolute terms, this is going to be a hit. But in relative terms, we will do better.
JS: When will things get better?
El-Erian: The spread of the virus around the world does two things. It paralyzes economic activity, and it creates fear, so that amplifies the economic effect. To address these issues, we need evidence that we can contain the spread of the virus, and we need indications that we can increase immunity and increase the recovery rate. Until that happens, the global economy will continue to face massive — I stress massive — contractionary winds.
JS: The Federal Reserve Board cut interest rates to keep the economy going. But many older people with their money in the bank say that punishes them for being savers.
Diane Swonk: Nothing could be further from the truth. The Fed is using the crude tools they have to try to stimulate the economy. Because, even if you are on Social Security and you're withdrawing from your savings account, you want lots of U.S. workers paying their Social Security taxes to keep the program healthy.
People look at their own financial situation — understandably — and they say, “This is penalizing me, so it's terrible for everyone.” As hard as it is for individuals, the government doesn't make monetary policies for individuals. It has to do it for the aggregate.
JS: Based on the $2 trillion aid package that Washington passed in March, should we worry about the budget deficit?
Ritholtz: My entire adult life, I've been hearing that the federal deficit is a giant danger and we're all going to hell: “Because of the deficit, nobody will lend to America, and our interest rates will go up.” All that criticism has been wrong, and it's been 50 years of hearing this.
When we talk about the deficit, the most important ratio is our debt-to-GDP ratio, meaning how well is the economy doing, and is that sufficient to service the debt? Japan's debt-to-GDP ratio is 237 percent. In the United States, it's 108 percent. Look at the 10-year bond: People are willing to lend money to Uncle Sam at about 1 percent. The market is saying they don't think the deficit is a problem.
Hobson: You always want to be mindful of debt. Always. If you're an individual, if you're a corporation, if you're government. If you can manage that debt, however, it should not overwhelm the conversation. A growing U.S. economy will be able to manage the debt.
JS: Are Social Security and Medicare at risk?
Edelman: You don't have to worry about the government eliminating them. They are among the most popular programs in the country. It is unrealistic to believe that Congress would make these programs go away.
At the current rate of withdrawal, though, and under current law, all Social Security beneficiaries will see their benefits cut 23 percent in about 15 years. It's time for a bipartisan solution to the problem. One party would prefer to raise taxes to preserve current benefits. The other party would prefer to lower or delay benefits in order to not raise taxes. The two are going to have to compromise. The sooner that they begin working on the solution, the less painful it will be for all Americans.
JS: Any parting advice?
Schwab-Pomerantz: It's so important for everybody to understand the basics of personal finance. Whether you are working with an adviser or delegating finances to your spouse, you need to know how to ask the important, hard questions rather than putting your head in the sand. It's like knowing how to swim. It doesn't matter that your partner knows how to swim. You also need to know how to swim.
Hobson: We've got to get better at squirreling away an emergency fund. I grew up with no money, so I know how hard this can be when you are desperately trying to make ends meet. But a financial cushion is very reassuring. More importantly, it will help you in the tough times that will come. They always come.