Delta Air Lines Inc. Chief Executive Officer Ed Bastian told analysts on April 22 it could take as many as three years before the carrier sees a sustainable recovery from the pandemic and the resulting financial worries.

“People will hoard the money because they’re so nervous,” said Stiglitz, author of “People, Power, and Profits: Progressive Capitalism for an Age of Discontent.”

This will restrain growth and hold inflation down, at least for a time, in spite of trillions of dollars in fiscal and monetary support. Bond-market investors are betting consumer prices will rise 0.75% annually in the next five years. That’s dangerously close to deflation territory and compares with the last expansion’s 1.7% average.

The surfeit of savings will keep interest rates “very low for a very long time,” said former International Monetary Fund Chief Economist Olivier Blanchard. Mushrooming government debt also might make the Fed “think a bit harder” about raising rates, the Peterson Institute for International Economics senior fellow added.

Counter the Hit
The Congressional Budget Office sees the federal budget deficit more than tripling this fiscal year to $3.7 trillion as the government tries to counter the hit from the coronavirus crisis.

Besides reducing interest rates effectively to zero, the Fed is helping to hold down government financing costs by gobbling up Treasury securities in the secondary market. Its balance sheet already has grown by $2.5 trillion this year, with further increases to come.

Nevertheless, BlackRock Inc. CEO Larry Fink reportedly told clients last week that corporate taxes eventually will have to be raised significantly to help fill the budget gap -– a development that would undercut company profits and confidence and could hold back growth.

Faced with little visibility about what comes next, companies probably will be cautious. At least 55 businesses in the S&P 500 Index have announced cuts in capital-spending plans, according to Bloomberg Intelligence Chief Equity Strategist Gina Martin Adams and Associate Analyst Wendy Soong.

“Liquidity and cash conservation are now primary concerns,” they wrote in a May 7 report.

Protect Workers
To protect employees from the virus, companies are expected to reconfigure their workplaces and spend more on safety. Former Congressional Budget Office Director Douglas Holtz-Eakin likens the situation to the costly post-9/11 drive to make America more secure from terrorist attacks, which acted as a drag on economic expansion.