Above Photo: Unemployment line in the Great Depression. This would not be allowed today under the CDC guidelines for the coronavirus pandemic (not allowed to congregate in restaurants, six feet of spacing for social distancing).
We are living in interesting times, as the old Chinese curse goes. In an unprecedented move in modern history, the U.S. and other countries around the world are shutting down their country’s economic activity and ordering people to stay home to combat the coronavirus pandemic. This could last or recur for many months.
During the Great Depression in the 1930s, the highest rate of U.S. unemployment was 24.9% in 1933, and even with the massive government intervention of the New Deal programs, unemployment remained above 14% from 1931 to 1940. It was the mass mobilization for World War II that eventually ended the Great Depression.
Yesterday, Treasury Secretary Steven Mnuchin warned Republican senators that no action on the coronavirus pandemic could drive up US unemployment to 20%. This is depression level unemployment, with all of the resulting economic hardship that it entails.
During the Democratic presidential debate on Sunday night, presumptive Democratic Party nominee Joe Biden argued for an economic response that would “hold harmless” American workers who lose their jobs and “make them whole now” during the coronavirus crisis:
Here’s the deal. We’re going to have to not only deal with the immediate crisis, economic crisis, which is the most critical now to let people know their mortgages are going to be paid, their rents are going to be paid, they’re going to have childcare, they’re going to make sure that all their medical bills are cared for relating to this, et cetera. We have to go beyond that … We hold all these folks harmless.
[Americans] want to deal with the results they need right now, and we can do that by making sure that we make everybody whole who has been so badly hurt in terms of they lose their job, in terms of not having the ability to care for their children, in terms of the healthcare costs that they have related to this crisis. We can make them whole now, now, and put in process a system whereby they all are made whole.
[T]he need [is] for us to act swiftly and very thoroughly and in concert with all the forces that we need to bring to bear to deal with the crisis now, so no one’s thrown out of their home, no one loses their mortgage, no one is kicked out of their house, no one loses their paycheck, no one is in a position where they have a significant financial disability as a consequence of this [coronavirus pandemic].
Unfortunately, this is not the robust economic stimulus we are going to get now because we are stuck with a Republican president and Republican Senate until January 20, 2021, and they are never going to agree to an economic stimulus package which looks anything like this plan.
The Trump administration is eyeing a stimulus package worth $1 trillion that includes directly providing Americans with checks. How The White House Wants To Cut Checks For Americans And Inject $1 Trillion Into The Economy To Combat Coronavirus:
The plan has yet to be fully fleshed out, but the size and scope of such a proposal—which is on top of two other stimulus packages addressed by Congress—represents the realization by the White House and lawmakers that unless extreme measures are taken, the country could slip into a recession as workers lose their jobs or see their hours scaled back.
The proposal is set to include loans, liquidity for small businesses and checks for individuals, according to Mnuchin. There’s also been talk by the president and among Republicans to include bailout money for the travel industry, like cruises, airlines and hotels [i.e., Trump Hotels]. It’s yet-to-be-determined by what metrics the government would determine how much money an individual should receive, but Mnuchin indicated he was eyeing an expeditious timeline of just a few weeks for the proposal to be drawn up and passed.
The massive stimulus would be on top of two other packages, in addition to the Treasury deferring IRS payments for 90 days and making them interest- and penalty-free. An $8.3 billion bill for coronavirus vaccine and treatment costs has already been signed into law while a second multi-billion-dollar piece of legislation to provide workers with paid sick leave is set to be sent to the president’s desk after being passed by the Senate sometime this week.
The idea of infusing the economy with cash that Americans can immediately see and use—rather than payroll tax cuts, for example, which have been met with pushback from both sides of the aisle over concerns it would not go far enough, quick enough—has grown among Republicans. Mnuchin did not push for payroll tax cuts during their Tuesday meeting, according to Sen. Josh Hawley (R-Mo.), despite President Donald Trump’s past desire to implement them.
Sen. John Thune (R-S.D.), the majority whip, said doling out money would be far more popular among his Republican colleagues.
“It can get dollars out there more quickly to meet the need in a more direct way,” he said. “Payroll tax cut, obviously, will distribute out over several months. I think that there is a high level of interest among our members, and that idea seems to be an area where there’s some common ground with the Democrats as well.”
Among the Democratic and Republican lawmakers who’ve proposed cutting checks is Sen. Mitt Romney (R-Utah), who suggested each person should receive $1,000.
Seriously? American workers, many of them in service industries who are being ordered not to report to work for up to the next eight weeks are supposed to survive on a $1,000 check? This in no way “makes them whole” for lost wages, or health insurance benefits for those lucky enough to have them. How are people supposed to pay their rent or mortgage, pay for food and medicines, pay for utilities, etc.?
We are talking about the unprecedented need for the government to subsidize the payment of wages and benefits through enhanced unemployment insurance benefits during the period of time that the government orders businesses to close and employees not to report to work in order to maintain a basic level of economic activity. If the government is going to shut down the economy under its police powers, then the government needs to pay for it (we all will be paying for this in taxes).
Democrats have put forward plans of their own, including [an insufficient] $750 billion plan from Senate Minority Leader Chuck Schumer. While he remained open to the idea of cutting individual checks, he said the bulk of the response should remain focused on containing the spread of the virus.
“They’re worried about the big businesses,” the New York Democrat said. “They want to pump some money into the economy, but if you don’t solve the immediate health care and economic needs of the people who are hurt, the problem will just get worse.”
Schumer also accused McConnell’s process of first working with the White House and then turning to input from Democrats would only delay a final agreement.
“This should be a four corners negotiation with the White House,” he added.
The Hill reports that the GOP is divided on next steps for massive stimulus package:
Senate Republicans are divided over how to structure a massive stimulus package that could wind up costing nearly $1 trillion, likely slowing down how long it will take to get the relief bill to President Trump’s desk.
Senate Majority Leader Mitch McConnell (R-Ky.) pledged Tuesday that the Senate will not leave town until it passes the bill, but doing so will be a huge undertaking.
Republicans disagree over fundamental questions such as whether to make direct payments to Americans who miss paychecks because of the crisis or to all adults in a bid to boost the economy more generally.
They’re also split on whether economic aid should be delivered primarily through unemployment benefits for workers who miss time or lose their jobs or whether economic aid should go directly to businesses in the form of loans or payroll tax reductions.
Another contentious topic is how to help the airline industry, which has requested a $50 billion bailout. President Trump and Treasury Secretary Steven Mnuchin favor a generous economic assistance package, but GOP lawmakers are calling for loans instead of direct payments.
“Everybody’s got their own idea,” Sen. John Hoeven (R-N.D.) said after his conference met with Mnuchin and National Economic Council Director Larry Kudlow. “Everybody wants to make sure we get the help out to people that need it. There are different ideas on how best to do it.”
In a sign of the difficulties to come, the Senate as of Tuesday evening could not agree on how to proceed to a vote on a much simpler $104 billion coronavirus relief bill already approved by the House. Senate coronavirus vote delayed after Rand Paul pushes doomed amendment. The $1 trillion package will be a tougher battle.
The Senate could wind up working into next week or longer to get Trump the giant stimulus package he has demanded. Lawmakers know it will have a major impact on the deficit and could be their last real chance to boost the economy. They want to make sure they get it right.
Sens. Mitt Romney (R-Utah) and Tom Cotton (R-Ark.) are leading the charge for making direct payments to adult Americans, including those who don’t miss paychecks because of the coronavirus. They believe this will get money into the economy quickly and effectively.
Romney, who favors sending out $1,000 checks, says it will help families meet their short-term financial obligations and ease the burden on students entering the workforce.
Cotton has a slightly different idea. He wants the Treasury Department to cut tax-rebate checks of $1,000 for every adult tax filer making less than $100,000 per year and an extra $500 for each claimed dependent.
Mnuchin and Kudlow at a Senate Republican lunch meeting Tuesday proposed issuing $250 billion in a first round of direct checks and another $250 billion in a later second round if needed.
But that idea is running into powerful GOP opposition.
Senate Judiciary Committee Chairman Lindsey Graham (R-S.C.) says direct checks are “money wasted.”
“It won’t help the economy just throwing money at a problem,” Graham told reporters after the meeting. “I don’t know why giving a thousand dollars on top of their paycheck makes any sense now because there’s no economy to participate in. I’d rather take that money and shore up health care systems.
First of all, what paychecks? Secondly, this sonuvabitch has been trying to kill Obamacare without offering a viable health insurance alternative for the past decade or so, and the Supreme Court may help him kill Obamacare in the next few weeks. He is full of shit when he says he wants to shore up the health care system.
Sen. Mike Braun (R-Ind.) on Tuesday said cutting the payroll tax makes “more sense” than “cash payments or this stipend idea.”
Braun, however, said he wouldn’t rule out supporting direct payments as long as they are limited to hourly workers affected by the coronavirus.
Enough with this payroll tax reduction! If people are not working and not getting paid, there are no payroll tax deductions anyway. More importantly, this is money taken directly from the Social Security and Medicare Trust Funds, which would have to be reimbursed from general tax revenue or the government would be adding to the shortfall in these social insurance programs that many Americans are dependent upon.
There’s also a debate over whether to bolster the economic safety net by increasing loans and grants to small businesses or broadening out unemployment insurance.
Braun, a former small business owner, says it’s better to beef up unemployment insurance benefits [this is correct!], but other Republicans are pushing for pouring hundreds of billions of dollars into direct assistance for small businesses.
Mnuchin on Tuesday proposed $250 billion in assistance for small businesses, according to Hoeven.
Sen. Marco Rubio (R-Fla.), the chairman of the Senate Small Business Committee, and Sen. Susan Collins (R-Maine), who faces a tough reelection battle next year, are pushing for direct assistance to small businesses.
“There’s strong conviction and belief that we’re going to have to step up, using the local banks and all the banks to participate in a program guaranteed by the [Small Business Administration] to provide immediate cash availability to businesses in order to be able to maintain workers,” Rubio said.
Rubio said the administration wants to use an existing Small Business Administration loan program in which the government would guarantee loans to small businesses.
Collins is working with Rubio and Mnuchin on a plan to give cash-flow assistance to employers who agree not to lay off their workers.
Under her proposal, cash-flow assistance would be forgiven so long as employers keep their workers employed and paid.
Finally, a reasonable idea!
Another thorny topic of debate among GOP senators is how to provide assistance to major corporations facing a cash crunch because of the coronavirus, such as the airline industry.
Mnuchin warned on Tuesday that airlines are in danger of grinding to a halt and said he has been in conversations “around the clock” with airline CEOs.
But Republican senators are warning they will not support a bailout of the airline industry similar to what happened in 2009, when President Obama’s administration pumped tens of billions of dollars into ailing banks during the financial crisis.
“A lot of us our against a bailout,” said Senate Appropriations Committee Chairman Richard Shelby (R-Ala.), who would back loans for the industry.
Sen. Josh Hawley (R-Mo.) said that any industry seeking significant economic aid should be ready to agree to concessions to bring jobs back to the United States.
“I will say this about industries who come to us and want significant relief: For those that have significant supply chains in China, I want to see some commitments they’ll move those supply chains out of China and back to the United States,” he said.
Asked what industries deserve rescue packages, Hawley said it should be evaluated on a “case-by-case basis.”
I don’t think these people understand the size and the scope of the problem that they are dealing with from a shutdown of the global economy. They need a reality check, right now.