Economics and Politics in a Pandemic: Trump’s shotgun strategy misses the target

By Robert A. Vella

The desperation of President Trump‘s rapidly changing proposals yesterday, to stimulate a global economy shutting down in response to the most dangerous pandemic since 1918, reveal a politician flailing away to save his own skin.  What was initially reported as an $850 billion tax cut and airline industry bailout plan quickly morphed into a $1 trillion spending spree intended to reassure panicky voters by giving them each $2,000 in two payments.  This stimulus proposal misses the target like a shotgun fired at long range, and is very likely to run into stiff opposition in Congress from both Democrats and Republicans (note:  the second phase of financial aid already passed by the House of Representatives, at over $100 billion, won’t be passed by the Senate until later today due to ideological interference from some GOP senators like Rand Paul of Kentucky).

The most effective targets to contain this crisis are the coronavirus itself and its unfortunate victims.  Stop the spread of COVID-19, dramatically increase the healthcare response to it, provide financial aid to those most needy, and the economy will naturally recover.  That would be a sharpshooter strategy pursued by a president who put the nation’s interest above his own.

But, Donald Trump is not that kind of president.  He is preoccupied with getting reelected.

Still, the economic downturn resulting from normal everyday life coming to a screeching halt is undoubtedly going to be severe.  A painful recession is practically guaranteed, and a disastrous depression is not out of the question.  Just in the restaurant, bar, hotel, and casino industries alone there are approximately 50 million workers who could be laid-off for extended periods of time.  From my bartender experience, I can tell you that most of these workers live paycheck to paycheck and could not survive long without income.  For comparison, the U.S. unemployment rate peaked at about 10% during the Great Recession and at about 25% during the Great Depression.  Both of those economic downturns were triggered by a top-down collapse of the markets and the big banks.  The current pandemic caused downturn is the opposite and it is unprecedented, being triggered by a bottom-up collapse of ordinary society.

We are in uncharted territory.  We have no tried-and-true roadmap for action.  Government efforts which worked in the past might be ineffective or even counterproductive this time.  What’s worse is that America is being led by an impulsive, unintelligent president further compromised by a perverse set of priorities.  We can only hope that his powers are constrained.

Addendum:  If today’s market decline holds, it would erase all the gains made during the Trump presidency and would represent a massive 10,000+ point falloff (about 33%) since last month’s all-time high.

From:  White House coronavirus plan aims to send $2,000 to many Americans, includes $300 billion for small businesses

White House officials are working with congressional Republicans on an emergency stimulus package that could send two $1,000 checks to many Americans and also devote $300 billion towards helping small businesses avoid mass layoffs, according to two senior administration officials and a Treasury Department fact sheet.

No final decisions have been made and talks with Republican leaders remain fluid, but the growing scale of the $1 trillion rescue plan is coming into sharper focus. The Treasury Department is circulating a two-page sheet of priorities that it wants to see in the final deal. As part of it, the White House seeks to create a $50 billion “airline industry secured lending facility” that would allow it to make direct loans to “U.S. passenger and cargo air carriers.”

[…]

The White House is also looking for Congress to allow it to temporarily backstop money market mutual funds, a sign that government officials are worried that an investor panic could lead to a run on these funds. A similar structure was used during the Great Recession, but lawmakers had sought to block its future use.

The White House’s evolving spending plan could be unprecedented in its size and velocity, dwarfing the stimulus bill passed during the Obama administration and the Troubled Asset Relief Program passed during the Bush administration.

From:  U.S. Virus Plan Anticipates 18-Month Pandemic and Widespread Shortages

WASHINGTON — A federal government plan to combat the coronavirus warned policymakers last week that a pandemic “will last 18 months or longer” and could include “multiple waves,” resulting in widespread shortages that would strain consumers and the nation’s health care system.

The 100-page plan, dated Friday, the same day President Trump declared a national emergency, laid out a grim prognosis for the spread of the virus and outlined a response that would activate agencies across the government and potentially employ special presidential powers to mobilize the private sector.

Among the “additional key federal decisions” listed among the options for Mr. Trump was invoking the Defense Production Act of 1950, a Korean War-era law that authorizes a president to take extraordinary action to force American industry to ramp up production of critical equipment and supplies such as ventilators, respirators and protective gear for health care workers.

From:  Coronavirus Infections Pass 200,000 Globally

There were 203,529 confirmed cases of the disease known as Covid-19 early Wednesday, with infections outside of mainland China—where the epidemic began—now above 122,000, according to data compiled by Johns Hopkins University.

Deaths globally have also more than doubled over the past two weeks to more than 8,000. In Europe, the death toll reached 3,415, overtaking China for the first time and cementing the continent’s position as the new epicenter of the pandemic.

[…]

The U.S. has 6,496 confirmed cases in all 50 states and Washington, D.C., including 114 deaths. Case numbers are expected to grow as testing capabilities expand. U.S. hospitals are already facing a shortage of masks, gowns and other equipment needed to care for patients.

From:  Stocks drop again as coronavirus turbulence rolls on

Stocks tumbled Wednesday, triggering yet another trading halt and reaching a new coronavirus crisis low as the markets remained highly volatile with the government response to the outbreak still unfolding.

The S&P 500 was down 9% after a marketwide circuit breaker was tripped just before 1 p.m. ET. The Dow sank more than 2,000 points, or 9.8%. Wednesday’s drop also erased the Dow’s gains since President Donald Trump’s inauguration on January 2017. The Nasdaq Composite slid 7.8%.

A circuit breaker halts trading across the U.S. stock exchanges for 15 minutes and is meant to ensure orderly market behavior. Wednesday market the fourth time in a week that a circuit breaker was triggered.

From:  Mnuchin warns virus could yield 20% jobless rate without action

Treasury Secretary Steven Mnuchin raised the possibility with Republican senators that U.S. unemployment could rise to 20% without government intervention because of the impact of the coronavirus, according to people familiar with the matter.

Mnuchin discussed the scenario with the lawmakers on Tuesday as he proposed an economic stimulus of $1 trillion or more.

He told the senators that he believes the economic fallout from the coronavirus is potentially worse than the 2008 financial crisis.

From:  Pence aide dismisses reports of possible 20% U.S. unemployment

WASHINGTON — Marc Short, the chief of staff for Vice President Mike Pence, said on Wednesday there were no forecasts of 20% unemployment in the United States because of the coronavirus outbreak, after reports suggested such a rise was a possibility.

From:  Democrats say Mnuchin squeezed paid sick leave program

The House on Monday night approved a slate of last-minute “technical” corrections to a sweeping aid package, paving the way for swift adoption by the Senate. But several Democrats and progressive advocates say changes pushed by the White House are actually significant revisions to the bill’s paid leave program, undermining one of their top priorities in the package.

[…]

The legislation initially allowed workers up to 10 weeks of paid leave — as part of the federal family and medical leave program — for three different scenarios: if they become sick or are forced to be quarantined, if they are caring for a sick person, or if they are caring for a child whose school or daycare has been closed.

Under the latest changes, however, there is only one category that qualifies for the extended family and medical leave: Individuals who are taking care of children.

From:  Treasury and IRS to delay tax season deadline by 90 days

Taxpayers will get a three-month reprieve to pay the income taxes they owe for 2019, Treasury Secretary Steven Mnuchin said on Tuesday at a news conference.

As part of its coronavirus response, the federal government will give filers 90 days to pay income taxes due on up to $1 million in tax owed, Mnuchin said in Washington. The reprieve on that amount would cover many pass-through entities and small businesses, he said.

Corporate filers would get the same length of time to pay amounts due on up to $10 million in taxes owed, Mnuchin said.

Live updates: Trump says border with Canada closing to ‘non-essential traffic’ in effort to slow coronavirus spread

US Citizenship and Immigration suspends in-person immigration services

From:  4 takeaways from the Arizona, Florida and Illinois primaries

As the nation confronts the coronavirus and some states postpone primaries, three states pressed forward with voting on Tuesday. Joe Biden swept them.

Arizona, Florida and Illinois voters took to the polls to weigh in on the race between Biden and Bernie Sanders, while Ohio, whose primary was slated for Tuesday, postponed it at the 11th hour. The three remaining states will hand out more than 11 percent of the total delegates in the entire race.

[…]

The only states remaining between now and April 28, as it stands, are three April 4 states with very limited delegates in Alaska, Hawaii and Wyoming, and Wisconsin on April 7.

From:  Illinois Stumbles as States See Light Voter Turnout, With Many Ballots in the Mail

Voting in major cities in Illinois was rife with confusion on Tuesday and early turnout in many areas was significantly lower than expected, leading to complaints from poll workers and clashes between Chicago officials and the statehouse.

Illinois is one of three states that went ahead with their Democratic presidential primaries on Tuesday amid fears about people gathering in groups and risking exposure to the coronavirus. In Florida, relocated polling sites led to disruption and low turnout was reported in some counties, while voting in others was running smoothly. Arizona, where a vast majority of voters had cast their ballots early, was reporting no major issues.

Elections officials in all three states hoped that any drop-off in turnout would be partially offset by early voting and the vote-by-mail ballots that many Democrats filed in the weeks leading up to Tuesday.

From:  Dan Lipinski defeated in Illinois House primary

Progressive challenger Marie Newman narrowly defeated Rep. Dan Lipinski (D-Ill.) in the primary in Illinois’s 3rd Congressional District in one of the country’s most-watched House contests.

The Associated Press called the race shortly after midnight on the East Coast. Newman had a roughly 4-point lead with nearly 95 percent of precincts reporting.

Lipinski, who was running for his ninth term and is the first House member of the 2020 cycle to lose a primary, has been targeted by progressives over his opposition to abortion rights and his more conservative stances on issues.

From:  Could Trump delay November election? Not without inviting ‘President Pelosi’

WASHINGTON — Voters are unnerved. Confusion is growing throughout the country as the coronavirus outbreak moves states to postpone primaries and change voting procedures in the midst of a presidential election year. It is all leading to a lot of speculation — sometimes uninformed — about what could happen in November if this virus is still spreading.

Are there any guarantees the election will actually happen if congregating in public places, like polling stations, is still a risk come fall? Can voters be confident President Donald Trump can’t exploit this crisis to avoid facing them if he fears defeat?

The short answer is yes. While government officials have the authority to reschedule voting for the parties’ primaries, that flexibility does not exist for the general election. It is all but certain to happen as planned. The question is whether states reeling from the pandemic will be prepared to accommodate everyone who wants to cast ballots.

From:  Former Rep. Duncan Hunter sentenced to 11 months in prison for misusing campaign funds

Former Republican Rep. Duncan Hunter was sentenced Tuesday to 11 months in prison and three years of parole for corruption charges stemming from his misuse of more than $200,000 in campaign funds for a slew of personal expenses.

[…]

Hunter will be on supervised release for three years and must participate in a drug and alcohol treatment program, and he will be housed somewhere in the western region of the United States.

From:  China Rebukes the U.S. After Saying It Will Expel American Journalists

HONG KONG — China took a combative stance on Wednesday, accusing the United States of starting a diplomatic war that led it to expel almost all American journalists from three newspapers.