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The Wrongologist

Geopolitics, Power and Political Economy

Saturday Soother – June 13, 2020

The Daily Escape:

Spring in Grand Teton NP, WY – photo by MaxFoster098

Posting on her Instagram, AOC answered a question that read: “What does an America with defunded police look like to you?” AOC’s answer:

“It looks like a suburb…”

She continued:

“Affluent white communities already live in a world where they choose to fund youth, health, housing etc. more than they fund police. These communities have lower crime rates not because they have more police but b/c they have more resources to support healthy society in a way that reduces crime.

Why don’t we treat Black and Brown people the same way?”

Words to live by.

On to the issue for Saturday. From the WaPo: (brackets by Wrongo)

“Federal officials responsible for spending $660 billion in taxpayer-backed small-business assistance [PPP Loans] said Wednesday that they will not disclose amounts or recipients of subsidized loans, backtracking on an earlier commitment to release individual loan data.”

Since 1991, the Small Business Association (SBA) has previously released detailed loan information for the federal 7(a) program, on which the PPP is based. More from WaPo:

“The SBA initially intended to publish similar information for the new coronavirus-related loans. An SBA spokesman told The Washington Post in an April 16 email that the agency “intend[s] to post individual loan data in accordance with the information presently on the SBA.gov website after the loan process has been completed…”

Treasury Secretary Steve Mnuchin is saying that the Treasury Department won’t disclose the recipients of more than $500 billion in bailout money delivered to 4.5 million businesses through the PPP, because that the information is “proprietary” and “confidential”.

As Charlie Pierce says:

“In one sense, of course, the money is “proprietary information” and we’re the damn proprietors. It’s our damn money.”

According to filings with the SEC, nearly 300 publicly traded companies received $1 billion in stimulus funding. That led to a subsequent ruling from the SBA that public companies with access to credit elsewhere didn’t qualify. Many of those businesses subsequently returned the money, although the SBA has declined to say exactly who, or how many did so.

The reversal on disclosure comes amid a waning belief that the $2.2 trillion pandemic relief package approved by Congress in March will be subject to any oversight. The GAO, which is responsible for preparing a mandated report on the relief spending by the end of June, has requested loan data for both the PPP and a separate program for economic “disaster” loans, but has not been told if or when their request will be honored.

Republicans are not even trying to hide their true intentions any more. The overlap of people who believe in “small government” and people who do not object to Trump’s handing out $500 billion in unmarked bills is total.

But, we’ve had enough body blows for one week. Time to take a few minutes, and escape from all of the world’s chaos. It’s time for our Saturday Soother.

We’re expecting a beautiful weekend in Connecticut, and Wrongo hopes there’s fine weather wherever you are reading this. Start your weekend off by brewing up a cup of Ethiopian Suke Quto coffee ($19/12oz.) from the Greater Goods Roasters of Austin, TX. This is the fourth time they have been featured in the Saturday Soother.

Now, settle back in a physically-distant chair in the shade, and listen to Playing For Change (PFC) perform Marvin Gaye’s “What’s Going On”. The message in his song is as relevant today as it was in 1971:

PFC’s focus is to record musicians performing in their natural environments as part of a series called “Songs Around the World”.

Sample Lyric:

Picket lines and picket signs

Don’t punish me with brutality

Talk to me, so you can see

Oh, what’s going on

What’s going on

Ya, what’s going on

Ah, what’s going on

Those who read the Wrongologist in email can view the video here.

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Biden Isn’t FDR, But FDR’s 1932 Strategy Could Work

The Daily Escape:

Sunset, Poudre River trail, Fort Collins, CO – May 2020 photo by Dariusva07. Looks like a painting.

Livia Gershon has an article in JSTOR Daily, “One Parallel for the Coronavirus Crisis? The Great Depression”. She focuses on the question of whether America is already in a depression, or if are we sitting in the equivalent of 1928 or 1929? From Gershon:

“Today’s soaring unemployment, small business failures, and uncertainty about the future are like nothing most of us have seen in our lifetimes. If there’s any useful historical parallel, it might be the Great Depression.”

The cliff that our economy just dove off is different from what America experienced in the Great Depression. From 1920 through 1933, America had Prohibition. The 1920’s were a time of unbridled capitalism, and many working class Americans were hurting financially.

In 2020, COVID-19 has hit us fast and hard. Today’s economic crisis is the result of deliberate choices by governments and individuals to restrict commercial activity. However, the results look about the same: Businesses shuttered, families worried about where their next rent payment is coming from, long lines at food banks. And the 100,000+ deaths.

In 1929, life in America was already awful for a lot of people: Businesses had few regulations to constrain their activities. The rich got much richer. Pro-worker policies had little political traction. That all changed after the Depression. By the 1940s, the country’s unions were stronger than they’d ever been and Congress had passed unprecedented economic policies to support workers.

It didn’t happen quickly or easily. FDR beat Hoover in a landslide in 1932. Hoover had won over 58% of the popular vote in the 1928 presidential election, but in 1932, his share of the popular vote declined to about 40%. Democrats kept control of the House, and gained control of the Senate, bringing 12 years of Republican Congressional leadership to an end.

Erik Loomis, a labor historian at the University of Rhode Island and blogger at Lawyers, Guns & Money, offered Gershon historical perspective:

“A lot of Roosevelt’s campaign in ’32 is ‘I’m not Herbert Hoover’….It’s not policy-driven, not about organizing the masses…..In fact, if FDR had been a left-wing figure, he couldn’t possibly have won the nomination of the 1932 Democratic Party, which, like the Republican Party, was deeply beholden to big corporations.”

And today we see Biden, with his man cave presidential campaign, running as “I’m not Trump”. And while he’s not policy-free, his Democratic party is still beholden to big business, much like FDR’s.

Many Democrats worry about Biden’s ability to stand up to Trump on the campaign trail. FDR, despite his polio disability, deliberately chose to present himself vigorously, including breaking precedent by flying to Chicago during the 1932 convention. His campaign song, “Happy Days Are Here Again” remains one of the most popular in American political history.

Biden may also need to consider breaking a few precedents, possibly by running a throwback front porch type of campaign, one that ignores Donald Trump. James A. Garfield, Benjamin Harrison, and William McKinley all ran successful front porch campaigns.

Returning to FDR’s efforts to turn the country around, Gershon says:

“…the major New Deal programs—including public hiring through the Works Progress Administration, Social Security’s old age and unemployment insurance, the NLRA, and progressive taxes—largely followed ideas that had been brewing on the liberal side of mainstream political conversations for decades. To many policymakers, relief for workers was a way of supporting capitalism. It powered the economy by encouraging consumer spending.”

She further quotes Loomis:

“When those measures are passed in the ‘30s, the left considers them all sell-out measures…FDR is heavily criticized on the left.”

In the 1930s, as today, the left wanted more radical pro-worker, and pro-family policies that were a bridge too far for FDR. Today is similar to the 1930’s. As much as Democrats want to run on policy, the candidate (and who the opponent is) are at least as important as policy.

Biden can run on a message of “I’m not Trump. He’s failing. And I won’t fail“. He and the Party can mostly save the details for after the election. For example: Running on some variant of Medicare for all (M4A) isn’t necessary. All Biden must drive home is that COVID-19 has proven that the current private insurance-powered healthcare system has failed us, and that we need reform.

Then impress on voters that the GOP vehemently supports the failed current health insurance model.

Once elected, Biden could push for M4A, assuming he has the Senate.

2020 isn’t 1932, and Biden certainly isn’t FDR. But there are political lessons to be learned from taking a look back in time.

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Monday Wake Up Call – Get Back to Work Edition, May 11, 2020

The Daily Escape:

Pileated Woodpecker chicks – photo by JH Cleary

Americans are starting to peek out of their nests again. Governors have decided, and 30 of them are re-opening their states. Those states are not exclusively Republican; there are a few Democratic states too. The logic behind reopening is that of risk assessment and risk management. Somewhere between prudence and overreaction lies today’s American toxic politics.

We judge risk versus gain for everything, including for other causes of death. We try to model healthy behaviors. Most of us wear seatbelts, most watch our diets, and have stopped smoking years ago.

We also have to judge the risks associated with whether to end, or continue the lockdown. That means deciding which steps to take that will minimize both the spread of the virus, along with minimizing the crushing economic hardship being experienced by many Americans.

Ignore that the government isn’t currently taking care of healthcare and housing if you are unemployed.

The lockdown could go on for much longer if the federal government was willing to underwrite living costs for those who are out of work, until such time as it was safe to go back to work. But they have no intention of doing that.

So, from the Trump perspective, the choice is clear: Businesses need to open and their workers need to go back to work, despite the risks. Their argument is that living with COVID-19 isn’t as risky as it seems. Twenty-two states have had fewer than 100 deaths. So far, only 15 of 50 states have had total deaths for the crisis that are higher than NYC’s current rate of 500 a day

The original goal of lockdowns was to keep the health care system from being overwhelmed, and in the largest cities, that risk seems to be behind us. Whether that will be true in rural America where few hospitals operate, remains to be seen. Derek Thompson said in the Atlantic:

“This crisis represents an existential threat to America’s small businesses. Almost half of all job losses in April occurred in leisure and hospitality, where small businesses are overrepresented in companies like restaurants and stores. The decimation of small business would have long-lasting implications. It would destroy jobs that would be unlikely to return quickly, while creating a crisis of long-term unemployment.”

And all of those restaurants, cafés, theaters, community centers, and specialty shops that are part of the local fabric of our towns and villages could be wiped off Main Street. Losing many of them would be an economic tragedy. More from Thompson: (emphasis by Wrongo)

“The virus is real, the hospitalizations are real, the deaths are real, the need for masks and social distancing is real, the threat to millions of restaurants and shops is real, and the incomparable levels of unemployment are real, too. The White House plan to reverse this cavalcade of horrors is to “reopen” the economy. But 20 million Americans just lost their jobs in the past few weeks, not because the government shut down the economy, but because a pandemic scared millions of Americans into staying at home. There is plenty to be wisely afraid of, but Washington thinking that a pandemic economy is like a garage door that it can reopen by pressing a button might be the scariest thing of all.”

No one knows what will happen between now and Election Day. It’s not just a matter of businesses opening up. For people to go back to work, schools must be open, day care must be open, public transportation must be safe, and customers must show up.

Are you up for all of that?

In the Great Depression, we learned that unemployment at today’s scale required massive government intervention to address: Jobs programs, infrastructure investment, and a robust social safety net.

It required an FDR to galvanize the country. Needless to say, neither Trump nor the Republican Party have the desire to provide that leadership. They will be every bit as uncaring and incompetent at rebuilding our economy as they have been at stopping the pandemic.

Time to wake up America! The economy has been opened, and you need to protect yourself whether you’re back to work, or trying to find a new gig. And you know that Trump isn’t going to help you protect yourself and your family, and he’s certainly not going to help you find a new job.

To help you wake up, listen to Guns ‘n Roses cover Paul McCartney’s “Live and Let Die” which played during Trump’s visit to an N95 mask manufacturing plant in Phoenix:

Remember all of this in November.

Those who read the Wrongologist in email can view the video here.

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Stimulus Bill Blocked By Rogue GOP Senators

The Daily Escape:

Late winter, NH – February 2020 photo by Betsy Zimmerli

Just when you think that the two Parties and the White House have found agreement on a massive stimulus bill, a few rogue Republicans decide that there’s too much welfare in it for them. From NBC News:

“A handful of Republican senators on Wednesday threatened to delay the $2 trillion coronavirus spending bill over a proposed increase to unemployment insurance.

Sens. Tim Scott, (R-SC), Lindsey Graham, (R-SC), and Ben Sasse, (R-NE), said that the bill “could provide a strong incentive for employees to be laid off instead of going to work” because some people could theoretically make more by being unemployed. Senator Rick Scott (r-FL) jumped onto the obstructionist bandwagon as well.

More from the Senators’ statement:

“If the federal government accidentally incentivizes layoffs, we risk life-threatening shortages in sectors where doctors, nurses, and pharmacists are trying to care for the sick, and where growers and grocers, truckers and cooks are trying to get food to families’ tables.”

The fight is over an additional $600 per week payment to each recipient on top of their unemployment insurance payment. The proposed benefit also extends to workers who typically would not qualify, such as gig economy workers, furloughed employees, and freelancers.

Imagine! These Senators are so out of touch, they think you can receive unemployment payments if you quit your job.

This is hypocrisy in action: These Republicans obstructionists pretend to be suddenly concerned about either deficit spending, or about government fraud and abuse after they blew a trillion dollar hole in the our last budget to give unneeded money to their wealthy benefactors.

The bill was supposed to be voted on late yesterday, but the Senators who are objecting could hold up the bill by forcing votes on amendments. Sen. Chris Murphy, (D-CT), tweeted:

“Let’s not over-complicate this…several Republican Senators are holding up the bipartisan Coronavirus emergency bill because they think the bill is too good for laid off Americans. “

From Charlie Pierce:

“Right on cue, of course…Bernie Sanders threatened to block the bill unless the stooges dropped their opposition. Which, of course, is exactly what every Republican everywhere would like. The stooges are running a bluff. They don’t want to be the people who block this. They just want to talk about blocking it. If Sanders does them the incredible favor of blocking it himself, thereby pulling Mitch McConnell out of the ditch into which the Democratic minority has rolled him, they’ll all get re-elected.”

So the question is what is Majority Leader McConnell prepared to give up to pass the bill? And are Chuck and Nancy prepared to give up anything in order to move the bill on to the House?

It seems likely that McConnell wants to meet their demands with no real Democratic pushback. Is that likely to happen?

So, a few Republican supporters of our capitalist super heroes want to reduce the crumbs provided to ordinary workers. They have a small point about people not “earning” more from the government than they did on the job. The problem is that each state has its own unique unemployment insurance system, and it would be a nightmare to adjust each payment for each worker just to make Lindsay Graham feel good.

That’s the trouble with grifters. They simply can’t understand that there are people who aren’t always grifting.

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It’s the Economy Stupid. Or Is It?

The Daily Escape:

On Tuesday, Trump was in the Rose Garden for a “virtual town hall” on Fox News. The Boston Globe reported that he wants the country “open and raring to go” by Easter, which is less than three weeks away. “I think it’s possible, why not?” he said with a shrug.

Watching Trump do a press conference is like watching the kid who didn’t read the book give his book report.

The top health professionals have called ending social distancing by Easter far too quick. But, Trump compared the potential for Coronavirus fatalities to our annual flu casualties and, to automobile accidents. That led Charlie Pierce to say:

“I can speak with some authority on this. On December 9, I got hit by a car. It has been three months now. Nobody I came into contact with in the aftermath has been hit by a car.”

It’s important to remember that Trump is saying this while we still have no idea how many Americans have, or have had, the virus. It seems safe to say the number is vastly higher than the number of people who have tested positive (nearly 50,000). Here’s a terrifying tweet:

(James Gallagher is the BBC’s Health and science correspondent)

Trump’s “let’s get America back to work” plea comes at a time when we have no idea about the extent of the virus’s impact, or how large the tsunami of cases will be. Trump is sounding a bit like General Buck Turgidson in 1964’s “Dr. Strangelove“:

“I’m not saying we wouldn’t get our hair mussed. But I do say no more than ten to twenty million killed, tops.”

There are operational issues involved in conducting a safe economic restart while the virus remains rampant in the country: It would require testing all who enter the workplace, every time they come to work. Where do those test kits come from when we can’t get enough for America’s hospitals? Who will read the tests and get the data back to the individual and the business? Can social distancing really be practiced at work? In offices?

Obviously there are conflicting opinions about how long to use severe Coronavirus mitigation and suppression measures when the economic consequences of that mitigation could be disastrous. The medical experts can tell us what the consequences of various courses of action are most likely to be in terms of illness and fatalities.

But the willingness to endure the likely costs of a particular course of action is a political, and possibly an ethical question. Last week, Wrongo asked:

“Is restoring our economy, and putting Americans back to work worth a million lives lost? Is it worth 300,000?”

Trump is right both to wrestle with this question, and to be concerned that Coronavirus could end his presidency. Here’s a chart that shows how long prior stock market crashes took to return to the pre-crash level:

This compares three prior crashes and the time it took to recover. Only the 1987 crash was a sharp “V” recovery, and that recovery took nearly two years. Both of the others took four years.

This most likely means Trump can’t run as a peace and prosperity president. He’ll simply be running as another Republican who ran up the debt with the crucial difference that Americans died on the home front on his watch, after trying to go back to work prematurely.

A few words about the attempted bailout. As Wrongo writes this, it’s likely that there may be a “deal” sometime late on Tuesday . The stock market has already closed up more than 2,000 points, or 11% on the hope of a deal.

The bailout deal should absolutely be as big as possible, but Mitch, Trump and the GOP have it wrong. We should be pointing our water hoses where the immediate fire is: Low – moderate income households and small businesses that have a week or two of cash reserves, and little access to credit markets.

While this is an emergency, it’s no excuse for another GOP round of opportunistic, potentially wasteful spending with little oversight. We have more important things to do than setting up a $500 billion Republican slush fund in an election year.

Trump will no doubt make an announcement that “America is again open for business”. But, that’s not really within his power. The economy is not usually like a faucet you can turn off and on.

It also means that Trump’s replacement will have a major job starting in 2021 trying to restore the stock market and the employment level to where they were pre-Coronavirus.

It is the highest duty of the US President to keep the country safe, and protect its people. Trump’s downplaying of what his science and security advisers have told him is doing exactly the opposite.

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Monday Wake Up Call – March 23, 2020

The Daily Escape:

Great Wave off Kanagawa – Japanese woodblock print by Hokusai c. 1829. The wave could represent a tsunami of COVID-19 cases, or could it represent the rising of malign intent by Trump towards our democracy?

Are we in the midst of a national emergency or not? Is a tsunami of COVID-19 cases about to inundate America, or not? Let Wrongo answer: It’s a national emergency. When there’s a national emergency, does the federal government let the states take care of the problem? It does not.

Here’s America’s worst excuse for a leader on twitter Sunday afternoon:

He says it’s not the federal government’s job to lead in a national emergency. As Haberman and Baker said in the NYT: (emphasis by Wrongo)

“For years, skeptics expressed concern about how he would handle a genuine crisis threatening the nation, and now they know.”

Any other president, even the weakest, would have acted differently. Despite the fact that his policies are generally pretty standard right-wing Republican, Trump has managed to make a national disaster worse than it had to be.

Now all Americans should know how it feels to be Puerto Rican.

Bloomberg reports that Trump’s directive for governors to buy their own medical supplies to fight the coronavirus ran into a big problem when the federal government outbid them for the products! Earlier that day, Trump said that his administration is not a “shipping clerk” for medical gear that the states require to fight the virus.

Another example from the NYT: (emphasis and brackets by Wrongo)

“…on Saturday {Trump] sought to assure an anxious American public that help was on the way…and that private companies had agreed to provide desperately needed medical supplies to fight the fast-spreading coronavirus.

But Mr. Trump [said] he would not compel companies to make face masks and other gear to protect front-line health workers from the virus….. Mr. Trump said the clothing company Hanes was among those that had been enlisted to start churning out masks, although the company said they would not be the N-95 masks that are most effective in protecting medical workers.”

Trump could simply order companies like Hanes to make them, but instead, Hanes is making masks that don’t actually protect medical personnel. Capitalism @ work!  At a time of national emergency, Trump is letting the market do it, and simply declaring victory.

Another: In the on-going (Sunday) negotiations on the Coronavirus bail-out package, it turns out that Treasury Secretary Mnuchin and the White House are demanding that the relief package include $500 billion to be provided to corporations at the discretion of Treasury Secretary Steve Mnuchin.

The best part is that it permits the Treasury secretary to withhold the names of corporate recipients for up to six months. How is it possible to use taxpayer money for corporate bailouts and demand that taxpayers can’t know who’s received the funds?

Finally, here’s an example where Trump is unhappily, showing leadership. He wants to suspend habeas corpus, the Constitutional right to appear before a judge after arrest, and seek release:

“The Justice Department has quietly asked Congress for the ability to ask chief judges to detain people indefinitely without trial during emergencies — part of a push for new powers that comes as the coronavirus spreads through the US.”

The DOJ is looking for broad authority, including the ability to ask chief judges to detain people and to pause court proceedings during emergencies. It would apply to:

“any statutes or rules of procedure otherwise affecting pre-arrest, post-arrest, pre-trial, trial, and post-trial procedures in criminal and juvenile proceedings and all civil process and proceedings,”

This means you could be arrested and not brought before a judge until they decide that the emergency or the civil disobedience is over. Shouldn’t we be even more careful about granting new powers to the government if we’re in a national emergency?

We can hope that the House will block this nonsense.

We should remember that the US government was founded for the very purpose of solving some rather serious problems that the individual states couldn’t handle. That role of federal leadership has worked for 230+ years, but that doesn’t work for Trump.

You should be asking why.

It seems certain that at some point, Trump will say that the states were unable to solve the virus emergency, so he’s stepping in. He’ll try to use COVID-19 to assume extraordinary emergency powers between now and the election. That’s beyond frightening.

More will die because Trump won’t lead in the fight to contain the Coronavirus. And in the background, he’s busy laying the groundwork for emergency powers.

Wake up Democrats!

It’s time to ask, what are the DC Democrats doing to block all of this?

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Call It the Great Virus Crash of 2020

The Daily Escape:

Desert bloom on Siphon Draw Trail, AZ – photo by ericatect

That was the term used on Wednesday by Ed Yardeni, president of Yardeni Research:

“It’s all at once a health crisis, financial crisis and economic crisis. We need to fix the health part of it before we have it solved, but we can take financial and fiscal steps to blunt its effects.”

JPMorgan Chase said it forecasts a 14% decline in gross domestic product in the second quarter. That’s enough to scare anyone. In a partial response, the Trump administration suspended evictions, authorized the Defense Production Act, and is eyeing a stimulus package worth about $1 trillion.

The headline is that Trump wants to give Americans direct cash assistance. He wants to send two $1,000 checks to many Americans. Beginning April 6th, $250 billion would be issued, and another $250 billion would be issued beginning May 18th. Payments would be tiered based on income level and family size.

The Treasury Department is circulating a two-page sheet of priorities that it wants to see in the final deal:

  • Part of it is 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 Treasury would also earmark $300 billion to help small businesses avoid mass layoffs.
    • Eligible borrowers would be companies with less than 500 employees.
    • Loan amounts would be limited to 100% of 6 weeks of payroll, capped at $1540 per week per employee.
  • The Treasury also wants Congress to allow it to temporarily guarantee money market mutual funds. Some are worried that an investor panic could lead to a run on these funds. This was done before during the Great Recession.
  • Finally, there would be a $150 billion fund to prop up other sectors, including hotels.

And Wednesday was another day when Trump appeared in front of the press, attempting to look as if he’s a war president. The bad news was that they again halted trading on the stock markets during his press conference.

At Wednesday’s close, the Dow was down another 1,338 points. We’ve now lost almost all of the gains accrued during the Trump administration. Nearly every asset class – stocks, bonds, gold, and oil – fell as investors fled to the safety of cash.

Mr. Market has decided that cash is king. The smart money can’t decide whether Trump’s offering too much stimulus. If so, things must be really bad. And if he’s not offering enough, then there’s no leadership.

Here’s one way to look at the Dow’s performance:

  • First 1153 days of Obama’s presidency +67%
  • First 1153 days of Trump’s presidency  +0%

The WH needs to shut him up. Each time he speaks, things get worse for the rest of us.

Inside this crisis is perhaps the biggest political challenge for Democrats: They have to agree to help an incompetent president and his Party avoid killing their constituents.

That’s a bitter pill, particularly in an election year.

It isn’t a stretch to see how Democrats would be painted as obstructionists if they fail to support what Trump wants at a time when millions of people need a cash bridge to help them across economic difficulties.

Wrongo thinks helping people is a good idea, and a total of $2,000 is better than nothing, but what will it really do? The average US mortgage payment is over $1,000, while the median rent for a 1-bedroom apartment is $1,234. So for a couple, in most cases, one month’s housing costs will eat up about 25% of the total cash from the government. The rest will go to car expenses, the cell phone, perhaps student debt payments. Maybe, if people can stretch, it will last two months.

It’s helpful, but far from enough if employers remain closed for two months or more.

And loans to small businesses? Will small businesses willingly take on more debt when they can’t be sure when their income will return, or if the business will survive?

Any loans to large corporations is a huge mistake. The big four US airlines – Delta, United, American, and Southwest – whose stocks are getting crushed because they will run out of cash in a few months, would be the primary recipients of that $50 billion bailout. But together, they incinerated $43.7 billion in cash on share buybacks since 2012. Now they are looking to get that back from the taxpayers. Those buybacks enriched the very shareholders that Trump now wants to bail out.

Perhaps Trump said it best, although it was a while ago: “We’re seeing a stock market like no one has ever seen before.”

Trump spent the first three years of his presidency trying to erase Obama’s legacy.  Now, The Great Virus Crash in Trump’s last year will erase his.

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Can the Economy Endure a Two-Month Shutdown?

The Daily Escape:

Cannon Beach, OR – 2020 photo by franks28

The short answer to the question above is no, not without outright financial support for individuals by the government. That support if it comes, is likely to be too little, too late.

But the Fed tried something. On Sunday, it announced that it slashed its federal funds rate by a full percentage point, to a target range between 0% and 0.25%. In addition, they launched a new Quantitative Easing program for another $700 billion.

Investors threw up all over the Fed’s Sunday moves, because we’re looking at a “demand shock”, the state-enforced loss of consumer sales,something that can’t be stimulated away. The S&P futures immediately plunged 5% to hit its downside limit. That made for an interesting Monday, with the Dow ending down nearly 3,000 points, or another 13%. In the past month, the market has lost nearly a third of its value.

All these efforts to provide stability actually showed the market that our leaders have no idea what they’re doing. It’s the exact opposite of inspiring confidence.

Did the Fed panic? Fed Chair Jay Powell lowered rates right after Trump said he had the authority to remove Powell. That makes it seem, true or not, like the Fed is now in Trump’s pocket. No confidence-builder there.

Looking through a wider lens, Mr. Market has decided that the Fed is pushing on a string. Rates were already so low that there was little gain from the interest rate reduction, and little else that the Fed could do. Mostly, the Fed signaled that it is very frightened about the prospect of a global recession.

In addition, the market understood that the stimulus bill working its way through the House and Senate is inadequate to the task ahead. For one thing, Pelosi’s bill promises paid sick leave, but as written it only covers about 20% of all workers.

Again through that wide-angle lens, the growing COVID-19 business lockdown strategy will have an economic impact similar to a natural disaster, like a hurricane, but played out over a longer time frame. FEMA has found that 40% of businesses close in a natural disaster. And of the businesses that reopen, only 29% survive the after the following two years.

Since our economy is 70% services, many industries facing the lockdown, like tourism, casinos, restaurants, and hotels, will soon be in meltdown mode. The Fed has no answer to a massive drop in consumer spending, only the president and Congress can solve that.

We know that 40% of Americans don’t have enough cash on hand or room on a credit card to handle a $400 emergency. Many service industry workers will be hit with either cutbacks in their hours, or outright job losses. Without financial assistance, we’ll quickly see defaults on rent or mortgages, and delinquencies on credit cards and car payments.

So the Fed creates some more money. But just like in 2008, rather than distributing it to every citizen, they’re giving it to the banks. Somehow, all that money is going to people who already have plenty, while those who need it get nada.

Why is the answer always to give more to the supposed “job creators” when we get basically nothing in return? Why not just send a check to the actual people who need it?

Finally, what will this interest rate cut do for the economy?

  • Are restaurants going to start hiring workers that can’t actually come to work just because loans are cheap?
  • Are workers not collecting a paycheck going to go out and buy a new car/TV/house because interest rates dropped a bit?
  • Are banks going to lend cheap money to airlines, restaurants, and cruise lines when we have no idea how long this will last?

Every company on the planet has simultaneously realized that it is in an existential cash-flow crisis due to COVID-19. The big and smart companies already have drawn down their unused loan facilities to ride through the slowdown.

The slower and the smaller firms are staring at an economic nuclear-winter scenario where their revenue plunges for months, and they can’t pay their staff, or make their fixed payments.

The speed and comprehensiveness of the lockdowns, and their drastic impact make what’s going to happen very clear. Our leaders are in a fog of denial. They don’t see that much of what was the traditional mode of operating our system is crumbling.

During the 2008 financial crisis, we learned that events can move too quickly for anyone to intervene and limit the damage. Our business environment’s drive for highly efficient systems, from just-in-time inventory sourcing to reducing the number of hospital beds per capita, have created fragile systems that are now being stress-tested.

We may be learning, to our collective detriment, that all of these systems along with our leaders, have failed us.

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Biden’s Win and Trump’s Economic Stimulus

The Daily Escape:

This week’s Supermoon over Three Fingers, WA – March 2020 photo by Alpackie

Today we’ll talk superficially about two topics. First, a quick take on Tuesday’s Democratic primary, and second, about whatever it is Trump is cooking up with Republicans as an “economic stimulus” in this time of Coronavirus and stock market volatility.

Here’s Jameson Quinn with a pithy summary of the primary:

“Right now, the best-case scenario is that Joe Biden will be the next president of the USA; the worst-case is that Trump is the last one. That is to say, we will have a choice between a guy whose primary campaigns twice flamed out from self-inflicted errors and who, the day he takes office, will be the oldest president the country has ever had; and a narcissistic, mobbed-up reality television star whose platform is focused on his core base of racists, trolls, and racist trolls.”

But how do you really feel?

That said, Wrongo was always for Elizabeth Warren, but now, that door has closed. Wrongo like many others, overestimated the importance of competency and policy. Most people don’t read policy papers, and they knew that Biden had been Obama’s VP. That was enough to get them to vote for Biden.

People make their voting decisions based on things like personality, perceived connection to their tribe, perceived electability and an “X” factor, vague trust in a candidate’s judgment. Would Biden be a good president? Who really knows?

Moving on to Trump’s economic stimulus: It isn’t surprising that Trump promises some more corporate socialism and the stock market likes it. And it isn’t surprising that no one in the media notices that the Party of Obama Derangement Syndrome had zero concerns about debt/deficits once Orange became the new black.

But, rather than proposing tax cuts, good policy starts with identifying the problems:

  1. Sick people: They require costly medical care. Many can’t afford it, even if it’s available, and even if they have insurance.
  2. Unemployment: Unemployment will rise. Sick people without sick leave will lose their jobs. Businesses will have less revenue.
  3. Goods shortages: Much of our goods come from China, including medical supplies and drugs. Trade has already been disrupted, and it will get worse. Italy finds it needs thousands of ventilators, and China is supplying them.
  4. Childcare: Schools and daycare centers are closing, and working parents are in a jam. Worse, parents will be hospitalized with no care arranged for their kids.

Tax cuts won’t address these problems. Most sick people don’t have much income, so tax cuts won’t matter to them. Unemployed people won’t have income either. The idea that the government can wall off the economic impacts of a virus-caused recession is correct. Once the economic slowdown spreads, the right kinds of government programs could soften the blow.

Here’s Wrongo’s prescription for Trump and Congress:

  • No bailouts for any industry
  • Targeted financial help for hospitals and the health care sector
  • General financial relief paid directly to workers and families

America’s businesses and capitalists had a fantastic decade. Let them and their rich executives weather this economic downturn on their own.

Trump’s people floated the idea of a push back of the April 15 Tax Filing Deadline. This does nothing for people, and shows just how little the administration is prepared to do.

Trump’s suggestion of a payroll tax cut is also misplaced. It’s been tried in the past, including by Obama. But tax cuts are less effective than simply providing lump-sum payments to families below a certain income threshold.

Also, payroll taxes are the primary source of funding for Social Security and Medicare. So this opens the door to another GOP stealth attack on Social Security. Trump has already said he plans to cut Social Security if reelected.

Jason Furman, Obama’s head of the Council of Economic Advisers, proposed an immediate, one-time payment of $1,000 to every adult, plus $500 for every child. Such payments would help cover rent, food and other costs, without a large administrative burden of trying to determine who got sick, or who lost work due to the Coronavirus.

Furman’s proposal would add up to $350 billion. The right wing will say no financial stimuli for Joe Sixpack. Those things must be paid for.

But Trump thought it was fine to dig a $ trillion hole in the budget for an unnecessary tax cut during good economic times.

What we need now is urgent. It requires smart, humane, and energetic action.

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Saturday Soother – February 22, 2020

(There will be no cartoons posted this week)

The Daily Escape:

Bass Harbor Head Light, Acadia NP, ME – 2019 photo by York Chen

Some are saying that the Democrats have abandoned the House as an instrument of power, and that it might be lost forever. The idea is that Democrats have surrendered the power of oversight, because they haven’t been able to use it effectively, and they can’t enforce their subpoena power.

This was the calculus of the Trump administration. If you stonewalled the House Democratic majority, their only option was to declare contempt. Once contempt is declared, it is up to the Department of Justice to enforce the order, an impossible expectation so long as it’s Trump’s DOJ.

After a contempt order has been issued, Congress can pass the order on to the DOJ or, to the DC US Attorney’s Office for prosecution as a civil or criminal matter. In theory, a charge of contempt could result in a fine or jail time, though in reality, that’s unlikely to happen.

After that, it’s up to the courts. That process takes a long time, and the outcome is far from certain. If a judge rules against Congress and in favor of the Trump administration, it could set new legal precedent that could make it easier for future presidential administrations to withhold information from future congressional committees.

The House did exercise its impeachment power, but it’s clear that regarding oversight, Trump has no intention of cooperating, nor will his administration. So the Democrats are facing a Constitutional question: The House is either an independent instrument of power and authority, or it is not.

We’d like to think that the next president and those that follow will not abuse their powers. Or if/when they do abuse power, they will be confronted by a Congress controlled by the other party, and both contempt and impeachment will be taken seriously by the president.

If a Democratic president and a Democratic Congress were elected, they could agree on a series of changes to limit presidential overreach and misconduct. Here are a few options:

  • Statutory penalties for contempt of Congress followed by swift review by the Court of Appeals for the DC Circuit
  • Tightening time limits for responding to Freedom of Information Act requests and enacting penalties for abuse
  • Restatement and enforcement of whistleblower protections, including penalties for outing and retaliating against whistleblowers

Even these moves may not be enough to rein in a president who has operational control of the DOJ. It will take the Supreme Court to settle the issue of the power of Congressional oversight vs. the power of the president’s executive privilege.

Trump’s presidency has revealed great vulnerabilities in our politics. Americans must want democracy badly enough if democracy is to survive. Despite our adulation of the framers, the Constitution works because Americans have made it work, not because of the brilliance of its design.

We’re facing a critical presidential election. There must be serious soul-searching by all of us regarding who should have political power.

The question for November is why have so many Americans lost faith in democracy, and what must we do to restore that faith?

No coffee recommendation today, we’re already waay too amped up from Trump’s pardons of bad actors along with his threat to pardon convicted liar Roger Stone. Or, maybe his arguing in Colorado Springs that Obama should be impeached put you over the edge. Maybe you were interested in seeing Mike Bloomberg take the debate stage, only to find out that Bloomberg brought a wallet to a knife fight.

Bloomberg was probably wishing he had bought a podium in a better neighborhood!

It’s time to get some distance from the circus in DC and forget about the shouting and posturing. It’s time to take a break with a Saturday Soother. This week settle back and listen to Leonard Cohen’s “Hallelujah” performed by the 5th grade chorus from PS22 in Staten Island, NYC. Wrongo promises you will be happy that you watched:

Think about how a public school music teacher reinvents his chorus every year with a new 5th grade class. This is one reason why we need to fund arts in public schools.

Those who read the Wrongologist in email can view the video here.

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