Unsanitized: Senator Tammy Baldwin v. the Bailout

Plus, minting the coin. This is The COVID-19 Daily Report for March 22, 2020.

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First Response

After a slow week of exchanging proposals and fielding calls from lobbyists while millions of poor and newly unemployed Americans look on with concern, things are finally moving in the Senate, with possible floor action today and a vow from Mitch McConnell to be wrapped up tomorrow. The price tag has soared from $850 billion to $1 trillion to $1.6 trillion. Overall, if you include Federal Reserve and Treasury actions, White House economic adviser Larry Kudlow puts the final stimulus number at “about 10 percent of GDP”—more than $2 trillion. Democrats won a “concession” (desperately needed relief isn’t what I call a concession) for $250 billion in increased unemployment benefits to make it close to a full replacement wage, in addition to the $250 billion in direct payments, which I don’t believe penalize the poorest anymore. Democrats also secured tens of billions for hospitals. These, as Chuck Schumer said on the Senate floor Saturday, are Senate Democrats’ top priorities: helping workers and a “Marshall plan” for public health needs.

When I talked with Senator Tammy Baldwin (D-WI) yesterday, these items were still in flux. But it looked like a trade-off was forming: Democrats get relatively minor concessions on their priorities in exchange for what you can call a corporate coup. Lobbyists were making direct calls into Congress to obtain special favors for a wide variety of industries, from fisheries to commercial space exploration, from a gift to Adidas to cut taxes on gym memberships and fitness equipment to a gift to pig farmers to expand foreign guest worker visas. And then there are the bailout asks from large companies: $60 billion for Boeing, $1.4 trillion for major manufacturers, even the candy industry is asking for $500 million. Treasury Secretary Steve Mnuchin wants Goldman Sachs to administer all this—not really their core competency unless you count the part where they lard on fees.

Baldwin has been focused on what the government can demand if they decide to bestow these sums of loans and guarantees to industry. In particular, she released a version of her Reward Work Act, which would require any large bailed-out public corporation to refrain from stock buybacks and put workers on their corporate boards. These two planks are in Elizabeth Warren and other proposals on bailout conditions, but on these two, at least, Baldwin has long taken the lead.

“We have to make any corporate bailout contingent on benefiting the workers,” Baldwin told me. “We know the distorted impact that buybacks have on the whole enterprise. And I think it’s so important to have a worker voice in corporate decisions.”

The buybacks piece, at least, has caught on. Baldwin cited statistics showing that, between 2014 and 2019, the big four airlines spent $42.5 billion on buybacks, cash that could have been used on long-term investments or as capital reserves they need now. This money instead got funneled to investors (including executives who have some of the biggest holdings of corporate stock) and artificially propped up stock prices. The financial engineering came at the cost of an economic system vulnerable to shocks.

Senate Minority Leader Chuck Schumer has picked up the call for no buybacks, and even President Trump referred to it in his Friday news conference. “It suggests a remarkable moment of bipartisan agreement,” Baldwin said. “If taxpayer bailout money were used for stock buybacks at this moment, when clearly the intent of Congress is that the workforces of these major corporations are protected, that would be exploiting the current crisis.”

Baldwin added that Senate Democrats are remembering in this moment the rush to a badly designed bailout in 2008 with virtually no strings attached. She said that, while negotiations were happening among leadership, members were engaging at the committee level on areas within their jurisdiction. Leadership “is hearing constantly from those outside the ranks,” she said. That creates an opportunity for topics like buybacks and worker codetermination to catch fire, for blocks to form that make open demands. The corporate coup can be stopped, but time is running short.

Vital Stats

The New York Times now lists 24,380 U.S. coronavirus cases (and 340 deaths), which is nearly double the number of cases just two days ago. Johns Hopkins University has it at 26,747 cases (340 deaths), and 13,407 deaths globally from COVID-19. The COVID-19 Tracker shows 24,345 cases (296 deaths), and 191,541 tests completed. That number has again nearly doubled in the past two days, and the new positive case numbers are in part a function of more testing. To reach South Korea’s testing level on a per capita basis, however, we need something between 75,000-100,000 tests per day; we’re tracking closer to 40,000-50,000 right now.

#MTFC

During one of our previous crises, a wholly artificial one over whether to raise the debt ceiling to meet government obligations, the idea emerged of using the Treasury Department’s authority to mint a trillion-dollar platinum coin and use that to cover any repayment. This was seen by some as a gimmick, but it has backing in law—it’s an artifact of the pre-Federal Reserve role of coin seigniorage.

This concept re-emerged yesterday in the form of a legislative proposal from Rep. Rashida Tlaib. Her Automatic BOOST Act would give every American a prepaid debit card with $2,000 loaded on it, recharged by $1,000 each month the coronavirus crisis persists. It would be paid for with two one-trillion-dollar coins, sold to the Fed and then swept into Treasury’s account.

When the U.S. Senate is debating a $1.6 trillion stimulus and hardly looking at the cost, you might ask why the coin needs to be minted at all. But even if nobody has raised a peep about the deficit during this crisis, they may afterwards, said Rohan Grey, president of the Modern Money Network, who helped draft the bill with Representative Tlaib’s office. “It’s still in people’s minds, this notion of issuing debt,” said Grey in an interview. “While people aren’t concerned today, we’re trying to pre-empt the backlash and inoculate ourselves from the austerity that’s coming down the pipeline.”

Grey had been working with Tlaib before the crisis on digital currency legislation and solutions for the unbanked. The prepaid debit card in the coronavirus bill is a version of that, allowing people to obtain it without giving many details to the government. Not only would they be mailed, but delivered in at-risk communities and distribution stations, accompanied with a wellness check to enumerate human needs in the crisis, like a census. “If there’s fraud we can work it out on the back end,” Grey said, highlighting provisions that would claw back money through the tax code if it was found that people used more than one debit card. That speeds relief and puts the fraud off to later.

Ultimately, Grey would like to see everyone have an eCash account, similar to a postal bank account or a universal bank account delivered by the Federal Reserve, which could help deliver quick and automatic relief in a crisis. This would respect privacy and serve as a cleaner mechanism for federal benefits. And while you could do this through direct deposit at private banks, that would leave the unbanked behind.

As Congress scrambles to act, you’re starting to see leaders in alternative macroeconomic theory urge bigger and more creative thinking, ensuring that banks aren’t the only ones with access to an unlimited money cannon. Minting the coin would finance what is needed now and let the U.S. Mint, not the Fed, create the asset. Congress would secure the authority by passing a law. “People must understand that this is fiscal policy,” Grey said. “This is a tool in the Treasury’s toolkit. And once you mint two coins, it’s easier to mint the third.”

Watch This

I did an interview with Lauren Steiner for her Facebook Live show about bailouts and corporate maneuvering in the crisis. You can watch it here.

I still want to hear your stories of dealing with the COVID-19 crisis. Tell me about your experiences. Email me at ddayen-at-prospect-dot-org.

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