Susan Walsh/AP Photo
Unsanitized-081020
The orders will do next to nothing for people struggling with the economic fallout from coronavirus.
First Response
After weeks of unproductive talks with Democrats bending but the White House unyielding, over the weekend Donald Trump issued three memoranda and an executive order that, at this moment, reflect the only additional relief to the American people at a time when fiscal policy was the only thing preventing the economy from ruin.
We’ll get to what’s in these in a minute, but it’s worth noting what’s not there. The Heroes Act, House Democrats’ kitchen sink policy, added up to $3.4 trillion. According to the Committee for a Responsible Federal Budget, who get the vapors at the sight of a deficit so they ought to know, the Trump orders would provide at best $225 billion in near-term funds, and on net, just $13 billion, tops, in new budgetary outlays. Everything in the orders either shuffles existing money around or kicks payments down the road; the new spending just assumes some missed collections.
I’ve read all four documents (here, here, here, and here) and I’d say CRFB is being amazingly generous assuming that anything close to even the meager funding it outlines will actually materialize. Let’s dive in.
Read all of our Unsanitized reports
Unemployment: the Trump action, if it actually worked, would give unemployed Americans an $400 extra per week retroactive to August 1, down from the $600 that expired in July. Of that sum, $300 would come from a FEMA disaster relief fund, and another $100 would have to be supplied by the states, using relief funds appropriated in the CARES Act. However most of that CARES Act money is already spoken for, and cash-strapped states don’t have a lot of extra money available to contribute. So I’d say it’s unlikely the state share will be included in a majority of states. Unemployed workers themselves will get half of what they previously got.
In addition, there’s only $44 billion available from the FEMA fund for the federal share. About $50 billion was spent on the $600 enhancement in the first two weeks of July, with nearly 30 million people receiving benefits. This is half that and maybe fewer recipients as hiring increases. But at most, this gets you another 5 weeks of support; by the end of August it’ll be done, even though it’s supposed to last until December.
When recipients will actually get anything is unclear; states would have to create an entirely new program through their antiquated unemployment insurance systems. It’s first-come first-served, so early states might get a little more for their residents while states that take months to figure things out could be shut out at the window entirely. And while the unemployed endure the wait, rent and other bills are still due.
Besides all that, it’s plainly unconstitutional, as David Super explains. The Disaster Relief Program being used isn’t intended for this purpose and its ability to deliver unemployment benefits is severely limited. Violating the Anti-Deficiency Act, which this does, carries criminal penalties. But while many will grumble, who exactly will sue to block the unemployed from getting even meager benefits? Treasury Secretary Mnuchin taunted Democrats with exactly this rationale on Sunday.
Payroll taxes: Set aside that people working need far less support than those who don’t. The president cannot change tax law to cancel taxes; he can defer payments. That’s what’s being done here. Any worker making less than $104,000 per year would have payroll taxes deferred from September 1 to the end of the year. They’ll still owe the taxes; they just won’t have to pay them until January.
This is a bureaucratic nightmare for employers, many of whom will likely opt to either keep paying them, or put them in an escrow account. Otherwise, they’d have to garnish a worker’s entire paycheck in January to cover back payroll taxes. My expectation is that this has next to no stimulative effect at all.
Trump says he wants to “terminate” these taxes if re-elected; he would need Congress to agree. It’s a political ploy to bribe the electorate, but if businesses just hang onto the money to avoid future fallout it won’t even work as a bribe. And Democrats are screaming that these taxes fund Social Security and Medicare and cancelling them would hasten a crisis (of course Congress could just, you know, fund Social Security and Medicare, and crisis solved.)
Evictions: This is just vaporware, the order just says that health officials should consider an eviction ban and that the Department of Housing and Urban Development and the Treasury Department should see what they can do about helping renters and mortgage borrowers with funds to stay in their homes. That’s it. The federal moratorium only covered a handful of cases anyway; this is more useless than that.
Student loans: Of the four orders this is the most useful, as it extends an existing forbearance for federal student loans. Again, borrowers would still owe the money eventually, but it’s somewhat useful to be relieved of the burden now. What this shows is that the Education Department has a lot of discretion to let these loans go uncollected indefinitely, if they choose, to say nothing of the authority to cancel student loans. Trump is proving the concept.
This appears to be the sum total of relief, with no talks scheduled for a broader bill. So, will there be another stimulus check, as it stands now? No. Money for state and local governments on the brink of firing millions due to an inability to cover staggering drops in revenue? No. Postal service funding? That’s out. Elections? Nope. Small business support (the PPP expired over the weekend)? Sorry. Increases to food stamps, and money for schools to safely educate, and testing, and… you get the picture. On a macroeconomic level, this dramatically snaps back the fiscal support carried out over the past five months, and will undoubtedly push an economy with double-digit unemployment deep into a spiral.
This was all foreseeable and foreseen. I don’t want to turn this into an “I told you so” situation, but since March I have been consistently stating that the temporary CARES Act measures for individuals and small business would prove insufficient, and that a second bite of the apple would be unlikely after Republicans got the corporate bailout they desired. On April 27 (!) Speaker Pelosi told Jake Tapper to “just calm down” when asked if she made a tactical error to not seek broader state and local fiscal aid in the CARES Act. “We will have state and local and we will have it in a very significant way,” she sniffed. Yesterday, on the same network, she said she’s praying for a resumption of talks.
It was a grave error to hold off on critical priorities until “the next bill,” after all the leverage was squandered. These Pelosi hagiographies are embarrassing in the context of her blowing the chance to secure ongoing relief throughout the pandemic. Whoever replaces Pelosi when she leaves doesn’t have to repeat these mistakes, as long as they learn from them.
I was on Democracy Now today talking about these orders as well as the war on the postal service, and you can watch that at their website.
Monopolized
Two of the best interviews for my book Monopolized released over the weekend (did you get your copy?), and I’m excited for you to see them. First, Ryan Cooper and Alexi the Greek had me on their fine podcast Left Anchor to discuss the book. This went about an hour and really got to the heart of the book’s themes. Listen here.
Then, Matt Stoller, whose incredible book Goliath freed me from having to recount the history of monopolies in my own work, interviewed me about a through-line in Monopolized. Every chapter includes a mention of Warren Buffett, as he’s an exemplar of the monopoly structure of this country. His investments and portfolio companies reflect his strategy of building “moats” around businesses (i.e. securing market power). So we discussed Buffett for his exemplary newsletter, BIG. Read here.
Days Without a Bailout Oversight Chair
137.
Today I Learned
- Mentally prepare yourself for the end of the college football season before it begins. (ESPN)
- One week after that viral photo of the school with the crowded hallway, classes are shutting down for at least a couple days, amid a handful of positive cases. (11 Alive Atlanta)
- The government’s Kodak loan is off, amid investigations into executive insider trading. (Wall Street Journal)
- There will be another education job quirk in the next employment report, in the negative direction. (Calculated Risk)
- Eight merger deals over $10 billion in the last six weeks. The consolidation wave has begun. (Financial Times)
- Trump officials want faster, cheaper tests, but don’t have the supply chain capacity for them. (Politico)
- A nursing home tycoon made $750,000 in donations to a Trump SuperPAC and got $27 million for his facilities, even as patients died. (The Intercept)
- Sturgis begins, and it’s every bit the magnet for hundreds of thousands of nonconformists that you’d expect. (Sioux Falls Argus Leader)
