Washington Going Full Andrew Mellon as Stimulus Talks Drag, Inadequate Support Guaranteed
Herbert Hoover’s Treasury Secretary Andrew Mellon1 at least had an excuse: he was a staunch believer in a disastrously bad idea. The Republican and Democratic party leaders who are failing to prevent the US economy from continuing to careen down a steep hill via dithering with inadequate stimulus schemes, won’t be able to excuse themselves as misguided ideologues. They are too small minded for that. They are simply clientelists, captured by elite factions that lack the imagination to see that the US is approaching a corruption end state, and that having America continue to decline will result in an acceleration of our post-Soviet style plutocratic land grab. It will produce only a comparatively small number of winners, and most of the top 10%, and even quite a few current billionaires, won’t be among them.
The stimulus deal talks are so not-going-anywhere-quickly that there are no updates on the front pages the Wall Street Journal, or the Financial Times; Bloomberg does have one over the fold (Senators Look to Break Deadlock with Small Business Proposals) but in small, non-bold type, making it easy to miss.
Remember that the $600 a week unemployment supplement expired as of July 25 (except in New York, its drop dead date was one day later). Remember that even in the best-case scenario that the parties get to a deal this week, the votes won’t take place until next week. So any new supplement payment won’t come any time soon:
Rule of thumb per @EvermoreMichele is to say it’ll be about 2 weeks from passage of new law for most states to adopt and implement new UI benefits
So if Congress passes something next week (likely best case scenario), $ may not arrive until ~Aug 28 — ~full month after expiration https://t.co/e4jsxIQ7b5
— Jeff Stein (@JStein_WaPo) August 4, 2020
And remember the reason the Republicans went for the unemployment supplement was that they worked out it would get money into citizens’ hands faster than those $1200 per person stipends.
It was also interesting that our readers’ collective take yesterday on the state of small business America was cheerier than the data says, perhaps because many of the businesses still operating, particularly restaurants, have greatly cut headcount:
75% economy: Small business employment in the US has plateaued 25% down on pre-crisis level. @homebase_data via @SoberLook pic.twitter.com/OawVSE8Dua
— Adam Tooze (@adam_tooze) August 4, 2020
There’s no strong reason to think this plateau will hold. Some small businesses did have a strong rebound after the lockdowns were lifted, such as dentists. But as we’ve pointed out, some owners of enterprises that received PPP loans expect to lower headcount once their obligations expire. Both Bloomberg and the Journal have stories on the continuing decline of department stores, and some small businesses did break into the bigger leagues by landing boutique and bigger retailers as customers. A smaller second round of stimulus, which looks baked in, will further damage businesses that are on the wrong side of Covid-19 risk.
And that’s before factoring in the real economy effects of rising infections. It’s up in the air as to how many public schools will reopen, but in anywhere other than locations where infection rates are low, that looks to be a prescription for a spike in new cases a few weeks later. Many colleges and universities are having students back on campus, which even if the numbers are much lower than the old normal, are disease futures. So current trajectories favor more lockdowns and/or fear-induced self-imposed restrictions, particularly if there is more evidence of lasting Covid damage even in
The Hill’s evening update describes how the stimulus talks got nowhere over the past week, and finally showed some movement on Tuesday. While some key players are making optimistic noises, the two sides are still far apart on their big bones of contention: the amount of the unemployment payment supplement, funding for state and local governments, and funding the Post Office. Let us not forget that as of June, state and local governments had reduced headcount by 1.5 million, but those were (so far) mainly temporary layoffs. This section of the story gives the very strong impression the two camps are miles apart:
Schumer said they are still “far away on a lot of the important issues” and have a “fundamental disagreement” on the scope and depth of agreement. Pelosi indicated during an interview with PBS that Democrats were sticking by the $600 weekly federal unemployment payment [versus the Republicans’ $200], saying that “there’s no in between.”
And negotiators haven’t yet agreed on a top-line spending figure for the overall package. Pelosi told CNN that she would accept $3.4 trillion — the amount of the bill House Democrats passed in May.
Mnuchin rejected that amount.
“Let me be clear: We’re not going anything close to $3.4 trillion,” Mnuchin said. “That’s just ridiculous.”
Politico’s story adds that McConnell is keeping the Senate in session until there is a deal, which is making Republicans facing tough races unhappy by keeping them off the trail. And they are apparently also worried because opponents are running ads attacking them over the lapse in the unemployment supplement and the eviction moratorium. It also describes how Republican fiscal hawks are sniping at fellow party members who are more amenable to spending, accusing them of depressing turnout in November from the party faithful. Predictably, each party is trying to blame the impasse on the other guy.
Trump has stated he’d use an executive order to extend the eviction moratorium if Congress didn’t get that done soon. If he’s serious about that idea, he probably needs to move by early next week at the latest, if nothing else to lower anxiety levels among those at risk. But while these moratoriums buy the stressed some breathing space, I don’t see what the endgame is for tenants that either make no or very low payments. Some landlords will evict when the moratoriums are up on general principle. Some will be foreclosed upon because they needed the rent to pay their mortgages and property tax payments. And governments can’t order landlords to accept lower rent payments; that’s amounts to a taking and would require the governmental body to compensate the owner.
In other words, approaches like eviction freezes are mere “kick the can” strategies. But Covid-19 isn’t just a demand shock; the disease is forcing a wide-ranging restructuring of the economy. And even though there is a tremendous amount of work that could be done in place of the lost jobs, from planting trees to elder services to dealing with deferred infrastructure maintenance, no one seems to be discussing the fundamental problem, let alone developing concrete plans about how to respond. The display of the loss of institutional competence, the official responses that amount to rearranging deck chairs on the Titanic, show that decades of overcompensating rentiers and symbol manipulators are coming home to roost.
1 Mellon who was also Treasury Secretary under Harding and Coolidge, left that office after Congress threatened to impeach him, and is infamous for the recommendation that Hoover attributed to him;
Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. … enterprising people will pick up the wrecks from less competent people.