Preview

When we last left the economy, one better-than-expected jobs report had the policymakers with unfortunately significant control over the country’s next moves thinking that the nation was wholly back on track. Optimism swept the land. So did spiking coronavirus cases, which may have put a kink in that narrative. But well before that, you could already see the storm clouds forming.

Federal policy is starting to expire; for example eviction protections for federally-subsidized properties run out at the end of July. But in the states, many of which enacted their own moratoria, renter protections are already running out. In New York City there was a decent-sized rally Monday protesting the imminent opening of housing courts. You can expect thousands of eviction cases the moment courts reopen. Moving up the housing ladder, the delinquency rate on mortgages has more than doubled since March, to its highest level since 2011. This could be leveling off, but with boosted unemployment running out in five weeks, that cresting could be temporary.

I’ve been serially collecting stories of closing small businesses. Here’s one for shops in the Santa Clarita Valley, California, and here’s another for restaurants in L.A. Some high-risk storefronts turn over all the time, but every community in America is experiencing this at a higher level right now. At the higher-class edges of Main Street, business mega-bankruptcies with over $1 billion in debt are expected to hit a record in 2020. And smaller businesses won’t be restructured in bankruptcy, but liquidated.

That’s why the layoff figures we see now are of a different type than the big numbers from back in March and April. These feel more permanent, the result of businesses throwing in the towel or cutting back to avoid that scenario. The permanent job loss phase has arrived.

That’s even more true in the public sector, where the carnage from lost revenues has created a scramble. Every last scrap of gimmickry is being generated—somehow a California budget deal was reached yesterday, though it relies in part on an expected $14 billion in federal money—but you cannot fully paper over such an historic collapse. In particular, we’re seeing rapid cancellation of planned infrastructure projects at the state and local level, much of which is funded by road and excise taxes that aren’t being used as people drive and move things around less. Even if the feds pony up funds for infrastructure, it won’t fill the gap, because federal funding has to be matched at some level locally, and if the money isn’t there, the projects won’t go forward. (There’s also a five-year extension of the surface transportation bill expiring in September!)

In short, we have a mess. And it was a predictable one. While everyone was patting each other on the back for the wonderful prevention of poverty and boost to low-end income from the emergency relief, it was plain to see that it would fade too soon, essentially holding the poor and the near-poor and the unemployed hostage to a Washington power play. This was bad policy, as the second round never matches the first, even though in this case the needs will be greater. We had a temporary bridge in March; we have growing pockets of permanent joblessness and bankruptcies and state budget holes now.

The golden boys of economics, Obama and Bush veterans, have mapped out a plan for recovery that has a couple of good elements—automatic triggers for federal benefits and more work-sharing is solid—along with “incentives for work” that seem to race past the near-term crisis (including the crisis of unsafe workplaces) and go right to the fun recovery stuff. Nathan Tankus gives this a much longer treatment.

Too many policymakers, when not outright ignoring the pain out in the country, pretend that there are a couple dials to tweak with a problem as big and complex as this one. It’s astonishing that there won’t be talks on another round of immediate relief until next month, per Republicans in the Senate. The outlook is pretty dire and they’re playing a game of leverage. It’s revolting.

Here’s a semi-regular update on the spiking states in the South and Southwest. Arizona saw a new high for hospitalizations on Monday, suggesting that even if deaths are muted so far, the virus makes people sick enough to need serious treatment. About 84 percent of ICU beds are in use. Texas Governor Greg Abbott is very, very cross with the state over the rising case numbers, enough to… ask pretty please if people will stay home and maybe wear a mask, but not requiring anything because that would destroy freedom. Hospitalizations there have doubled.

We probably won’t know much about the state of hospitals in Florida before long, because the state has altered ICU reporting to only list those patients who require “an intensive level of care.” ICU stands for Intensive Care Unit. Feel free to roll your eyes at this point.

Here’s Max Nisen on how to manage this, mainly through contact tracing, social distancing and crowd control indoors, and mask use.

As we begin to seriously discuss additional economic stimulus, we’re also likely to unseriously discuss it. That brings me to the proposal from Martha McSally, well on her way to losing her second straight Senate election. Her latest Hail Mary, reported last night by Steven Dennis, would give $4,000 to each American as a tax credit if they take a domestic vacation. (It appears to be good for 2020 and 2021, meaning that you could conceivably grab $8,000 in all.)

This manages to be unbelievably dangerous short-term and a giveaway to the rich long-term. It’s not a refundable tax credit, so you only get the money if you have tax liability, ruling out millions of households that don’t make enough. Also you’d have to front the money since you only get it back come tax time, likely ruling out millions more. It’s best understood as a tax cut for the rich to take trips they’d already be inclined to take, especially in 2021. And sending people criss-crossing across the country right now to pollinate touristy areas with the ‘rona just speaks for itself.

Lest you believe that McSally has terrible ideas, I must inform you that she is a very busy senator, what with the fundraising and fundraising and such, and she doesn’t trifle with such banalities as “writing legislation” or “coming up with them.” This idea came entirely from the U.S. Travel Association, the travel industry trade group, right down to the $4,000 number and the dates in the plan. It’s itself a version of the first-time homebuyer tax credit, another “stuff well-off people with money” concept used during the financial crisis, which merely pulled spending forward and offered no net boost whatsoever.

You’d think a Republican like McSally wouldn’t need help writing a “throw free money at rich people” bill, but that’s lawmaking, 2020 style.

I think Trump has long admitted that he slowed down testing in March, but that was when the CDC was mostly in charge. I think he’s just being a loudmouth now, though that’s redundant. (Politico)
The immigration executive order, by contrast, is not just talk, it’s an appalling policy with the pandemic used as an excuse (Washington Post)
More pandemic excuses for deregulation, this one severely damaging mortgage underwriting. (National Consumer Law Center)
How consolidation made the airline industry impact from coronavirus worse. (ProMarket)
Just what we needed, toxic hand sanitizer. (New York Times)
The pandemic is the “biggest psychological experiment in history.” (Scientific American)At least TJ Maxx is doing well. (Wall Street Journal)