Unsanitized: The COVID-19 Report for Aug. 10, 2020

Trump Orders Up a Poor Substitute for COVID Relief
But bad strategy from the Democrats led us here

 

Trump's orders will do next to nothing for people struggling with the
economic fallout from coronavirus. (Susan Walsh/AP Photo)

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.

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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 .

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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
.

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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)

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