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Unsanitized: The COVID-19 Report for Oct. 15, 2020

How Biden Can Jump-Start Recovery Before Becoming President

He'll have to take on the mantle of FDR, but in a different way

 

If he wins, Joe Biden will need to use the skills of the bully pulpit to
make an economic impact before becoming president. (Carolyn Kaster/AP
Photo)

First Response

**** I see that we're going to continue to
play dumb on stimulus in public for the next couple weeks. After stating
at the Milken conference that there's no deal likely before the
election
,
Treasury Secretary Steven Mnuchin came on CNBC and said that the White
House would agree to Speaker Pelosi's language
on a
national testing strategy, purportedly a stumbling block in the
negotiations. Between that and a couple House Democrats urging Pelosi to
take the deal

(Tom Malinowski of New Jersey became the second to publicly state it
), maybe
there was some daylight to secure an agreement.

Unfortunately, the Senate hasn't been turned into the House of Lords
yet. In that same CNBC interview, Mnuchin was inconveniently asked about
Senate Republicans, and he hemmed and hawed
, because
there's nothing to actually say without admitting that the above
paragraph is useless fan fiction.

In fact, news outlets have gotten around to reporting what I said a week
ago
,
that Mitch McConnell has given up on the 2020 election, and wants mostly
to deny Joe Biden a smooth start to his presidency by immiserating
millions of people, as part of a pivot to austerity that would foster a
2022 comeback. Bloomberg catches a GOP advisor

making this case, and there's more from Greg Sargent
.

This strategy didn't exactly work out well for the Republicans of the
1930s, but McConnell did pull it off to an extent after the financial
crisis of 2008. So do we have FDR coming into the White House, or Barack
Obama? And what can be done for the 8 million people who have fallen
into poverty

since May and the millions more suffering from food insecurity
,
in the now-certain absence of an agreement? Those are the practical and
useful questions right now, so let's tackle them.

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**** The Times is out today with a story
where Joe Biden points in the FDR direction
,
something I wrote about in May
. Biden is
certainly cognizant of his position and the need to go big. But if you
look at what that piece is about, it's mostly targeted on public
health mandates: increasing testing to 100 million a month, speeding
protective equipment to where it's needed, and properly distributing a
vaccine.

Some of that intersects with the economic crisis: the "public health
jobs corps" of 100,000 contact tracers (which the Prospect called for in
April
)
has echoes of the Civilian Conservation Corps, for example. And
certainly centralization of production and distribution (Biden wants a
"Pandemic Testing Board" and a "supply chain commander" to handle
delivery of tests and equipment) resembles what FDR did during wartime.

But the New Deal wasn't just about centralization and spending money
on public jobs. It was about bringing to heel the desires of
corporatists to run the government. It was about restoring the rule of
law. And this can have an economic purpose as well. In fact, most of the
things I think can be done in the near term involve Biden using the
power that could be conferred to him to make the system work for the
downtrodden.

For example, I've been harping on the idea of the Federal Reserve
using its Section 14(2) powers

to purchase low- or no-interest, six-month bonds from state and local
governments and commit to rolling them over for 20 years. This would
effectively substitute for the lack of state and local government grants
from a second stimulus. And if that comes in, the loans could be paid
off quickly. State and local austerity is the biggest long-term threat
to recovery, and it can be neutralized.

But Biden will have to loudly encourage the Fed to get their blinders
off and get this done. Stating the terms he and Democrats (should they
win both houses of Congress) would agree to in an immediate budget
reconciliation bill should provide the certainty needed to lower any
risk of taking these assets onto the Fed's balance sheet.

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Similarly, Biden should make the same approach to the banking sector,
advising them to give short-term, no-interest advance loans to
struggling people that will be paid back when people get their stimulus
checks. If the industry can be guaranteed that those checks will arrive,
they could be jawboned into doing this early, so people don't sink
into disaster.

Interestingly, the industry is somewhat uncertain about Biden
,
who represented banking interests in Delaware but has been alternately
aggressive and vague about what he would do on finance policy. He can
credibly say that, given the flush times on Wall Street (Goldman
Sachs' profit doubled

in the third quarter), banks can afford to earn some public goodwill by
supplying immediate relief at no cost to them in the long run. A
combination of threats and persuasion could get this done. (

One of the things Biden has talked about is the establishment of a
public credit registry, which can be done through existing authority to
take the credit reporting market over from Equifax, Transunion, and
Experian. He should tell the leaders of these companies that he'll do
it-unless they wipe away all negative credit events for the duration
of the pandemic. One of the big impediments to recovery will be people
wanting to restart their businesses when people can gather again, but
being stymied by negative credit reports because they couldn't pay
their bills during the crisis. That shouldn't be a hurdle, and by
wiping out those reports, it doesn't have to be.

These actions would be more FDR-like than just spending federal funds.
He set about to bring organized money under the laws of democracy.
Getting banks to lend, getting the Fed to live up to its mandate,
getting the credit bureaus to remove impediments-this would invoke the
spirit of Roosevelt. Though we will need laws and money, before one law
is passed or one dollar is spent, Biden can engage in that bold
experimentation that will be needed to dig out of this wreck.

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Behind Closed Doors

Here's a window into our kleptocracy: Trump officials, ebullient in
public about how they've locked down the virus in February, express
anxiety about it simultaneously
,
in a closed-door briefing for conservative donors. A hedge fund analyst
who attended writes it up, and investors sell on the info. Is it insider
trading?

That's a more open question than you'd think. The same investors who
received the news and sold on it were already anxious based on public
information from China. The information from Trump officials reinforced
a general sense that was already out in the world. I'm fully willing
to believe that the Trump administration was saying different things to
different audiences to allow favored friends and donors to limit losses.
But I don't really think that's what happened here. It's more of
the usual situation of wealthy people having more access than others.

Days Without a Bailout Oversight Chair

203
.

We Can't Do This Without You

Today I Learned

* An update on business interruption insurance: policies without
explicit virus exclusions are losing their motions to dismiss
.
(University of Pennsylvania)

* Wells Fargo fired 100 employees who defrauded the Small Business
Administration

on COVID relief programs. (Bloomberg)

* I wonder why seniors would be abandoning Donald Trump
,
maybe it's that deadly disease that most affects them. (Politico)

* Weekly unemployment claims unexpectedly jumped last week
,
but I'm a little wary now of these statistics due to fraud.
(Calculated Risk)

* Bargain-basement rates

for commercial real estate in New York. (Wall Street Journal)

* The rise of ghost kitchens
. (Freethink)

* COVID spread amid the primaries appears muted
.
(FiveThirtyEight)

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