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