There’s more in heaven and earth than pandemic response
We've run out of semiconductors like this one. (FeatureChina via AP Images)
The Chief
For most of the existence of First 100, I have focused on two things: the vaccine rollout, and Joe Biden’s $1.9 trillion American Rescue Plan. There’s good reasons for that. The vaccine has given hope for the end of a pandemic that has dominated American life for a year, with 44.4
million doses into arms, and the rescue bill comprises the sum total of legislative policymaking at the moment, as well as the critical signal of the trajectory of the Biden era in domestic policy.
It’s been appropriate to target our focus there, especially because that’s what Biden has been doing. And Biden is moving toward a novel conception of economic management, about which I’ll have more tomorrow. But presidents have a host of other responsibilities that go beyond one bill or one implementation, however important. There’s been a trend among
liberal wonks to see themselves as macroeconomists, and attention inevitably gets pulled there. But there’s more to life than the macro-economy.
Biden has taken some tentative steps on immigration and foreign policy, but in a number of key areas, the laser focus on the pandemic has crowded out important decisions that eventually the president and his team will have to make. Here’s a sampling of the lingering issues that need addressing:
Supply chain: When not smugly discussing kids on Reddit, the big story in the business world is a giant semiconductor shortage, which so far has hit the auto industry the hardest. General Motors has had to roll back production until the
middle of March, along with other major car companies. Ford estimates it will lose $2.5 billion from the delay; the total industry losses could be as high as $61 billion. That translates into a lot of idled factories and lost manufacturing jobs. It should not surprise you that other industries use computer chips as well, and could see their own slowdown.
The shortage is being blamed on unexpected demand during the pandemic, which has made it difficult for carmakers to spin up production and find enough chips. But as many as 70 percent of all semiconductors come from Taiwan, and that kind of dependency is unhealthy and prone to disasters like this. Rebuilding domestic manufacturing capacity was a Biden’s campaign promise, though largely confined to the medical supply chain. But it’s about far more than facemasks.
Financial
speculation: You know about GameStop, but I’ve written about how this just scratches the surface of the Wall Street casino. These special purpose acquisition
companies (SPACs) in particular, which are companies with no revenue and no product that exist to buy other companies and take them public without disclosure of their financial statements, have gotten completely out of control. There are so many SPACs now that insurance companies that protect directors and officers against liability are overloaded. Colin Kaepernick has a "social justice" SPAC now.
These are just moneymaking schemes for the lead sponsors, and could easily be used to bilk ordinary investors through inflated valuations of junk companies. They’re taking risky venture capital plays and putting them on public markets, with investors taking all the risk. And we’re already seeing the first hints of fraud in the markets, as Chamath Palihapitiya’s SPAC purchased Clover Health without disclosing an active Justice Department investigation. What will financial regulators do about this? The SEC just gave its Enforcement Division subpoena power; it’s time to use it. More broadly, this rampant speculation will surely come to a bad end, and Biden’s team needs to get out in front of it before it spreads to Main Street.
Small business: An interesting paper from the Economic Innovation Group showed that 2020 featured a startup surge, with business applications up 24 percent year-over-year. That’s unlike most recessions, and the significant safety-net assistance provided to families allowed the laid off and those with shuttered businesses to try something new. But there’s a downside here; most of these "startups" were single self-employed individuals unlikely to hire employees. And with 9 million businesses at risk of failure in the pandemic, a number worsened by the sluggish initial
vaccine rollout and new variants threatening another lockdown, these new businesses being formed might not be enough to replace the old ones.
Unless we want market consolidation everywhere and the associated harms, Biden’s team must figure out how to keep businesses likely to hire workers afloat, and access to capital would really unlock that. Related to this, the Consumer Financial Protection Bureau’s acting director, career employee Dave Uejio, outlined in a memo to agency staff that he would target banks who only took Paycheck Protection Program applications from existing customers, saying that this "may have a disproportionate negative impact on minority-owned businesses." CFPB has jurisdiction over fair lending in small business loans; banks could be in
big trouble.
Local government: We keep hearing these stories about the improved fiscal outlook for state and local governments, presumably obviating the need for any federal relief. But it raises a question: if revenues are so good, why have cities and states cut so many jobs? Job loss is running at about 7 percent in state and local government, while revenues are down only 1.6 percent in the last fiscal year. What’s the disconnect? Why are four times as many jobs being lost relative to revenues? Is it the increased costs from COVID measures? An unequal recovery from the pandemic leading to
higher social service spending? The lack of in-person schooling? It’s something Biden’s economic team needs to understand.
Housing: Just keeping people housed in the pandemic is critical; the inadequate eviction moratorium isn’t protecting enough people, and mortgage relief is about to expire. Moreover, the debt overhang on rent and mortgage payments is a huge factor, one that we saw stunt recovery in the last recession. Implementing rental assistance programs so people can actually get relief is the biggest under-the-radar challenge of the Biden administration. And beyond the immediate
crisis, the future of housing finance and housing affordability loom, requiring more building but also a better method for wealth building than a volatile asset critical to sustainability like shelter.
Vaccinations hit 2 million people one day last weekend, which is a good barometer of our growing capacity. (Kevin Drum)
The belief is still that herd immunity won’t come until Thanksgiving, which I think neglects the level of natural immunity in the population. (Daily Beast)
Community health centers will become another vaccination site, targeting harder-to-reach populations. (CNBC)
Case rates and hospitalizations are falling, and here’s a theory why, though the rise of more transmissible variants will likely overcome this soon. (Twitter thread)
Quietly, the Biden rescue plan has the biggest overhaul of health insurance since the Affordable Care Act, mainly through much higher subsidies. (Axios)
At least publicly, Chuck Schumer isn’t giving up on including the
minimum wage in the relief bill. (Wall Street Journal)
Biden’s pullback in Yemen really does hang on your definition of "offensive operations." (The New Republic)
