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February 18, 2021

Both Good and Bad Economic Indicators Point to Biden Rescue Plan

Plus, an executive action tracker update

 

Retail sales figures jumped last month but Walmart predicts a slower
year ahead. (BBB/STAR MAX/IPx)

The Chief

Retail sales numbers surged in January, as people spent their $600
stimulus checks. You can tell a story
about
a solid economy waiting to break out once the all-clear signal lifts and
a semblance of post-pandemic normalcy sets in. And yet you can also tell
a story about a locked-down economy-made temporarily worse by Arctic
cold-that is leaving people behind.

First-time jobless numbers have been above the worst level of the Great
Recession every week since the pandemic started. That's going on
nearly a year. Last week the number was supposed to slip to a
still-above-the-Great-Recession 770,000. Instead it rose to 861,000
,
the Labor Department announced today, and the previous week was revised
up sharply.

How can these numbers tell the same story? You can bring in a third set
of numbers to reconcile them: the falling COVID cases and
hospitalizations
.
A number of factors explain that, from vaccinations to natural immunity
in key populations to the more seasonal nature of coronaviruses. But one
big one is social distancing: mobility data shows that people actually
got the message after Christmas and began to stay home.

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So if more people are at home, then restaurants and retail stores
don't need as much staff. And the pink slips go out. People have
purchasing power, however, from the $600 check and the extra $300 in
weekly unemployment compensation, and more subtly from the lack of
leisure and entertainment options accumulated over the course of a year.
So there's money to burn on deliveries and groceries and other goods.
That's how you can have a consumer spending surge and a job collapse.

Both sets of data reveal the need for the American Rescue Plan,
actually. The reason for the spending increase in January, which will
eventually funnel out into more economic activity, was the stimulus from
those direct payments. And with more heading onto the unemployment rolls
every day-16 million

on regular unemployment, Pandemic Unemployment Assistance for
freelancers and gig workers, and the extended benefits of Pandemic
Emergency Unemployment Compensation-we need to keep the latter two
programs going before they expire in less than a month, as well as
keeping the federal enhancement in place.

But there's even more to it. Walmart released a forecast predicting
disappointing sales

in the next fiscal year. The theory is that people made their big-ticket
purchases with stimulus money and have no need to upgrade. More
important, the political system is reckoning with changing habits
leading to permanent job loss
,
with no need for millions to return to work. More work from home and
less business travel is a seismic economic event. The shops and lunch
joints clustered in business districts may not be needed at the same
capacity. All of the hospitality and travel services can be scaled down,
as catering to business travelers is a big chunk of the income.

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You don't have to fear automation and robot takeovers of jobs (it's
a good thing if it increases productivity, actually) to worry about a
sort of substitute automation, where technology indirectly obliterates
jobs through remote work. How will the economy recover? Well a big
stimulus package could provide a bridge to that other side, with public
investment paying off in higher-wage jobs, not to mention the long-term
benefits. And we know there's a lot that needs fixing in our nation.

Yet many will engage in a one-sided reading of the data and decide that
a month-long consumer spending boost means that the economy needs no
further support. Or they will just plug a set of data into pre-existing
priors. That's what we see with the Committee for a Responsible
Federal Budget's press release demanding a perfectly targeted,
perfectly precise rescue package where non-disaster items are "paid
for." There's the usual talk about state and local governments being
fine (despite dramatically higher layoffs
)
and overshooting the output gap (which is a slippery concept that varies
wildly )
and "targeting" relief (when we don't have the income data).

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But CRFB is also mad
about a
long-sought fix to save the pension benefits of hundreds of thousands of
workers, because they don't consider it "COVID relief." Benefits
would get cut 65 percent
without a
solution, an unconscionable outcome at this time. The Ways and Means
Committee apparently rolled back the unemployment benefit extension from
September to August to make room for this fix, but the problem isn't
the fix, it's rolling back the UI extension for no good reason.

I think Democrats are likely to brush off the overall concern, although
rolling back a month of unemployment benefits suggests that they've
already drawn blood. That needs to be changed, and the pro-austerity,
"we've done enough" forces need to be combated.

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What Day of Biden's Presidency Is It?

Day 30. Cue the "One Month Agenda" takes.

By the way, we've been updating our Executive Action Tracker
to reflect Biden executive actions. With his
rejection of student loan cancellation at Tuesday's Milwaukee town
hall, we have made that an official "NO." That's subject to
change, however, as the president will reportedly ask the Justice
Department

for a review of the legal authority to cancel student debt. The Office
of Legal Counsel routinely advises
presidents on legal reviews. Biden hasn't named anyone to run that
office, and there's no timeline for the review.

Check out the Executive Action Tracker here .

We Can't Do This Without You

Today I Learned

* Useful rundown of what's in the House rescue bill
.
(Vox)

* Lawmakers are already looking ahead to the second reconciliation bill
,
and trying to determine its contours. (Washington Post)

* Some troubling pre-compromising

on an immigration package that was already going to be tough to pass.
(New York Times)

* Biden allies mount an outside advocacy group
.
(Wall Street Journal)

* Joe Manchin setting a marker

that whatever the Senate parliamentarian decides will set the
reconciliation boundaries. (CNN)

* The IRS is drastically underfunded
.
(Politico)

* 74 members of Congress ask Biden for an immediate filling of vacancies

on the Postal Service Board of Governors, so they can dispatch Louis
DeJoy. (House letter)

* The "Rahm Emanuel might get a job
"
talk will never end. (Bloomberg)

* How FERC can play a role

in climate mitigation. (Grist)

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