Democrats and Republicans have failed to reach an agreement to extend desperately needed relief and benefits for millions of Americans. For twenty weeks in a row, more than a million additional people have newly filed for unemployment benefits. Extra benefits from the federal government have kept the country from sliding into an all-out second Great Depression. But now they’ve lapsed, and election-year posturing has trumped effective negotiations.
Democrats and Republicans had months to negotiate a new stimulus package. Instead, after House Democrats passed a $3 trillion “Heroes” relief package in May, Senate Republicans refused to discuss it, Donald Trump weighed in that he was in “no rush” to sign another stimulus bill, and the Democratic leadership responded with no fight at all.
Unemployment benefits and eviction moratoriums lapsed last Friday and millions are being pushed off a financial cliff. People like Kelyn Yanez who used to clean homes and wait tables, lost both jobs in March and is now facing, along with her three children, eviction. “Right now, I have nothing,” she said. Or those like Daniel Vought, whose unemployment benefits, mired in a bureaucratic black hole for months, never arrived to begin with. He found himself with $10 in his pocket and no place to go. There are countless more untold stories as millions of people await the results of congressional theatrics and dysfunction. “Not knowing when and if they will extend our benefits,” wrote one person on reddit, “is cruel and inhumane and like some of you have said, I’m beginning to think that neither party cares but time will tell.”
Yet last Friday, senators (most of whom are millionaires) left town for the weekend anyway. They returned this week after feeling the wrath of their electorate at home. Republican lawmakers have come around to the position that they need to get something done fast. “How do you think it looks for us to be back home when this is unresolved?” Sen. John Cornyn (up for reelection in November) told the Washington Post. “This is the most important thing we need to be doing.”
With public uproar lighting a fire under the Congress, rushed negotiations took place between Democratic leaders (and self-professed master negotiators) Nancy Pelosi and Chuck Schumer, and Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows. Certain popular measures, like another $1200 “stimulus check,” seemed bound to pass. But it also seems unlikely that Republicans will budge anywhere near where they need to. As millionaire robot Mnuchin said: “We’re not doing anything close to $3.4 trillion. That’s just ridiculous.”
In what was, until today, the best case scenario, where a deal is reached and signed into law by next week, most states would still have taken another two weeks to implement it, meaning relief would not have come for a full month, since the benefits expired on Friday. A month is long enough to inflict deep damage to families and individuals, and incidentally, to the economy as well. Now, with talks stalled, it appears even that timeline is too optimistic.
What’s At Stake?
COVID-19 cases are spreading like wildfire across the country, and deep signs of economic disorder have punctured all but the most delusional aspirations for a quick recovery. So much so that Bank of America executives recently predicted we would be in a recession “deep into 2022.” Record unemployment rates have barely (and likely temporarily) budged, US companies are “losing hope,” and as that mouthpiece of the American capitalist class, the Wall Street Journal, admits: “Everybody Is Struggling.”
Given the unprecedented scale of the crisis — cratering demand, shocks to supply chains, the complete upending of economic activity, and now a downward spiral of job losses to diminishing consumer spending to more closures and more unemployment — requires an equally unprecedented response. The first four stimulus bills have so far succeeded in heading off another Great Depression, but we are still at the outset of this nightmare.
- Up until Friday, the federal government had supplemented unemployment benefits with an extra $600 per week. Democrats want to keep the enhanced benefits in place through January, Republicans want to extend till September but at $200 per week.
- Republicans are proposing an additional $200 billion in lending programs for small businesses. Democrats omitted an extra allocation of small business loans, though both parties agree on extending the program through December.
- The Democrats are proposing almost $1 trillion in aid to state and local governments to offset massive budget shortfalls, while Republicans are limiting state funding to education, and specifically to school districts that reopen.
- Democrats also propose more than $700 billion for social programs like hazard pay, housing assistance, and food assistance as compared to $18 billion from the Republicans.
- Though both parties agree on a second round of stimulus checks, Democrats have raised the amount allocated to dependents, and, significantly, have included undocumented immigrants as recipients.
- Republicans also saw fit to throw in an extra $30 billion for the Pentagon, and a new $1.75 billion FBI headquarters.
- Lastly the Republicans want to lace the stimulus bill with liability shields for hospitals, schools, businesses and government agencies. Mitch McConnell quipped: “Nobody should have to face an epidemic of lawsuits on the heels of the pandemic that we already have related to the coronavirus.” Democrats, meanwhile, are content to force liability shields through state budgets.
The Good, the Bad, and the Ugly
To assess the current stimulus proposals, it’s useful to look first at the stimulus spending undertaken thus far. The first four bills provided some financial cushion in the face of a body blow to working-class living standards. They were historic in the sense that they responded to an unprecedented crisis with some speed and force, and with an uncharacteristic (for the neoliberal US) amount of social welfare.
But the good that came out of them was paired with a big heap of no-strings-attached corporate slush funds, a few insidious items sown into the details, and some troubling precedents. Analyzed in conjunction with the actions of the Federal Reserve it’s clear that the bad and the ugly are not just incidental by-products, but are means to preserve and advance class inequality.
Four rounds of stimulus bills in March and April — including the largest and most well-known among them, the CARES Act — together dedicated almost $3 trillion dollars in stimulus spending to keep the economy from imploding. They broke down like this:
- March 6: Coronavirus Preparedness and Response Supplemental Appropriations Act ($8.3 billion) dedicates funds primarily for programs that develop and procure vaccines and other medical supplies, and gives support to public health agencies and organizations.
- March 18: Families First Coronavirus Response Act (estimated $192 billion) provides funds for coronavirus testing, paid leave for workers, and increased funding for food stamps.
- March 27: Coronavirus Aid, Relief, and Economic Security (CARES) Act ($2.2 trillion) is the broadest stimulus bill, covering individual, state, and corporate-level supports.
- April 24: Paycheck Protection Program and Health Care Enhancement Act ($484 billion) replenishes funding to the CARES Act’s Paycheck Protection Program and also provides more funding for hospitals and testing for COVID-19.
The most well-known aspects of the stimulus were the most useful: stimulus checks and expanded unemployment benefits. For those whose benefits did not get mired in red-tape, the extra financial support made the difference between staying afloat or falling into poverty. The economy was kept from the cascading effects of unemployment and cratering demand, allowing laid off workers to continue to pay rent and bills.
Still, these items made up only about a fifth of the funding allocations, while almost half of the funds went to bailing out large and small businesses. A whopping $58 billion was doled out to the airline industry (which has, over the past decade, spent 96 percent of its cash flow on stock buybacks to increase dividends to shareholders rather than maintaining profitability, let alone their workers’ living standards).
The rest (just over $500 billion) provided significant but insufficient support for public services, as well as state and local spending on a few critical line items like education and COVID testing.
Apart from the well-documented slush funds built into the stimulus spending, among the primary limitations of the bills — and the one we are currently paying for — is their short-term lifeline. Rather than being written in such a way that benefits are kept in place until unemployment rates drop, or some other clear marker of a turnaround, the stimulus packages were conceived as a gamble that the economy would correct itself once the worst of the pandemic passed. The hard deadlines drawn on the bills instead leave us vulnerable to the whims of Capitol Hill every few months.
Then there are the ugly details written into the fine print. Employers, for instance, are required to provide family medical leave and paid sick leave, but only at companies that have fewer than 500 workers (and those with less than fifty can qualify for exceptions). In a sick twist, the workers that need these protections most — health care workers (including non-clinical workers at health care facilities) — are not entitled to these benefits. Another hidden gem, the Families First Coronavirus Response Act included a liability waiver for manufacturers and distributors of protective gear and drugs.
Lastly, the Paycheck Protection Program has at best been a “Band-Aid on a bullet wound” for struggling small businesses, and at worst an opaque and frequently corrupt bureaucratic mess. While in Europe universal payroll aid — paid directly by the government — allowed workers to retain as much as 80 percent of their salaries, in the United States the program was centralized through the Small Business Association and administered by private banks, who collected billions in fees. These banks, in turn, are being bailed out by the Federal Reserve.
What About The Fed?
Conventional wisdom assumes that the actions of Congress and the Treasury are fiscal (tax and spending) and those of the Federal Reserve are monetary (money and interest rate policies), and never the twain shall meet.
This is true to some extent, but besides significant areas of overlap, a combined accounting of the two gives a fuller picture of economic policy and allocation of resources. In the midst of a global pandemic, governmental action is helping to accelerate income inequality and the corporate concentration of wealth.
The actions of the Fed since the start of the crisis have been as Eric Levitz put it “impressive and alarming.” While Congress debates the finer details of every line item of the stimulus bill, and millionaire Mnuchin scoffs at the possibility of a $3 trillion package, the Federal Reserve is meanwhile pouring out trillions of dollars itself without any public discussion, oversight, or democratic accountability. How many people even follow the string of alphabet soup facilities?
The Federal Reserve has signaled its willingness to use about $4 trillion (most estimates assume they’ll use closer to $6 trillion) to prop up financial markets and keep credit from freezing up. They’ve set rock-bottom interest rates, hacked away at bank regulations, and embarked on multitrillion-dollar corporate bond purchases. Now they are even lending directly to corporations, a previously unheard of policy. The Washington Post reported: “The Federal Reserve is probably doing as much (or more) to prop up the economy than Congress is, but its contributions are harder to measure. Several Fed interventions have no stated limit, and none of them is government spending in the traditional sense.”
If we add in the facilities set up by the Fed (which go almost exclusively to banks and corporations) at the most conservative estimate of $4 trillion, the breakdown in allocations looks more like this.
It’s not a simple itemization because the money is not coming out of the same pot. Congressional spending will appear in the national debt; the Fed’s on its own balance sheet. But the overall spending priorities of the government are clear.
Of course it’s true that corporations need to borrow in order to function (especially during a crisis) and that a frozen financial market would spell disaster. But pumping financial markets full of money both creates bubbles and exacerbates income inequality. Consider the difference in the experiences of Elon Musk, whose wealth has increased by tens of billions of dollars since the start of the pandemic due to soaring stock prices, and Tesla workers who have been fired for staying home due to health concerns.
Most significantly, the Federal Reserve, by lending directly to corporations, has simultaneously sidestepped congressional debate and put taxpayers on the hook for the risk of corporate defaults. As Bloomberg columnist Narayana Kocherlakota, a former president of the Minneapolis Fed, argued:
The Federal Reserve announced two entirely novel interventions in the corporate debt market: the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF). If used appropriately, the latter is a smart and defensible use of central bank power to stabilize liquidity conditions in a key financial market. The former is an indefensible attempt by the Fed and the administration to sidestep Congress… The Fed shouldn’t get in the business of lending directly to corporations… its direct loans are simply a way to assume default risk without receiving a compensatory return.
Finally, as with the stimulus bills, there are plenty of devils in the details. In this case, with little public attention and zero democratic accountability, particularly unpopular bailouts, like that of the oil industry, were unceremoniously snuck in. As a report from the Center for American Progress noted: “As of July 16, the Fed had purchased $11.5 billion in corporate debt and financial products…Not surprisingly, the limited disclosures available so far reflect that while these programs are open to companies from all sectors, the energy sector is disproportionately represented in the purchases.”
Extend the Good, Regulate the Bad, Kill the Ugly
As Congress debates the next stimulus, a few things are clear. We have to fight like hell to make sure enhanced unemployment benefits are extended at their current levels as quickly as possible. The $1200 “stimulus check,” while significantly less than what socialists and progressives have called for, is still an important (and at this point uncontroversial) step in the right direction. And money allocated for housing assistance is absolutely critical in the face of likely spikes in evictions and homelessness.
Just as important, but receiving much less attention, is the question of state and local aid. The previous bills included very little of it. The Democrats’ HEROES Act thankfully (for now) includes over $1 trillion to state and local governments. Presently, the Republicans are still offering crumbs, and it’s likely an area that Democrats will feel safer to concede on, since it is much less on the public radar.
But states are facing massive budget shortfalls and are not allowed to run deficits. This is translating into increased budget cuts and austerity, and will only get worse. Ironically health care and education, the services we need most, are first on the chopping block. It could also mean mass layoffs in the public sector, pointing to larger struggles ahead.
The slush funds need to be reined in, both in scope and in content. It’s a crime that so few strings are attached to corporate bailouts. As for the ugly details, we need to push back completely on perverse liability shields and greater Pentagon spending.
These demands are defensive and they are necessary. The fate of millions of people will be impacted by them. Yet this is also a good time for the Left to go on the offense to address the scale of the crisis. As Doug Henwood recently argued, with the right discredited and mainstream Democrats out of ideas, “now is not the time to be shy!” Unfortunately, this crisis isn’t going anywhere anytime soon. As it progresses, the Left can cohere around a radical economic agenda.
A lot of important work has been done around articulating the need for a Green Stimulus. Now is a good time to talk about nationalizing the energy sector. After all, at current prices, the entire American oil industry could be bought outright, nationalized and phased out. Now is a good time to talk about a jobs guarantee — especially in the face of a pandemic in which it would be good for people to be paid to stay home. And it is also a good time to talk about universal childcare and paid parental leave. The virus has taught us something that parents have long understood: parenting is a job, and it sometimes cannot be done concurrently with another job.
We will also need more discussion about the Fed. We’re unfortunately a long ways away from nationalizing and centralizing banking and finance. But it would be a step in the right direction for the Left to articulate a clearer understanding of what the Fed is doing, and what we should demand.
Lastly, this is an economic crisis born of a public health disaster. In the United States, containment completely failed, and vaccines, though fast-tracked, could still take years to be distributed and utilized widely enough to control the virus. Ultimately this crisis requires a public health response, and with party leaderships on both sides of the aisle unconditionally betrothed to for-private health care, we need to ramp up the fight for Medicare For All, nationalizing the pharmaceutical industry, and providing ample funding for hospitals, staffing, and medical equipment.
The Republicans are homicidal maniacs, refusing to doll out relief while coercing schools to reopen. The Democrats have cleared a low bar by doing better. A stronger left can force them to do much more.