U.S. Stocks Tumble With Stimulus Details Uncertain: Markets Wrap

Financial markets spasmed, sending U.S. stocks down to levels in December 2018 and Bloomberg's dollar index to a record, as the economic fallout from the pandemic outpaced the massive response from governments and central banks.

The S&P 500 fell more than 7%, triggering a 15-minute pause, with stocks adding to losses when trading resumed. The next halt would occur at a 13% decline. The Dow Jones Industrial Average wiped out all the gains logged since Donald Trump's inauguration, dropping as much as 10%, with investors craving more government spending to offset the impact from the virus.

Bonds tumbled around the world a day after Treasuries notched biggest yield jump since 1982, while municipal bonds extended the deepest rout since 1987 as markets braced for the potential flood of spending. Oil dropped to an 18-year low. The dollar strengthened a seventh straight day, while the pound hit its lowest level against the greenback since 1985.

Trump offered few details at a press briefing on the details his Treasury secretary is discussing with Congress. The Federal Reserve dusted off crisis-era programs to stabilize financial markets.

Governments have pledged or are considering massive fiscal support to offset the economic shock from the pandemic, with the Trump administration moving toward a big package, but the virus continues to spread at a pace that is forcing massive shutdowns across the globe.

"The missing fundamental ingredient for a sustainable recovery in risk appetite is some evidence that the growth of global Covid-19 infection rates is peaking," said Paul O'Connor, head of multi-asset at Janus Henderson Investors. "Clearly, we are not there yet."

The planned U.S. stimulus could amount to $1.2 trillion, aiming to stave off the worst impact of a crisis that already looks set to plunge many of the world's economies into recession. Meantime, the Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets. Those responses came after stresses appeared in the short-term funding markets.

"I don't think we're out of the woods yet in terms of liquidity," Mark Konyn, chief investment officer at AIA Group in Hong Kong, told Bloomberg TV. "It's a question of when the fiscal measures will have the most efficacy."

In Germany, Angela Merkel said the government will not rule out joint European Union debt issuance to help contain the impact.

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Elsewhere, Bloomberg's industrial-metals index dropped for a third day, with copper, nickel and aluminum among the biggest losers. Gold resumed losses as traders sold the metal to cover margin calls in other markets.

These are the main moves in markets:

Stocks

The S&P 500 Index fell 8.1% to 2,326 as of 1:35 p.m. New York time.

The Dow Jones Industrial Average decreased 8.6% to 19,383, the lowest in more than three years.

The Nasdaq Composite Index dipped 7% to 6,793.

The MSCI All-Country World Index declined 7% to the lowest in more than three years.

Currencies

The Bloomberg Dollar Spot Index gained 2.1%, hitting the highest in more than three years with its seventh straight advance and the largest rise in almost four years.

The Japanese yen depreciated 0.7% to 108.43 per dollar, the weakest in more than two weeks.

The euro declined 1.5% to $1.0836, the weakest in more than three weeks.

The British pound decreased 4.1% to $1.1561, reaching the weakest on record with its seventh consecutive decline.

Bonds

The yield on 10-year Treasuries rose seven basis point to 1.15%.

Britain's 10-year yield increased 20 basis points to 0.756%, the highest in almost 10 weeks on the biggest climb in more than six years.

Germany's 10-year yield advanced 16 basis points to -0.27%, hitting the highest in eight weeks with its seventh straight advance.

Ireland's 10-year yield gained 15 basis points to 0.499%, reaching the highest in about 10 months on its fifth consecutive advance.

Commodities

West Texas Intermediate crude fell 13.2% to $23.39 a barrel, the lowest on record with the largest fall in more than a week.

Gold depreciated 1.8% to $1,501.13 an ounce, the weakest in 12 weeks.

--

John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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Tim Taylor: Federal Debt in a Time of Pandemic [feedly]

Federal Debt in a Time of Pandemic
http://conversableeconomist.blogspot.com/2020/03/federal-debt-in-time-of-pandemic.html

In the midst of 1,001 ways that the government could increase spending or reduce taxes to blunt the immediate economic effect of the coronavirus pandemic, spare a moment for the existing level and trend of federal debt. The Congressional Budget Office has issued "Federal Debt:A Primer" (March 2020).

Here's the ratio of federal debt held by the public to GDP, going back to 1790. The "held by the public" means that when one part of the federal government loans money to another part of the federal government--like when the Social Security Trust Fund invests in US Treasury debt--this doesn't require the federal government to borrow from outside the government, and thus isn't counted in the total.

The historical spikes in the debt/GDP ratio are named easily enough. You can point out the rising levels of debt for the Revolutionary War, the Civil War, World War I, the Great Depression, World War II, the tax cuts and defense build-up of the 1980s, and the Great Recession. The current debt/GDP ratio is second-highest in US history, and trending toward highest.  

Much of the report focuses on the specific financial instruments that the Treasury uses to borrow:  short-term Treasury "bills" that are repaid in periods from one month up to one year; Treasury "notes" that are repaid over periods from two to 10 years; long-term Treasury "bond" repaid over 30 years; Treasury Inflation-Protected Securities (TIPS) where the principal value of the borrowing is adjusted for inflation twice a year; and Floating Rate Notes (FRNs) where the interest rate adjusts up and down based on the interest rate for 13-week Treasury bills. The report notes:

Since the late 1990s, Treasury notes typically have accounted for more than half of all outstanding marketable securities, peaking at 67 percent in 2013 . Treasury bills made up between 20 percent and 30 percent of marketable debt until 2010, when the Treasury began to issue fewer short-term instruments. Those securities declined to just 11 percent of marketable debt in 2015 before rising back to 15 percent in 2019. By the end of 2019, bonds accounted for 14 percent of the Treasury's outstanding marketable debt, in line with their typical share since the end of the 1990s. TIPS were first issued in 1997 and—after an initial growth phase through 2004—have represented between 7 percent and 10 percent of outstanding marketable debt since then. By the end of 2019, the share of debt taken up by FRNs, which were introduced in 2014, was just 3 percent. ...

Offerings that best meet investors' needs typically will lower the Treasury's overall cost of borrowing. Short-term instruments generally have lower interest costs, but they expose the government to the risk of paying higher interest rates when it refinances the issues. Conversely, long-term securities typically involve higher rates but provide more certainty about the future costs of interest payments because they require less frequent financing.

Putting all of these together, the average time to maturity for federal borrowing hasn't changed much in the last two decades: as the figure shows, it got a little shorter during the Great Recession, but now it's back to roughly the same level as 2001.

How much of the Treasury borrowing has come from domestic sources and how much from foreign sources? About half comes from abroad, much of that from China and Japan.

One interesting point I had not considered before is the how higher student debt has played a role in raising federal debt. The CBO explains:

In 2011, the federal student loan program stopped providing loan guarantees to banks and instead began lending to borrowers directly, with the result that the magnitude of federal holdings of financial assets began to increase markedly. In total, at the end of 2019, the government's financial assets—loans as well as cash—had an estimated value of nearly $1.8 trillion. Subtracting that amount from the $16.8 trillion in debt held by the public leaves about $15.0 trillion in debt held by the public net of financial assets. Debt held by the public at the end of 2019 was equal to about 79 percent of gross domestic
product; debt net of financial assets was about 71 percent of GDP.

The CBO report is focused on laying out trends and patterns, not on ringing the gong about possible dangers. However, there's a brief discussion of risks and effects at the end of the report.

1) "If federal debt as a percentage of GDP continues to rise at the pace of CBO's current-law projections, the economy would be affected in two significant ways: Growth in the nation's debt would dampen economic output over time, and higher interest costs would increase payments to foreign debt holders and thus reduce the income of U.S. households by rising amounts."

2) "The increases in debt that CBO projects would also pose significant risks to the fiscal and economic outlook, although those risks are not currently apparent in financial markets. ... High and rising federal debt increases the likelihood of a fiscal crisis because it erodes investors' confidence in the government's fiscal position and could result in a sharp reduction in their valuation of Treasury
securities, which would drive up interest rates on federal debt because investors would demand higher yields to purchase Treasury securities. However, the debt-to-GDP ratio has no identifiable tipping point because the risk of a crisis is influenced by other factors, including the long-term budget outlook, near-term borrowing needs, and the health of the economy. Moreover, because the United States currently benefits from the dollar's position as the world's reserve currency and because the federal government borrows in dollars, a financial crisis—similar to those that befell Argentina, Greece, or Ireland—is less likely in the United States. Although no one can predict whether or when a fiscal crisis might occur or how it would unfold, the risk is almost certainly increased by high and rising federal debt."

3) "Not all effects of the projected path of debt are negative, however. In addition to allowing policymakers to maintain current-law spending and revenue policies, that path would cause underlying interest rates to be higher than they otherwise would be, giving the Federal Reserve more flexibility in implementing monetary policy."

4) At the current moment, I'd emphasize one other reason mentioned briefly: "In addition, high debt might cause policymakers to feel constrained from implementing deficit-financed fiscal policy to respond to unforeseen events ..."  The enormous and fundamentally healthy US economy can take on more debt in response to the coronavirus. But it's just a fact that if you have already loaded up on borrowing, and your future tax and spending plans already have you locked into pattern of additional borrowing, then your flexibility is lower. The idea of taking steps to hold down the rise in federal borrowing is never going to be  popular. It feels as if it's all discipline and no benefit--right up to when a situation arises when you would like to be able to borrow with confidence in an unconstrained way to meet the challenge of a pandemic. 

 -- via my feedly newsfeed

The coronavirus pandemic requires state and local policymakers to act, in addition to demanding a strong federal response [feedly]

The coronavirus pandemic requires state and local policymakers to act, in addition to demanding a strong federal response
https://www.epi.org/blog/the-coronavirus-pandemic-requires-state-and-local-policymakers-to-act-in-addition-to-demanding-a-strong-federal-response/

Federal lawmakers seem poised to enact legislation that would help combat some of the public health and economic dangers posed by the COVID-19 pandemic. However, this initial legislation is not sufficient to fully address the problems created by the crisis, and even with additional federal action, there are still steps that state and local policymakers must take—both to slow the spread of the virus and mitigate the economic toll that the crisis will take on state and local economies. Here are some of the critical steps that state and local officials should consider, including many good ideas that are circulating and some of the positive steps already being taken:

Protect public health

1. The foremost action for state policymakers and community leaders is to do everything they can to slow the spread of the virus. Though it will be disruptive in the short-run, leaders need to strongly encourage social distancing. In many communities, this may require closing schools, libraries, and other community centers; cancelling events; requiring telework where possible; ordering retail shops, restaurants, and bars to close or shift to delivery service only; and setting strict limits on public gatherings.
2. Expand access to testing and treatment by bolstering state and local healthcare systems with emergency funding and, to the extent possible, removing any financial barriers for people seeking care. Good examples can be seen in Washington, where Governor Inslee used his emergency powers to require state healthcare insurers to waive all copays and coinsurance for all coronavirus testing. Similar actions have been taken in California, Colorado, Massachusetts, New Jersey, and New York. But states should commit to not only covering the cost of coronavirus testing, but treatment as well. Federal lawmakers are considering a 6.2% increase in the share of Medicaid costs covered by the federal government to help relieve the strain on state budgets caused by the virus. Such an increase should hopefully be enough to cover the vast majority of COVID-19-related care.
3. Expand healthcare coverage through Medicaid and the exchanges, and protect coverage for those with employer-based plans. As the Century Foundation discusses, states should request emergency waivers to quickly expand eligibility for Medicaid, especially in those states that did not adopt the Affordable Care Act (ACA) expansion. States that run their own health insurance exchanges can also declare the COVID-19 outbreak as a special enrollment period that allows people to sign up for coverage outside the standard open enrollment period. Governors should also use emergency authority to require employers to maintain insurance coverage for employees whose work hours fall below the ACA's 30-hour threshold for employer provision of insurance.
4. Enact emergency paid sick leave programs that cover all workers in businesses of all sizes in those states where such systems do not already exist. The federal COVID-19 response bill that is moving through Congress takes an important step in the right direction, but does not provide the comprehensive access to paid leave that this moment demands (and should really be available in non-pandemic times anyway.) Giving workers the ability to take time off when they or a family member are sick protects public health. It eliminates the need to work when they're ill or must provide care for a sick family member, thereby reducing the risk of disease transmission. Studies have shown that paid leave programs measurably reduce virus transmission. In states that have paid leave programs, lawmakers should mandate that businesses provide at least 14 days of leave, regardless of workers' accrued leave time.
5. Create clear, accessible systems for communicating information about the virus and resources for the public. This can include hotlines and online resource pages. It may also require larger public education efforts—public service announcements, social media campaigns—and resources to expand online access for low-income communities and make content available in multiple languages.

Mitigate economic harm for workers and businesses

1. Bolster and reform state unemployment insurance (UI) systems to quickly protect workers who lose their jobs, and those whose hours are reduced. As the National Employment Law Project points out, UI systems will need increased funding to support additional demand even without greatly needed reforms. Current UI programs only provide support to workers who have lost a job and are actively seeking a new one. To protect working families' well-being and help prevent deeper economic decline, states should immediately expand UI protections to workers who have been idled, waive job-seeking requirements, and eliminate all waiting periods for delivery of benefits (as some states, such as Californiaand Ohio, have already done.)
2. Expand "work sharing" programs that allow workers who lose hours, but still remain employed, to receive compensation from state UI systems in order to offset their lost wages. A number of states already have such programs and state agencies should broadly publicize them as they can offer a straightforward alternative for employers who might otherwise be considering layoffs.
3. Ensure that healthcare professionals and first responders are protected from harm, both physically and economically, as a result of their response to the pandemic. States will likely need to allocate additional funding to municipalities so that firefighters and paramedics have all the protective gear they need to respond to emergency calls safely and effectively. They also need to financially support first responders who may be exposed to the virus in the line of duty. For example, in Washington, the state is allowing health care workers and first responders to receive benefits from the state workers' compensation system if they're quarantined due to work exposure (even if they, themselves, are not sick.) In Maryland, the state is providing childcare for personnel responding to the outbreak. Though these measures may not be possible in all states, policymakers should investigate how existing state systems can be used to provide economic support for impacted workers.
4. Expand workers' access to child care and provide additional support to child care providers who are likely seeing increased demand. As the Center for Law and Social Policy explains, current federal law allows states to make adjustments to their state child care programs that would reduce the strain on children, families, and child care providers. These include adjusting state payments to providers based upon enrollment rather than attendance; waiving eligibility requirements for children based upon attendance and temporarily suspending family eligibility redeterminations; and using additional state or federal funding to waive co-pays, adjust reimbursement rates, and supply centers with any needed products to ensure safety and hygiene.
5. Communicate clearly to workers who may have been misclassified as independent contractors that they may apply for unemployment insurance and the state—not their employer—will make the ultimate decision regarding eligibility. Make sure that economic support programs are available to genuine independent contractors; for example, Massachusetts' paid family and medical leave program covers independent contractors. States should look for other ways to ensure nontraditional workers can access programs being made available to standard W-2 employees.
6. Consider providing special lending programs and allowing deferralof certain tax payments to help small businesses cope with any sharp declines in revenue as consumers are forced to stay home. Declaring a state of emergency may also allow businesses to tap into the Small Business Administration's disaster loan assistance program. States should also be sure to make the process for receiving state funding for "worksharing" and any other "advanced UI" programs as simple and accessible as possible.

Protect vulnerable households and communities

1. States should look for ways to expand direct income support programs for people and families in need. They should increase benefit amounts for the Supplemental Nutritional Assistance Program (SNAP), Temporary Assistance for Needy Families(TANF), and the Special Supplemental Nutrition for Women, Infants, and Children (WIC) while also relaxing eligibility requirements, especially counterproductive work requirements (if such requirements are not already suspended in any federal response legislation.) Local governments and school districts should try to ensure families with children who depend on free or reduced school lunches can still receive a meal.
2. Lawmakers should provide emergency funding to social service providers—such as food banks, homeless shelters, and senior centers—that can support increased services to counter greater economic distress, and implement better disease-fighting measures (e.g., hand sanitizer, regular cleaning, face masks). This should also include increased resources for medical teams and health workers serving jails, prisons, and halfway houses.
3. Governors and local executives should use their emergency powers to protect vulnerable households that might be put at further risk from an economic downturn. They should adopt moratoriums on evictions, halt all utility shut-offs including internet and cell service, and suspend collection on medical and court debt until the crisis has subsided.

Address additional equity concerns while also mitigating the spread of the virus

1. Many of the responses discussed above must also be further targeted to address the needs of workers and communities at the frontlines of the crisis. For example, public education and access to care must combat racialized discrimination and stigmatization of specific communities, such as LGBTQ communities and Asian American and Pacific Islander communities. Xenophobia has led to decreased business among Asian American small businesses and restaurants in major cities. Federal resources for small business are available in the form of low-interest disaster assistance loans and some cities are also making additional short-term emergency loans available as well. Communications and public education about the virus should accurately describe how the virus spreads and protect people of Asian descent from harassment and discrimination
2. People who are incarcerated in jails, prisons, and detention centers face greater health risks from COVID-19. State policymakers should ensure all people have access to necessary screening and quality health care regardless of incarceration or detention. They should also try to reduce the number of people who are incarcerated through monitored release programs, medical furlough, and early parole. Courts should also consider postponing any nonessential proceedings.
3. Ensure that immigrant communities are aware of the public resources available to them, and have access to screening and quality health care without fear of harassment, deportation, or impact on their immigration status. Communities are put at risk if undocumented individuals who fall ill avoid seeking treatment out of fear of immigration consequences. State and local governments should call on the U.S. Department of Homeland Security to suspend immigration enforcement near health care facilities to ensure immigrants get the medical care they need if they become sick.

Strengthen democracy while protecting voter health

1. With the 2020 elections already underway, it is essential that states take action to provide safe means for all eligible voters to exercise their right to vote. State policymakers should adopt voting options that facilitate social distancing—such as vote by mail programs and no-excuse absentee voting—and measures that reduce crowds at polling locations, such as expanding early voting, adding additional polling sites, and extending voting hours.
2. Finally, the 2020 Census has begun, and the spread of COVID-19 raises concerns both about impact on participation in the Census and the health of census workers. This once a decade count is used to determine the number of seats each state has in the House of Representatives, adjust or redraw congressional and state legislative districts based on population changes, and guide decisions to allocate hundreds of billions of dollars in federal funding to communities for disaster recovery, housing, food assistance, Head Start, and more. In a recent statement, the Census Bureau noted that, if needed, it would adjust the July 31, 2020 completion deadline to ensure an accurate count. State and local policymakers and public officials can support public education efforts through advertising and encouraging residents to participate by mail, phone, and online.

VISIT WEBSITE
 -- via my feedly newsfeed

Coronavirus shock will likely claim 3 million jobs by summer: Policy is needed now to curb further losses [feedly]

Coronavirus shock will likely claim 3 million jobs by summer: Policy is needed now to curb further losses
https://www.epi.org/blog/coronavirus-shock-will-likely-claim-3-million-jobs-by-summer/

At this point, a coronavirus recession is inevitable. But the policy response can determine how deep it is, how long it lasts, and how rapidly the economy bounces back from it.

If this response includes enough fiscal stimulus that is well-targeted and sustained so long as the economy remains weak, job loss will be substantially reduced relative to any scenario where policymakers drag their feet. Even with moderate fiscal stimulus, we're likely to see 3 million jobs lost by summertime. Keeping this number down and allowing any job loss to be quickly recouped after the crisis ends should spur policymakers to act.

Put simply, the federal government needs to finance a much larger part of household consumption in coming months, transfer significant fiscal aid to state governments, and ramp up direct government purchases (particularly on items helpful in fighting the epidemic).

Forecasting the number of jobs lost

Currently, the closely watched Goldman Sachs economic outlook is forecasting 0% growth for the first quarter of this year and −5% contraction (expressed as an annualized rate) for the second quarter. Given the cratering of demand already evident in data from restaurant reservations and airlines and accommodations, this may already be an overly optimistic forecast, but we'll stick with it for now. This forecast implies that the economy will shrink by roughly 1.25% from January to June (2.5% at annualized rates for half a year). Given that productivity growth (or output growth divided by hours of work) has been rising at roughly 1.25% in recent years, output growth of 0.75% is needed just to keep job growth from falling below zero in these months. (The intuition is that if output growth was zero for an entire year, and the amount of output produced in a given hour rose by 1.25%, then 1.25% fewer hours of work would be needed in the economy.)

If output growth actually contracts by 1.25% between January and June, this implies a loss in employment of roughly 2% (1.25% reduction from output contraction and 0.75% reduction from productivity growth), or more than 3 million jobs lost. If the actual number of jobs lost by the end of the summer is anywhere near this large, it will represent a pace of job loss comparable to the very worst months of the Great Recession. The unique nature of a coronavirus-driven recession means that the numbers of job losses could diverge substantially from these established, mechanical models of economic forecasts. But this is not cause for complacency—some forecasts for growth in coming quarters are even a bit worse than the Goldman Sachs projection.

One argument against this kind of mechanical calculation is that output losses are often substantially greater than job losses in recessions. In typical recessions, the first wave of job losses tends to include substantial losses in manufacturing jobs. However, a coronavirus recession is much more laser-targeted at low-wage, low-productivity, and low-hours jobs in service industries. This should increase job loss relative to output loss. Given that workers in these sectors are likely to have very little savings to tide them over the economy's downturn, the ripple effect from the first round of job losses are likely to be far greater.

A big and fast fiscal stimulus is needed to stem job losses and boost recovery

Policy will play a key role in determining the ultimate number of Americans who lose their jobs due to this outbreak. Goldman forecasts a return to growth in the 3rd quarter, but this forecast is largely driven by their assumption that a fiscal stimulus of 1-2% of total gross domestic product (GDP) appears—between $200 and $400 billion. Without at least as much fiscal stimulus as this, output and job losses will be worse. Further, if businesses expect fiscal stimulus to be quick and effective, they may be more willing to "hoard labor" during the downturn—cutting work hours back or even putting workers on temporary rather than permanent layoffs. This labor hoarding would help cushion the shock during the recession and could boost the speed of recovery.

After hopefully passing a second round of coronavirus response early this week, Congress must get right back to work passing a macroeconomic stimulus package, one large enough and well-targeted enough to fill in the substantial hole in demand that will be left by the coronavirus economic shock.

Household consumption in coming months will crater as people engage in "social distancing," but the depth of the decline will depend in part on the fiscal response. Housing, utilities, food, health care, and other consumption possibilities unaffected by social distancing constitute well over a half of all consumption spending. And some of the decline in consumption spending necessitated by social distancing will be substituted by other types of consumption spending: People will spend less in restaurants and more on groceries in coming weeks, for example.

When households' incomes fall due to job loss during recessions, their spending on items commonly considered necessities—like food and housing—often falls in turn. So even during the period when economic activity in many sectors is being intentionally suppressed to halt the spread of the virus, there is the opportunity to provide households some income support to keep other types of consumption spending from falling.

Further, having the federal government finance consumption during the downturn will allow households to emerge from the recession with much healthier balance sheets than otherwise, and this can help ensure a more rapid bounce back of economic activity. After maximizing how much income support can be delivered through existing social insurance and safety net programs (including expansions to unemployment insurance, food stamps, and Medicaid, for example), another good idea would be sending out checks of $1,000 for every American adult and $500 for every child. The first checks could arrive roughly a month after a bill was passed and signed by the president. The checks should then continue monthly until economic conditions allow for them to start winding down.

Besides preserving households' balance sheets during the downturn, the economic response should preserve state governments' fiscal capacity as well. State governments will bear a large share of the burden for providing the public health response, and their spending is often quite pro-cyclical due to balanced budget rules—meaning that state spending often collapses just as the economy needs it to be strong. The federal government should take on all state Medicaid spending for the next year to give these governments the capacity to spend as freely as public health demands, and to keep these governments from turning into the anti-stimulus machines they have tended to in past recessions.

Additionally, there should be lots of scope for ramping up direct government spending in coming months. The federal government should significantly increase their purchase of medical equipment for use in the current (and potential future) pandemics. Federally financed field hospitals and testing clinics could greatly aid the medical response and also support aggregate demand.

After the crisis

We should reiterate again that all of this stimulus should come with conditions-based triggers. We have no real idea how quickly the economy might recover from the coronavirus shock, even with an optimal policy response. We shouldn't guess. Instead, we should make sure the economy gets the support it needs so long as spending remains weak.

Finally, once the current crisis has passed, we will need a thorough diagnosis of just why the U.S. economy and society was so fragile to this shock. The already-persuasive case that public investment and social insurance in the United States should be much stronger has been made even more convincing by how unprepared our economy and public health apparatus was for this shock.

 -- via my feedly newsfeed

Sherry Linkon: Class and the Challenge of COVID-19 [feedly]

Class and the Challenge of COVID-19
https://workingclassstudies.wordpress.com/2020/03/16/class-and-the-challenge-of-covid-19/

COVID-19, the coronavirus that is spreading across the world, is wreaking havoc on working people and their families.  Weeks after it burst onto the world scene, the end of this deadly threat is still not in sight.  Although it is clear that its death toll will not begin to approximate that of the lethal 1918-19 worldwide Spanish Influenzaepidemic, early indications are that COVID-19 could end up inflicting even more economic and political damage than that earlier pandemic.  Its impact is likely to reveal with deeper clarity than we have seen in a long time the class lines that divide our society and the true costs of decades of deepening inequality.

There is no escaping the class dimension of the COVID-19 outbreak, for working people are most likely to be affected by both the virus and efforts to contain its spread.  The way they earn their livings necessarily exposes many workers to the risk of contracting the disease.  Some—such as nurses and homecare workers—put themselves at risk on the front lines caring for those who are ill. More than one-third of the 180 workers Life Care Center of Kirkland, Washington, the Seattle-area nursing home where 13 patients died of COVID-19, appear to have contracted the virus.  Other workers—including flight attendants, teachers, and food service workers—work in highly interactive settings where the virus could easily be contracted and transmitted.  If they do contract the virus, working-class people are more likely to die from it because they disproportionately experience one of the underlying medical conditions that makes COVID-19 much deadlier than the flu: heart disease, diabetes, and lung disease.   Moreover, if they feel ill, U.S. workers are more likely to delay seeing a doctor either because they lack health insurance or have high co-pays that discourage them from getting treatment.

Efforts to contain the spread of COVID-19 also have a class dimension.  As the Chinese and Italians found, workplaces provide natural nodes of virus transmission.  In order to restrain the spread of COVID-19, the Chinese government adopted strict quarantine measures that prevented nearly 300 million migrant workers from returning to their jobs after Chinese New Year celebrations, shuttering that nation's manufacturing economy for three weeks.  Italy did the same.  Fiat-Chrysler closed its Italian plants as the virus spread.  Manufacturing and service workers worldwide cannot "telework" as many white collar or professional workers worldwide are now beginning to do.  Hourly workers are far more likely to lose income than salaried workers during the coming weeks of "social distancing."  The relief bill enacted by the House on March 14 guarantees sick leave to only 20 percent of American workers according to the New York Times.  Those still vulnerable include independent contractors or gig workers.  As San Francisco Uber and Lyft driver Steve Gregg explains, he is "not in a position" to stop driving despite suffering mild panic attacks over his fear of infection.  He must work to support his family.  Too many workers like Gregg are still in the position where they must decide between personal financial ruin and accelerating the spread of a deadly pandemic.

In their classic 1929 study Middletown, Helen and Robert Lynd observed that the class lines separating working-class from middle-class neighborhoods in 1920s Muncie, Indiana, were most visible before dawn: working-class homes were first to switch on their lights as their occupants rose to face the workday ahead, which started earlier than the 9 to 5 days of the "business class."  In the weeks ahead, the class lines that divide today's America might become most visible around who must still venture out to work and who can work from the safety of home.

Yet crises can also be opportunities.  For forty years, Americans have been subjected to the drumbeat of libertarian market fundamentalism, the endlessly repeated allegation that government action could only worsen problems.  "The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help," Ronald Reagan famously joked in 1986.  Who's laughing at that line now?

Crises like the current one have a way of exposing the bad faith of unclad emperors and their minions.  If the impacts of just wars, depressions, and epidemics tend to be differentiated along class lines, they also give the lie to ideologies rooted in atavistic individualism.  While they demand expertise and intelligent leadership, crises of this kind cannot be resolved by "dear leaders" who issue dictates.  Both their courses and their consequences transcend the individual; they demand mass mobilization and collective action on behalf of the common good.

Although we have not chosen this moment, it is within our power to decide how to meet it.  We could deepen divisions and set off on the fool's errand of building a "Fortress America," as our wall-obsessed president urges by cynically labeling the contagion a "foreign virus."  Or we could use it as an opportunity to build community, forge solidarity, revive internationalism, and renovate the crumbling edifice of democracy.

Working-class culture and workers' movements have long carried within their DNA the antidote to what now threatens us.  The COVID-19 pandemic reminds us of the timeless truth of the principle once popularized by the Noble and Holy Order of the Knights of Labor, the largest workers' organization in nineteenth-century America: An injury to one must be the concern of all.  If we embrace that time-honored ideal, not only can we reduce the potential lethality of COVID-19, we can begin to build a world more resistant to future plagues.

Joseph A. McCartin

Joseph A. McCartin is Executive Director of the Kalmanovitz Initiative for Labor & the Working Poor at Georgetown University

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Krugman: Step Aside for Powell and Pelosi [feedly]

Step Aside for Powell and Pelosi

Paul Krugman

https://www.nytimes.com/2020/03/16/opinion/pelosi-powell-coronavirus.html
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America's catastrophically inadequate response to the coronavirus can be attributed largely to bad short-term decisions by one man. And I do mean short-term: At every stage, Donald Trump minimized the threat and blocked helpful action because he wanted to look good for the next news cycle or two, ignoring and intimidating anyone who tried to give him good advice.

But here's the thing: Even if he weren't so irresponsibly self-centered, he has denuded the government of people who could be giving good advice in the first place.

Trump disbanded the National Security Council's pandemic response team in 2018, although he now, with his characteristic refusal to accept responsibility for anything, says that he knew nothing about it. And he has in general staffed his administration with obsequious toadies who never tell him anything he doesn't want to hear.

What's now becoming clear is that when it comes to dealing with the economic fallout from Covid-19, the situation may be even worse. There are still some competent professionals holding senior positions at federal health agencies, who could give Trump good advice if he were willing to listen. But serious economic thinking has effectively been banned from this administration, if not the whole Republican Party. As far as I can tell, the Trump team is utterly incapable of formulating a coherent response to the gathering economic crisis.


As a result, there are only two potential loci of intelligent economic policymaking left in Washington. One is the Federal Reserve; the other is the congressional Democratic leadership. At this point, in other words, it's pretty much up to Jay Powell, the Fed chairman, and Nancy Pelosi, speaker of the House; the question is whether Trump and Senate Republicans will let them save the economy.

Powell, of course, slashed interest rates and announced a large asset-buying program on Sunday. He was right to do so. But it's painfully obvious that these moves won't be sufficient, indeed will probably do little to stop the economy's tailspin. Remember, in 2007-8 the Fed cut rates five times as much as it did Sunday, and it still wasn't able to prevent the worst slump since the Great Depression.

In fact, Powell himself basically acknowledged as much, declaring that he and his colleagues "don't have the tools" to reach those most in need of help, and that "fiscal responses are critical."

Fiscal responses, of course, have to come from Congress. True, in another time, under another president, the White House would have played a crucial role in shaping crisis legislation. But last week, as the House drafted and then passed an economic relief bill — one that was helpful, if still clearly inadequate — it was almost entirely a Democratic effort. Democratic staff members put together the key elements of the bill — paid sick leave for many (though not enough) workers, enhanced unemployment benefits, increased federal contributions for Medicaid and more.



True, Steve Mnuchin, the Treasury secretary, negotiated with Pelosi, basically to make the bill a bit worse. But Democrats set the shape of the bill, even as Trump was proposing the grandiose notion of a payroll tax holiday, which has been panned even by conservative economists.

As Greg Mankiw, chairman of the Council of Economic Advisers under George W. Bush, wrote, "a payroll tax cut makes little sense in this circumstance, because it does nothing for those who can't work. … President Trump should shut-the-hell-up."

And while the White House was basically out of the loop, Republican senators have been actively obstructionist, offering no serious proposals of their own but holding up a vote on the House bill, even though that bill passed with overwhelming bipartisan support.

Why are Republicans useless at best in the face of an economic crisis? As I've pointed out before, there are many competent center-right economists, but the G.O.P. — not just Trump, but the whole party — doesn't want their advice. It prefers hacks and propagandists, the people Mankiw famously called "charlatans and cranks," whose only idea is tax cuts. The party truly has nobody left who is capable of putting together a plausible economic rescue package.

The Senate probably will eventually pass Pelosi's bill. But with all signs pointing to a steep economic dive, we need a much bigger stimulus package — perhaps along the lines being developed by Chuck Schumer, the Senate minority leader — as soon as possible. This package shouldn't include tax cuts; it should focus overwhelmingly on cash grants, perhaps a basic grant to every legal resident plus additional grants to those in special need.

And since there's nobody left in the G.O.P. who can put together a coherent stimulus plan, Democrats will have to do the job, perhaps with help from the Federal Reserve intervention to stabilize highly stressed financial markets.

I admit to being somewhat worried that Democrats won't go big enough. But my bigger worry is that Republicans will undermine their efforts. It's now up to Powell and Pelosi to rescue the economy, and Trump and company need to get out of their way.




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