Opening For Business – Or Not

The climate in America is changing. No, not that climate, the one that President Trump says is not changing at all. It is the policy climate, the one Trump has been trying desperately to change. Until now, the doctors have been controlling policy. Social-distancing, hand-washing (in addition to hand-wringing), masking, but definitely not working. America is closed for business.

The consequences have been dire. Almost 17 million workers unemployed in the past three weeks, double the number thrown out of work during the 2007-2009 Great Recession; the unemployment rate at 13-14%; the GDP in the current quarter likely to be down by a massive 30%; airline travel down 95%; share prices off 17% from this year’s peak (but still 23% above the day Trump took the oath of office); mortgage payments skipped by the hard-pressed and by some big-business opportunists; schools closed.

Trump has had enough of a doctors-only policy. Late last week he announced that he is forming a second coronavirus task force to advise him on how to reopen the economy, Included will be National Economic Council Director Larry Kudlow; his Chief of Staff, Mark Meadows; and Secretary of the Treasury Steve Mnuchin – in charge, respectively, of communicating with the media, making sure there are no deviations from the Trump line, and getting something done. The task force is to come up with a policy that will hang an “open for business” sign on the American economy. Trump wants “a big bang, sooner rather than later.” About time.

After all, closure has serious unpleasant consequences. It saves some lives at the expense of others. Domestic violence is on the rise. Studies show unemployment increases suicides and drug addiction. According to an Associated Press study of demographic data, an increase of ten percentage points in the unemployment rate “translated to a loss of roughly a year and a half of life expectancy.” In New York City, high-end retailers are boarding up their shuttered shops in anticipation of looting despite the presence of National Guard troops, and around the country gun sales have soared due to fears of a rent in the social fabric.

The doctors will not easily cede their policymaking monopoly. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, is an adviser who tends to confuse his bureaucrat’s advisory role with that of an elected President, “the decider” as George W. Bush put it. Fauci insists, “You gradually come back. You don’t jump in with both feet.”

But Fauci does not want to be left standing at the station when the Presidential train marked “It’s the economy stupid” gets up steam (to use an old saw from pre-electrification days). After all, he has been catapulted to celebrity status by his daily television appearances with the President and the Pence panel, and on as many talk shows as will have him. So his current position is that “it makes sense to at least plan what a re-entry into normality would look like … and be prepared to ease into it.” The sting for Trump is in the tail.

Earlier, Fauci had favored us with a forecast that we would see 100,000-240,000 deaths through early August. The model on which he relies (Andrew Cuomo in New York consults five of these constructs) lowered the forecast to 80,000, and then, the very next day changed its projection of the grim reaper’s haul to 60,000, apparently without embarrassing its users. (Climate modelers and economic forecasters take note.)

The Trump team is not as patient as Fauci & Co. would have it be. Treasury Secretary Mnuchin, Trump’s point man in negotiations with Democrats in congress, says the U.S. could reopen for business in May if the President “feels comfortable with the medical issues”. Schools likely will open in the Fall, good news for young children, not-so-good news for older students, who will once again be subjected to what is taught in their universities.

My guess is that the President is already comfortable that those medical issues are being given due weight in his new balanced policy, even though doctors want more testing. His will be no easy decision. On Friday models produced by the departments of Homeland Security and Health and Human services predicted a death total of 200,000 on the assumption that the 30-day stay-at-home orders are lifted, the schools remain closed until the summer, 25% of the country continues to work from home, and some social distancing remains.

Trump, however, earlier made it clear that he does not rely on these models. “The professionals did the models. I was never involved in a model – at least this kind of a model.” Undoubtedly, he was referring to his wife and first lady, Melania, who was a fashion model. Whether his reliance on his instinct rather than these models is another example of his ignorant anti-intellectualism, or a necessary and sensible step for a “decider” to take depends very much on which television channel you watch.

Back to testing. Trump and the Centers for Disease Control combined to botch early testing, the former by claiming there was no contagion problem, the latter by producing faulty test kits. By early April only about one in every 273 Americans has been tested, well above the 1-in-404 in the UK, but far behind the rate in Germany (1-in-90).

Meanwhile, more money is needed to meet the need of small businesses for loans that will be forgiven if they do not lay off workers, to pay for expanding unemployment insurance coverage to include gig and self-employed workers, and to top-up state benefits by $600 per week. Jay Powell, chairman of the Federal Reserve board and Trump’s favourite piñata, agrees that more fiscal support – spending, in lay terms – is “appropriate and a good idea…. It’s what the great fiscal power of the United States is for.” For his part, Powell has the Fed “lending, not spending” $2.3 trillion through a variety of programs that dwarf in size, scale, daring and impact its Quantitative Easing during the Great Recession. Trump’s “thank you” note seems to be lost in the post.

With many members of congress not in DC, congress is operating under a rule requiring unanimous consent to pass any bills. Thirty million small businesses that employ sixty million workers cannot all be serviced by the $340 billion fund contained in the relief package. Republicans want an additional $250 billion to replenish the $340 billion small business relief programme – technically, the Paycheck Protection Program — that has been overwhelmed by applicants needing these loans, which will be forgiven if recipients do not lay off their workers.

Democrats say “no” unless the additional $250 billion is allocated, not to businesses, but

  • directly to unemployed workers, rather than to them through their employers ($125 billion);
  • to small, community-based financial institutions ($60 billion), to reduce the power of the big banks and to better serve women- minority- and veteran-owned businesses and non-profits;
  • for Small Business Administration “disaster relief” for renters and homeowners ($50 billion); and
  • for SBA grants ($15 billion), largely to non-profits and state and local governments.

House speaker Nancy Pelosi adds that she will press for funds for voting by mail, and still another $250 billion for state governments, with their unionized work forces, and finances so shaky that the Fed is having trouble deciding which states and cities, if any, have bonds that meet its criteria for acceptable collateral.

Congress adjourned for a three-day weekend (Good Friday/Easter) without bridging these differences. Small businesses and their largely non-union staffs are left to bite the nails of their oft-washed fingers while Democrats try to shape relief spending to support their long-term political-social agenda. Another battle in the ideological war that dominates American politics.