If you want a quick summary of the state of play over fiscal stimulus legislation, here it is: Republicans insist that we should fight a plague with trickle-down economics and crony capitalism. Democrats, for some reason, don’t agree, and think we should focus on directly helping Americans in need.
And if legislation is stalled, as it appears to be as I write this (although things change fast when we’re on COVID time), it’s because Mitch McConnell, the Senate majority leader, is holding needy Americans hostage in an attempt to blackmail Democrats into giving Donald Trump a $500 billion slush fund.
First, let’s talk about the nature of the economic crisis we face. At the worst point in the 2007-2009 recession, America was losing around 800,000 jobs per month. Right now, we’re probably losing several million jobs every week.
What’s causing these job losses? So far it’s not what usually happens in a recession, when businesses lay off workers because consumers aren’t spending enough. What we’re seeing instead are the effects of social distancing: restaurants, entertainment venues and many other establishments have been closed to limit the spread of the coronavirus.
And we neither can nor should bring those jobs back until the pandemic has faded. What this tells us is that right now our highest priority isn’t job creation, it’s disaster relief: giving families and small businesses that have lost their incomes enough money to afford necessities while the shutdown lasts. Oh, and providing generous aid to hospitals, clinics and other health care providers in this time of incredible stress.
Now, while social distancing is currently driving employment destruction, there will eventually be a second, more conventional round of job losses as distressed families and businesses cut back on spending. So there is also a case for stimulus to sustain overall spending — although helping Americans in need will provide much of that stimulus, by also helping them continue to spend.
So what’s in the stimulus bill that McConnell is trying to ram through the Senate? It grudgingly provides some, but only some, of the aid Americans in distress will need. Funny, isn’t it, how helping ordinary Americans is always framed as a “Democratic demand”? And even there the legislation includes poison pills, like a provision that would deny aid to many nonprofit institutions like nursing homes and group homes for the disabled.
But it also includes a $500 billion slush fund for corporations that the Trump administration could allocate at its discretion, with essentially no oversight. This isn’t just terrible policy; it’s an insult to our intelligence.
After all, it would be hard to justify giving any administration that kind of power to reward its friends and punish those it considers enemies. It’s almost inconceivable that anyone would propose giving such authority to the Trump administration.
Remember, we’ve had more than three years to watch this administration in action. We’ve seen Trump refuse to disclose anything about his financial interests, amid abundant evidence that he is profiting at the public’s expense. Trump’s trade war has been notable for the way in which favored companies somehow manage to get tariff exemptions while others are denied. And as you read this, Trump is refusing to use his authority to require production of essential medical gear.
So it would be totally out of character for this administration to allocate huge sums fairly and in the public interest.
Cronyism aside, there’s also the issue of competence. Why would you give vast discretionary power to a team that utterly botched the response to the coronavirus because Trump didn’t want to hear bad news? Why would you place economic recovery efforts in the hands of people who were assuring us just weeks ago that the virus was contained and the economy was “holding up nicely”?
Finally, we’ve just had a definitive test of the underlying premise of the McConnell slush fund — that if you give corporations money without strings attached they will use it for the benefit of workers and the economy as a whole. In 2017, Republicans rammed through a huge corporate tax cut, which they assured us would lead to higher wages and surging business investment.
Neither of these things happened; instead, corporations basically used the money to buy back their own stock. Why would this time be any different?
As I write this, Republicans are ranting that Democrats are sabotaging the economy by refusing to pass McConnell’s bill — which is a bit rich for those who remember the GOP’s scorched-earth opposition to everything Barack Obama proposed. But in any case, if McConnell really wants action, he could get it easily either by dropping his demand for a Trump-controlled slush fund or by passing the stimulus bill House Democrats are likely to offer very soon.
And maybe that will happen within a few days. As I said, we’re now living on COVID time. But right now Republicans seem dead set on exploiting a crisis their own president helped create by his refusal to take the pandemic seriously.
Paul Krugman, Ph.D., winner of the Nobel Memorial Prize in Economics, is an Op-Ed columnist for The New York Times.