The mask has slipped. “We can’t let the cure be worse than the problem itself.” In times of economic crisis, it becomes clear that there are conflicting interests set about the landscape of our work, our lives, our employers, and our leaders. Depending on where you look throughout history, responses to crises have much to do with the fundamental mechanisms which brought the crisis about, whether economic or geopolitical. In the case of coronavirus, it is a black swan event — one that no tool of forecasting could reasonably have predicted. Still, we can look across the globe, analyze each country’s response and see that the reason the response of the United States was so different than most of the world is the result of systematic causes.
The Dow Jones Industrial Average has fallen from its year peak of 29,551 on Feb. 12, before the beginning of the rapid descent on Feb. 27, to its trough of 18,591 on Mar. 23 with the largest point drop in history on the journey down. In the three days since the 23rd, the Dow has rebounded several thousand points, including the largest point gain in history on the 24th. On that day the stock market was given a resounding confidence boost when President Trump said “we can’t let the cure be worse than the problem itself.”
What he meant was that in order to maintain predictability and stability in asset markets, he is considering lifting restrictions intended to mitigate the spread of the coronavirus. Texas Republican Lt. Gov. Dan Patrick supported Trump’s statement, saying on Fox News that seniors (including himself) are willing to die to get the economy going again, suggesting that they would be willing to make the sacrifice so as to not disrupt the “American way of life.”
As stock markets have plummeted, work stoppages have cut off incomes and directives to physically distance and shelter-in-place have become the norm, we are entering uncharted territory. Unemployment rates have reached levels unprecedented in post-industrial society. JPMorgan Chase predicted that the US gross domestic product could shrink 14% between April and June. Goldman Sachs has estimated 2.25 million filed for unemployment benefits the week of March 20th — the highest amount ever. Now that the data is available, we have learned that number is actually 3.28 million. Some figures need visualization for the magnitude of the event they describe to be fully realized. Here is what that level of unemployment looks like relative to the past 50 years:
This figure does not represent the complete picture of the work force disrupted by the coronavirus; workers who are self-employed, in the gig economy, and on uninsured independent contracts. Also bear in mind how many of those people will have lost private health care coverage tied to their employment.
Even on the Democratic side, New York Governor Andrew Cuomo used a graphic in a press conference suggesting that the government has a conscious decision to make between prioritizing ‘economic viability’ and ‘protect[ing] lives’. Despite the good press Governor Cuomo has received for his impassioned response to the crisis, he has given us a glimpse at how America’s leadership views the problem and the role that people have in it. Taking care of the citizenry, most of whom comprise the tax-paying labour force, is seen as a burden.
On the 26th, with several days of evidence that his uttering revived the stock market, Trump decided to gaslight Fox News viewers, saying “I don’t believe you need 40,000 or 30,000 ventilators. You know, you go into major hospitals sometimes and they’ll have two ventilators. Now all of a sudden they’re saying, ‘Can we order 30,000 ventilators?’”
Of course these are special circumstances we are facing, and the fiscal cost of keeping the fabric of society from tearing at the seams is greater than ever, but I digress, this kind of rhetoric is not being used in countries like China, South Korea, Iran, Italy, or any of the other worst-hit nations. Need I not add that stripping back self-isolation measures would be a purposeful overload of America’s health care and hospital infrastructure — during which millions have lost work and subsequently lost their health insurance — and will inevitably lead to tens, hundreds of thousands of deaths, perhaps even millions more than otherwise.
America’s Two Economies
The prioritization of ‘the economy’ over the people who comprise its individual components is the direct result of a decades-long cultivation of consensus within both parties in the US government: to govern in the interests of capital; executives of corporations which fund congressional campaigns and politico-ideological think tanks occupy cabinet positions and other key roles along side wealthy party benefactors. This describes the Democrats, too. Trump’s evangelizing of the economy at the behest of its individual moving parts — the labour force — can be rationalized by a political economy perspective, as can the disdain with which the Trump administration and GOP-led Senate have shown the working poor throughout this emergency, relegating the working class to a collective unperson that burdens the system.
When the economy is discussed on the news, wages are rarely discussed, because relative to price levels they have barely budged in decades. Economic inequality is rarely discussed, but when it is, it is given little credence as an outcome of decades of austerity, deregulation, and privatization. The ballooning cost of private health care and levels of uninsured are also economic conditions, but talked about as benign and distinct. This method of discourse has led to public opinion of the state of the economy being majority approval while many of its conditions as faced by its individual participants — economic inequality, cost of health care, size and influence of major corporations, poverty & homelessness efforts — have majority disapproval.
Make no mistake, the conditions of the working class also qualify as qualities of ‘the economy,’ but as it is discussed in the media, by the government and large corporations, they tend to refer to a handful of macroeconomic and asset (stock) market indicators. The economy that matters to them is the economy of capital. The economy they’re adversarial about is the economy of labour, with all of its tangential material conditions that people mostly are dissatisfied with. Now, Trump is effectively telling the economy of labour to sacrifice itself for the good of the economy of capital.
The government emergency relief bill which passed in the Senate on March 25th comprised a total of $2.2 trillion in emergency fiscal measures such as cash transfers to households, funding for unemployment insurance (more on that later), and funding for critical services such as hospitals. The size of this bill is roughly half of total federal spending in 2019. Of the total spending, $290 billion of the total is in one-time emergency cash transfers of $1,200 per adult* and $500 per child. Another $260 billion goes to expanded unemployment benefits. A minimum of $180 billion is on health spending.
*The cash transfers are means-tested. The first Republican draft of the bill stipulated that if you have no income tax liability, you are only eligible for $600. It is manifestly the modus operandi of the Republican Party leadership to punish poor people for being poor. Opposition senators got this removed. You also receive less if you earned over $75,000 in 2019 or 2018 if you have not yet filed your taxes. Non-recipients of the cash transfers include those without a social security number, taxpaying immigrants for example.
Workers are not the only ones asking for help, industries have asked for bailouts. The aviation industry has been especially vocal given the effects of travel restrictions on airlines’ revenues. However, this industry has been spending virtually their entire cash flow — 96% according to Bloomberg — on stock buybacks in the past 10 years, which have reduced the market supply of their shares, inflating their asset prices and enriching their shareholders. They want all the benefits of a massively inflated asset market with none of the risks. Such is the relationship between corporations, government, and the federal reserve since the global financial crisis.
Incentives As Punishment
The expansion for unemployment benefits had to be fought over. An amendment introduced by Sen. Ben Sasse (R-NE) would have reduced unemployment benefits. Senators Rick Scott (R-FL) and Lindsey Graham (R-SC) had been vocal about their unwillingness to let low-wage workers who qualify unemployment benefits to receive more money than they would have otherwise, because they claim it would “disincentivize” work. I need not remind them we are in a pandemic, it is simply the case that their priority is ‘incentivizing’ workers to risk their health and their lives to grease the wheels of the economy regardless.
Bernie Sanders delivered an impassioned defense unemployed workers on the Senate floor. Thanks to the effort of Sen. Bernie Sanders (I-VT), who vowed to hold up the legislation with a demand for more stringent measures on the corporate welfare part of the bill, he and Democrats managed to defeat the punitive Republican amendment and get the bill passed so the unemployed could receive their full earned benefits. This is some of what Sanders had to say:
…Meanwhile, these very same folks had no problem a couple years ago voting for a trillion dollars in tax breaks for billionaires and large profitable corporations, not a problem. But when it comes to low income workers in the midst of a terrible crisis, maybe some of them earning or having more money than they previously made, ‘oh my word we gotta strip that out’
No Incentives Needed for the Privileged
In the end, the aviation industry got what it wanted. A massive proportion of the bill is relief for businesses and corporations. The total amount going to ‘large business and local gov. loans’ is $504 billion, another $377 billion to small businesses, and another $280 billion in business tax cuts. This includes what originally was planned to be loans for airlines, finally decided on as grants instead. Taxpayers are indirectly subsidizing the inflated asset prices of American commercial airlines, as the government is effectively giving them absolute certainty that financial decisions that would carry significant risk in a more free and competitive market will be taken care of in the case of a crisis. The benefits are mutual. The aviation industry’s executives donate to GOP candidates and PACs, and they manage a significant labour base they can use as political leverage.
What incentive is there for large businesses to be cautious with their finances if they know that they can rely on corporate welfare from the government to mitigate all of the risk of their financial decisions and ask nothing in return? Let us not forget the massive giveaway that was the Trump administration’s $1 trillion tax cut in 2017, which led to a record $1 trillion in stock buybacks over the following year.
As an aside, the mechanism of stock buybacks reveal how they fundamentally a) provide no actual value to an asset, and b) create temporal market dips when corporations have an incentive NOT to buyback. From the linked CNN article:
The market appears to have become more reliant on repurchases, with stocks stumbling when buybacks get turned off. To avoid tripping insider trading rules, companies typically avoid repurchasing shares during the two weeks prior to reporting earnings. So-called “blackout” periods have coincided with multiple market tailspins, including the one that began in early October.
There is nothing but reward for this behaviour, because when things go south under relatively normal circumstances, there are tax cuts, federal reserve interest rate cuts, and both massive open market purchases of assets by the federal reserve to increase cash in asset markets.
Transactions, Not Giveaways
Alternatively, several European governments have been in the process of giving loans, or even nationalizing key corporations. In Germany, the government purchased stakes in companies that required bailout. In other words, an actual transaction took place, as opposed to a permit to continue engaging in cavalier financial decisions. In Ireland and Spain, hospitals have been nationalized. Their governments declared private health care to be in opposition to the welfare of the public. It simply would not be feasible for this kind of prioritization in the American government to materialize because of the financial-political relationship between the government and big business. These relationships are well-entrenched, and the GOP have used a megaphone to announce they are more important than the literal lives of the American people. They cannot be quelled unless the economy of labour demand not to be sacrificed on the altar of capitalism.