Just Send The Checks.

Another round of stimulus checks may be included in the next virus relief bill, Larry Kudlow told Fox on Tuesday, in another totally superfluous interview.

As the market saw with Peter Navarro late Monday evening, more is not necessarily better when it comes to administration officials and television cameos.

Unlike Navarro, we can at least count on Kudlow not to say anything with the potential to collapse equities within seconds, but as evidenced by his ill-advised “no systemic racism” in America remark and recent characterizations of coronavirus flare-ups as “small bumps”, we’ve reached the point of diminishing returns when it comes to soundbites from Larry.

And yet, the market was subjected to more on Tuesday. Tax rebates and direct mail checks are on the table for another stimulus package, Kudlow said, apparently echoing what he’s heard from the president.

Reports continue to suggest that Trump favors a second round of payments to households and individuals, and it’s not hard to understand why. “President Trump has told aides he is largely supportive of sending Americans another round of stimulus checks, believing the payments will boost the economy and help his chances at reelection in November”, The Washington Post said Tuesday, citing a trio of sources with access to the internal debate.

The president’s poll numbers are going in the wrong direction, and the debacle in Tulsa doesn’t appear to bode well for enthusiasm among his notoriously fervent base, although one imagines his campaign will do everything possible to ensure that subsequent events at least look to be well attended.

Ironically, the Post‘s sources said that while Steve Mnuchin supports more checks, Kudlow is hesitant, likely due to his steadfast refusal to admit that supply-side economic solutions never work, especially when it comes to the lower- and middle-income earners, who are the folks that need help in the current situation.

Not surprisingly, the GOP is starting to sound the alarm on the deficit. “Other conservative White House officials and influential congressional Republicans oppose the plan, expressing concern with the impact of tremendous levels of new spending”, the Post goes on to say, adding that “some White House officials have also argued internally that the checks were pocketed by Americans rather than spent in the economy, pointing to an enormous increase in Americans’ personal savings rate after the payments went out”.

That harkens back to the Ricardian equivalence debate as discussed on Monday in “‘The Most Fundamental Problem’ For Jerome Powell: Your Savings Account“.

Of course, it’s not economic theory that compelled Americans to save two months ago. Clearly, the idea that Republicans would cite the personal savings rate in April in arguing against another round of disbursements is ridiculous considering states hadn’t reopened yet, which means options for spending the money on anything other than groceries and E-commerce were limited.

More importantly, many Americans were scared out of their wits, and thus likely to squirrel away anything that was left over after paying for necessities.

I’m sure there’s granular data on this that lawmakers can consult when making a decision, but my guess would be there’s a very good argument for another round of checks to average Americans, especially if you lowered the income threshold from $75,000/year to say, $50,000/year, to ensure you’re getting money to the people who actually need it. At least one official who spoke to the Post confirmed the administration is discussing just that kind of calibrated approach.

House Democrats included another round of checks in their plan (the HEROES Act), but it seems as though they’ll have to make concessions on the extension of extra unemployment benefits if they hope to marshal GOP support.

“Congressional Republicans may be more likely to support another round of stimulus checks if it is paired with a substantial reduction to the $600-per-week increase in unemployment benefits approved by Congress in March”, the Post goes on to say, citing (amusingly) Stephen Moore, whose ongoing presence in this debate is not just unfortunate, but arguably dangerous given his lack of credentials, economic training and the fact that he isn’t an elected official or a member of the administration.

Meanwhile, 13 (lucky number!) US companies with liabilities in excess of $50 million filed for bankruptcy last week, matching a record from the financial crisis. That makes 117 for 2020 so far on Bloomberg’s data.

Kudlow went on to tell Fox Tuesday that as the economy continues to reopen, he expects to see a “V-shaped boom”.

Last week, during a similar interview with Fox, Kudlow floated the notion of an “I-shaped” recovery “where it just goes straight up”.

One thing that has “just gone straight up” are equities (the Nasdaq hit a new record high on Tuesday), and on that score, Rabobank notes that “markets remain wildly out of context when one considers that global virus infections are over 9 million and rising, with no sign at all of being brought under control, and with millions more out of jobs”.

Boris Johnson has decided to reopen pubs starting early next month, and you’d be forgiven for calling the specifications around the plan bizarre. “Hotels, pubs, restaurants and cinemas will be able to open their doors from July 4, the prime minister said as he gave the green light for England’s beleaguered tourism and hospitality industry to restart”, Bloomberg recounts, noting that “the minimum ‘social distance’ between individuals will be halved to one meter provided they also take mitigating actions like wearing a face covering”.

“Our long national hibernation is beginning to come to an end”, Johnson declared. “A new but cautious optimism is palpable”.

No, it’s not. I’m sorry, but it’s really just not. The UK’s handling of the epidemic was among the worst in the world. And Boris should know — he very nearly succumbed to the virus himself.

“Yes, London pubs might be about to re-open under strange new conditions, as will New York bars”, Rabobank’s Michael Every went on to say. “Clearly in Mr. Market’s mind a cheeky pint or brewski outweighs the global picture. You know what they say: a recession is when someone you know loses their job, and a depression is when you lose yours”.

As a reminder, no progress will be made on the next virus relief bill in the US until Congress returns from the July 4th recess — because it’s not as if this is an urgent issue, right?


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One thought on “Just Send The Checks.

  1. I read elsewhere that credit card charges have dropped by
    1. 17% for the US residents in the upper third of income earners
    2. 10% for the middle third
    3. 4% for the lowest third

    The upper 1/3 to 2/3 of income earners are the groups propelling the economy. Until the upper 2/3 of income earners start spending at pre-covid levels, there will not be a “V”.

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