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$1 Trillion Is The Floor (California Dreamin’)
"Stimulus Talks at Standstill With GOP Yet to Agree on a Proposal" read one feature headline on Monday afternoon.
"The Coronavirus Surge Is Officially Slowing the US Recovery", read another.
That's a rather stark juxtaposition, but you can be sure the ominous message is at least partially lost on some lawmakers, particularly Republicans. With the Senate in recess until next week, negotiations on the next round of virus relief will come down to the wire.
Read more: You’re Looking At The Wro
“We don’t expect these negative headlines to derail the economic recovery, which, based on the latest US data, is showing encouraging signs”, UBS wealth management said Monday. “Governments are continuing to provide fiscal support [and] while localized restrictions have been reintroduced in the US, Germany, the UK, and Australia in response to new spikes in COVID-19 infections, there appears to be no political appetite for renewed national lockdowns”, the bank added.
Really? “Localized restrictions?” That sounds like Betsy DeVos.
Are US consumers are going to ignore the “headlines” as well? Perhaps in the Trump heartland. Disney World is open!
We can ignore covid up until it cripples supply chains which have been under stress for months. We can ignore it until it overwhelms hospitals. We can ignore it until it closes schools unexpectedly. We can ignore it until massive amounts of people become homeless. We do not have the luxury of ignoring it much longer. Given the current approach the country will be in the most severe crisis of it’s existence by November and the stock market will be at all time highs.
“What a country!” (sarcasm)
We need a political analyst akin to H’s market commentary to explain the rationale for why Republicans are pushing so hard to limit the size of the package. My uneducated guesses:
1. Senate Republicans secretly don’t want Trump to be re-elected
2. They don’t want to admit that deficits don’t matter so they can keep pushing back on progressive policies
3. They don’t want to set up Biden to take credit for the recovery if he is elected
4. Endangering lives is their way of secretly raising wages for the working class (just look what the plague did for the peasants who survived in the middle ages!)
Or they are looking at breaking from Trump in the last couple of months of the campaign. This would let them say they went against Trump.
#2
The truth is most people still believe deficits do matter and this includes politicians, particularly on the right. The Senate Republicans aren’t plotting, they actually believe it. The UK government is already talking about how they’re going to have to raise taxes later to ‘pay for it’. This is the mentality in most conservative parties around the world. MMT is still very much a minority view, even though it is de facto being practiced in many countries.
#2…. They go hand in hand.
Our government is in crisis mode unable to get out in front of this in any meaningful way. Virus will likely go until it burns out. We have a long road ahead and lots of body bags to achieve burnout. Soylent Green anyone?
It is not clear what “burnout” looks like with this virus. Antibody levels in COVID survivors are falling off within a matter of months. We don’t yet understand much about T cell response and its persistence. There are isolated reports of COVID survivors becoming reinfected. So while we are working feverishly towards vaccines (and I hope we are successful), there is a chance that even a “successful” vaccine will only give short-term immunity, possibly protecting people from severe infection, but not inhibiting infectivity much. The other circulating coronaviruses (4 of them) cause variants of the common cold, and we become vulnerable to reinfection within months to a year or so. So there is a scenario in which COVID circulates like the common cold, indefinitely. We can hope for mutations that make the virus less virulent, but coronaviruses do not mutate nearly as rapidly as influenza viruses, and there’s no guarantee that it will in fact become less virulent (particularly because there is already so much asymptomatic spread already). So absent a really good vaccine–which is possible, in spite of the negative tone of this post–the virus could well just keep going, without achieving burnout.
Maybe just maybe the issue of a Ricardian equivalence is a reality which makes additional fiscal support counterproductive
“It probably would have been better if 2020 thus far just hadn’t happened.”