We’re Gonna Need a Bigger Stimulus

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S1: This past Friday, anyone who’s been tracking the economic spiral in this country got some bad news. It came from a bunch of nonpartisan policy wonks on Capitol Hill. So, Jordan, can I just tell you what I thought when I saw this Congressional Budget Office report? I was like, what’s the opposite of the future? So bright. I got to wear shades.

S2: There’s this great song that only fans of 2000’s indie rock will remember. It is called The Opposite of Hallelujah.

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S3: And I feel like that’s sort of what that report was, just the opposite of hallelujah. The opposite of things are going to be OK.

S1: Jordan Weissmann covers the economy for Slate. I called him up because after seeing this bleak report, I wanted a little perspective on what our economic future could look like. The CBO, they are now saying unemployment could go as high as 16 percent. This is the first time a federal agency has acknowledged our economic downturn. It’s going to last a year and a half, maybe more. How predictive usually is the CBO?

S2: This gets into a very fraught topic for budget nerds, which is how good is the CBO at its job? But they do pretty standard economic modelling. They’re not doing anything to off-beat. So what you’re seeing here is using a pretty straightforward vanilla set of assumptions. If you if you do an economic forecast based on those things, don’t look super bright.

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S1: I mean, the thing that stood out to me was that they projected unemployment at the end of 2021. So a year and a half from now, a little bit more. Was gonna be nine or 10 percent, and that was the statistic that got me like, oh, wow, this is good, right? While right.

S2: Well, what you have to remember is they are making these projections based on current policy. This is the warning where like the ghost of Christmas future is coming in and saying. Pass a stimulus bill or look what’s coming like. That’s sort of that’s sort of the way. That’s how I’m thinking of it, at least.

S1: Today on the show, the crystal ball on the economy, it’s looking pretty murky. Can Congress get another stimulus bill off the ground and change our economic fate? I’m Mary Harris. You’re listening to what next. Stick with us. Congress has spent so much money addressing the Corona virus already that the numbers are kind of hard to fathom. It’s 2 trillion dollars. It’s twice as big as the 2009 stimulus, which was previously the country’s largest aid package since World War Two. But Jordan says there’s a whole other question at hand here, which is whether all that money is going to the right businesses and people. So you’ve been pretty clear that you think the current bills that have gone through Washington and there’ve been a bunch of them and just, you know, so much money spent. You’ve been clear that you think that they are a disappointment. Can we talk about that a little bit? Yeah. So what makes them so disappointing to you?

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S4: So.

S2: I think the headline answer here is they are just not doing what people hoped they would do. The bottom line is we’ve seen 26 million people file for unemployment over the past five weeks. You’ve seen 26 million people laid off, essentially. That wasn’t really supposed to happen. This was sort of like I mean, like we knew that was a possibility. But like this bill was what was supposed to happen instead. Like the hope was that we would give small businesses money to keep people employed through programs like the Paycheck Protection Program, and that we would also give loans to larger companies, let through the large corporate bail out so that your you know. Manufacturers and such didn’t have to do mass layoffs and that that would keep people attached to their jobs. Somehow or another, and that, yes, we would have layoffs and that the unemployment system would have to support people. That’s why we created those generous unemployment benefits.

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S1: But that you wouldn’t just have this absolute crush of layoffs and you can see how that would work, where it’s like if you furlough someone and they’re getting some help from the government, you can really have that bounce back recovery. OK. We’re writing things up again. Get back to work.

S2: The idea was that if you kept people connected to their jobs, they would be rehired faster and you could read the economy’s engine. You wouldn’t you wouldn’t have this time or people had to kind of get rehired and find new work. You could just, you know, put the switch and reopen everything. Right. People could come running into the restaurants all of a sudden. It does not look like that is happening. We are not really supporting businesses the way we thought we would be at this point. We’re not really preventing layoffs. If we thought we might be at this point. But what you have to remember is the you know, the goal wasn’t to just shut down the economy and wait out this virus, you know, for an indefinite period of time until we had a vaccine. The goal was to shut down the economy for a reasonable period of time so that we could lower the number of infections and get a testing and trace and regimen in place so that we could actually have some semblance of normal life again in this country. And we’re not really it doesn’t really look like we’re hitting that goal either. So we’re just we’re not we’re not really hitting any of our marks. We’re just reaching for these rings and missing them one after another.

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S1: Pressure has been building in Washington to make sure the next stimulus, because it’s clear there’s going to be another stimulus, takes on a very particular set of problems. State budgets with so many people staying home. Tax revenues in the states are plummeting, even though residents need more, especially now.

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S2: Unlike the federal government, the states and cities can’t just borrow infinite amounts. I can’t print their own money. They can’t really run deficits. And so the fact is they’re they’re facing a fiscal cliff of their own. And the question is, what are they going to do? What I mean, you know, are they going to have to start laying off teachers and firefighters and police officers? What are they going to cut? Are they going to cut health care services in the middle of a pandemic? Where where’s the money going to come from? You know, people need their garbage picked up. But someone has to pay for that hits. It’s a real open question about how, you know, municipal and state governments are going to continue funding themselves. And if they do have to make serious cuts, if they don’t get some sort of bail out, if they don’t get some sort of support, that in turn is going to be is going to compound the economic pain we’re already in. Right. Like this is what we saw after 2008. After the initial crisis, states and cities started laying off workers. And that meant that those people weren’t spending. They didn’t, you know, they didn’t have money to pay their mortgages. And it just led to these cascading economic issues. It was as we were seeing austerity on the state level. And if that happens now, it’s going to drag down the economy further and it’s going to make any recovery take even longer than it already looks like it might.

S1: Not everyone is 100 percent on board with bailing out the states. Last week, Senate Majority Leader Mitch McConnell made a radio appearance and argued the federal government should stay out of the state budgets. In his view, they were being poorly managed before the pandemic.

S5: Yeah. I would certainly them over that. It is the bankruptcy route. Saved some cities. There’s no good reason for it not to be available. My guess is their first choice would be for the federal government to borrow money generation to set it down to them. No. So they don’t have to do that. That’s something I’m going to be in favor of.

S2: This week, Mitch McConnell said, you know, yeah, we should start worrying about the debt. And also, I don’t want to do a new round of aid to cities and states which Democrats been asking for because I don’t want to bail out blue states. And then he went further and he said that. Well, I think would actually be better rather than just giving states money to let them go bankrupt. And frankly, that was kind of the moment that I realized Mitch McConnell maybe isn’t in control. It was it was such a ridiculous statement that. And to understand why it was so ridiculous is that, a, it’s not just blue states that are hurting right now, like Florida is being crushed. Right. Like Florida has. Like, what is Florida’s economy at this point? Can you tell me? I don’t know what Florida’s economy is made up of. Like no one’s going to Disneyworld, like to fly down there for vacation because they rely on tourism so much. Yeah, exactly. But this is a state that relies on tourism and the sales tax to fund itself. You know, there are plenty of red states that are in pretty dire shape as well. But if you go even deeper into it and you listen to what he was saying, this idea that we’re just gonna let states go bankrupt at this point. It’s it’s kind of laughable because if that were to happen, it. Would be absolute havoc on the municipal debt markets. Right. Like the bond market would freak out. You would have pension plans and banks just having a meltdown. You would have firefighters getting let go. You would have public hospitals in even worse shape than they already are. You would have. You’d have police unions worried about their pensions. It would be it would be disasters on so many ways. And there’s so many constituencies that Republicans rely on that would be upset that it’s just like Mitch McConnell is not being serious, which told me when he’s saying, oh, we should let them go bankrupt. That just tells me that actually what you know, he’s posturing. It’s not clear that what he really says matters now.

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S1: Yeah. I mean, my I saw this and I thought, hold on. This is this is bargaining positioning. This is Mitch McConnell being like, I’m over here in this extreme position. You’re we’re gonna have to find a way to come together.

S2: Yeah. Except it’s like if you look at what the White House is saying it wants. It’s like, yeah, we want state spend. We want spending on states. We want infrastructure. We want a payroll tax cut. And we want some incentives for like restaurants and entertainment. Right. They really want the payroll tax cut. That’s that’s a Trump is still fixated on that. And they’re not saying we want any of the things Mitch McConnell wants or that we care about any of the things Mitch McConnell wants. So there’s this sense that the White House is priorities have sort of diverged from the Senate Republican leaderships. And it’s like who loses in that fight? I’m pretty sure I’m pretty sure Mitch McConnell loses in that fight. Like he’s not going to he’s not going to be able to hold up a deal that both the White House and the Democrats want. He just doesn’t have that have done. He’s I don’t think even his own caucus would really want him to do that.

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S1: We’ve had so many coronavirus bills already, and it seems like we’re at this juncture now where like the money spigot is turning off for a second. And people are trying to settle in and think about what they do next. Because I look at what’s just happened and what it looks like is we’ve like frantically put a bunch of Band-Aids on like a gushing wound and we’re realizing we need a bigger plan. And that means that you have Democrats and Republicans both looking at what that plan could look like. And they’re going to have very different ideas.

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S6: I think. We are at a really interesting inflection point where. The question is, are we going to just try to double down on what we’ve already attempted? Are we going to stick with the same basic strategy or are we going to try something new? Right.

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S2: We have this thing, the paycheck protection program, where we’re giving small to medium to even some large sized businesses, these forgivable loans. And it’s been run through the banks and it’s been sort of a mess. And no one seems very happy with it. Are we going to just keep. Putting more funding into it. Which. That was what we did in this last Phase 3.5 bill. They they topped it off with an extra three hundred and ten billion dollars when that money probably runs out. Are we just going to keep adding more? Or are we going to try something else? And then there’s the other question of like, well, what are we going to do to try and spur recovery once the economy is open? Are we going to do a gigantic stimulus bill with infrastructure spending and with a large amount of aid to states so that when where it’s ready to reopen, we actually can get people back to work? Or is Congress going to have it in them to do that? I do want to add a word of caution here, because we’re talking about how we’re going to get the economy back to full health once the pandemic is over. What’s frustrating right now is that we haven’t really created good conditions for just freezing the economy while we’re trying to fight the pandemic in the first place. You know, one of the reasons why there’s so much, I think, anxiety and there’s so much pressure to get things reopened sooner is just because we’re not doing a great job putting the economy on freeze in the first place. Like our plan to do that has led to just like mass layoffs of a lot of concern that we aren’t really doing a good job preserving what existed before. We didn’t manage to put the economy on ice. We kind of let half of it go bad. And so I do. There is part of me that wishes that before we turn our attention to what comes next, we would do a little bit more to make sure that, you know, everyone survives this period of lockdown. You know, it’s it does feel a little weird to me that the conversation’s already turning to sort of, you know, the future after lockdown. But we haven’t even figured out how long lockdown is going to last for.

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S1: That’s such a good point, because I feel like if you look at those initial bills, you could in some ways look at them as like misled in their optimism. You know, sort of short term ideas like we’re going to bounce right back. And that was part of what made them problematic.

S2: Yeah. I mean, you know, I’m not the first person to observe this, but every time Congress has passed a bill during this crisis, it’s felt like it’s always been about two weeks too late. Like they’ve always been two weeks behind the ball. And, you know, that’s that’s not entirely Congress’s fault. It been a fast evolving crisis. We have we have not dealt with anything like this in modern U.S. history. And so, you know, can you blame Congress for being a little bit behind the ball all the time here? No, not entirely. But I do wish that was a little easier to kind of revise things. And I wish Congress were a little bit better at saying, okay, well, this isn’t working. Let’s let’s try to think of, you know, try to come with a better plan quickly.

S1: Right. Because I look at that CBO report we were talking about at the beginning, and it’s it’s telling you this is going to take a while. And even when a recovery starts, it’s going to be pretty anemic. So the question is whether you, like, grab this situation by the horns and try to manage it or whether you just, like, throw some money at the same things you’ve been doing all this time that have been frustrating.

S2: I think that’s that’s a very. APT way of phrasing the question. You know, the CBO has laid out one potential pretty dismal future for us, and it’s basically saying if you don’t do more than you’re doing now, this is what you might be looking at. Here is the sad slog we all have to look forward to. And the question is, what more does Congress have it in it to do? Does it have it in it to just throw more money at these issues using the same basic framework we have? Or is it going to really go out and do something exceptional to get the economy revved up again?

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S1: Jarden, thank you so much for joining me.

S7: Thanks for having me.

S1: Jordan Weisman covers the economy for Slate. And that’s the show. We know things are still pretty hard for a lot of folks out there. We also know a lot of you have figured out pretty admirable coping strategies like DeKoe and Philadelphia.

S8: I’m a disabled man who uses a ventilator at night as I have at extreme risk for a virus infection. So just stay healthy. I’m completely isolating to stay healthy and cheerful and hydrating more, meditating more. And I’m watching five streams of news. The Philadelphia Zoo and the Cape Verde Zoo. Animals are awesome.

S1: All right, brother Niko, I am so glad you left us a message. You can call us to tell us about the animal videos you’re watching, the kitchen adventures you’re going on. Or that nice phone call you had with a friend, Jordan Weisman from today’s show. He has been teaching himself how to play Mambo Italiano while in quarantine. One, two, three.

S3: If you want to serenade us, our number is 2 0 2 8 8 8 2 5 8 8. We want to hear from you. What next is produced by Daniel Hewitt. Jason De Leon Morris Silvers and Mary Wilson. I’m Mary Harris. I’ll be back in your feed tomorrow.