Will $2 Trillion Buy Enough Relief?

Listen to this episode

S1: This ad free podcast is part of your slate plus membership.

S2: Hello and welcome to Slate. Money Corona Virus. Extra.

S3: The Wednesday mid week update because there’s just too much going on to fit everything into a single Saturday show. I’m Felix Salmon of axios. I’m joined by Emily Peck of HuffPost. Hello. I’m joined by Anna SHYMANSKY of Breakingviews. Hello. And we are recording this on the day of the 2 trillion dollar stimulus bill. Almost certainly getting passed in Congress. So we’re very excited about that. We’re going to talk about that. We’re going to talk about how the American constitutional structure compares to that in other countries and whether America really has it in it to be able to effectively respond to this crisis. All of that coming up on Slate.

S4: Money covered 19.

S3: So we’re recording this on Wednesday.

S5: And there is a deal there is two trillion dollars of money which Congress has agreed to spend, which is then going to be multiplied, what, like threefold by the Fed, which is going to lend 4 billion dollars in various lending facilities. And so it all adds up to about six trillion dollars of money, which is going to slosh into the economy, which sounds great, except for that we don’t seem to have made so much as a dent on the actual health crisis.

S6: Right. Which. Which. And to be fair, I don’t necessarily think anybody thought that the you know, what was going to be coming out of the Fed or what was going to be coming out of Congress was immediately going to be having any impact on the health crisis. But I think you’re right in the sense that this is all great, but until we get a handle on what’s actually causing this. It still might not really be as helpful as it should be.

S5: So, Emily, I want to I wanted to ask you about this. There’s this sort of meme going around on Twitter. And like I can definitely recommend if you care about mental health during these trying times, do not open Twitter. It just doesn’t help in any way. But for those of us who cannot not watch Twitter, there is this meme going around that basically all of this talk from Donald Trump about getting the economy back open again by Easter, which, by the way, he’s not even capable of doing since all of the shutdowns are done at the state level rather than the federal level. But like there’s this talk about how the Republicans want to sacrifice lives for the sake of the stock market. And this is something which I deeply do not understand, because it seems to me that if the death rate continues to rise exponentially, that can only be bad for stocks no matter how many people go back to business. Am I missing something?

S7: No. I mean, it’s idiotic. It’s it’s idiotic. On the easy level to explain, it’s idiotic to to prioritize stocks over human lives at the scale we’re talking about right now. That’s just dumb. Then I feel like this fantasy that you can just sacrifice the old people and the young people are the okay. Like as if the OWS people can be like carted off to an island or something, as if there doesn’t need to be other young people taking care of the older people who are at risk of infection also. And then of course, like as the old people that you sacrifice for the stock market, go to the hospitals, then the hospitals are overrun. And as we’ve discussed before, then that puts everyone’s lives at risk. So that’s like double. That’s like level 2 stupidity. And then like level 3, stupid. You would be just like not realizing that every human life beyond its value on a spiritual and just existential and soul way, every human life contributes to GDP and contributes to the economy. So yeah, you want to save lives because you want to save lives. But also.

S8: If you care about the economy so much, actually, you need to save lives for that reason, too. So it’s just like the dumbest thing. I think it’s just a fantasy, like to pretend like we’re making a choice to do this right now as if there’s a choice. But there just really isn’t like we need to solve the public health crisis. There’s no opting out of it with like the guy from Texas trying to sacrifice himself for Trump’s stock.

S3: Right? Exactly. I think I think that Trump has consistently throughout this crisis looked for some kind of magic bullet solution. It’s like we can contain it. We can close the borders. We can give every one chloro Quinn. We can reopen. Businesses like this is just the latest thing he’s grasping at in a desperate attempt to find something that he thinks will solve the problem. But the fact is, the only thing that will solve the problem is getting a handle on the health crisis. And the terrifying thing, certainly for those of us in New York, really for the entire planet, is that there is really no indication at all that the curve in the United States is bending at all.

S6: Yeah. And I think part of what Trump is doing is obviously making that worse now, and it’s probably going to make that worse. Moving forward, which is going to then have a negative impact on the real economy and the stock market, that if people aren’t following the rules. If people aren’t taking it seriously. If people do start going back to work far in advance of when they should. It is very likely that we will continue to see cases spike and then we’ll have to do this all over again. Like it. It really is. Emily? I mean, you’re both right. It doesn’t. It’s not a choice between the stock market and the real economy. People’s lives like they are intricately connected. This is going to be extremely painful. We have to have the government do as much as it can to mitigate the pain as we go through it. But we have to go through it or we will actually just make the economic impact worse.

S9: I do think that one of the big problems facing the United States is the fact that really the government doesn’t exist. You have the separation of powers. So you have Congress doing one thing. You have, you know, the executive branch doing its daily press briefings, which seem to be doing more harm than good. And then the actual decisions to lock down individuals and businesses aren’t done by either of those branches. They’re done at the state level by governors.

S5: And there is there was never the best of times, much in the way of coordination between the White House and governors. And given how polarized these times are, there’s less than even normal. And the one thing we really need is all of the 50 state governors to be on the same page and doing the same thing and working in coordination with each other. And there’s no coordination mechanism for that. And if there was, it would be the White House. But clearly, the White House doesn’t seem to be capable of doing that. So I just think the the sort of constitutional structure of the United States makes any attempt to really get a handle on this virus incredibly difficult.

S8: Yeah. And I think you now do. And that there was a failure of leadership at the top. I think Trump could be doing more in an unusual crisis. The president of the United States is able to sort of marshal all these are the states marshal some kind of uniform action and policy and push for something strong. But in this case, there’s a real failure of leadership. Dan, you point out even Boris Johnson’s doing a better job right now than Donald Trump.

S5: That can Boris Johnson was was terrible. Up until a couple of days ago. I mean, really bad. And there was all of these reports that his advisor, Dominic Cummings, who’s like basically Voldemort, had had come up with exactly what you’re basically talking about, this fantasy that they could get through the whole thing with lots of economic with with minimal economic harm, just by sending everyone out and sending them to work and allowing that the old to die off. And then they realized that wasn’t going to work. Reportedly, thanks to a phone call between Boris Johnson and Emmanuel Macron of France, and Macron was like, you do realise that if you do that, no one is going to be allowed to leave the British Isles and come to continent. We go for any reason at all. And Boris Johnson say, oh, right, OK. And then he just came out. And as you can do in a parliamentary democracy where the executive and legislature and the people running the making the rules for the whole country are all the same thing.

S9: He just decided to come out on television and give this address and say, okay, everyone stay at home for at least the next three weeks. And that is now what is happening. And you could make that decision and implement it in the space of basically 10 minutes. And that’s exactly what happened in India as well. You know, the prime minister just said, okay, everyone has to. Stay at home for the next two weeks and then it was done. The order was given and there doesn’t seem to be anyone in the position to do that in the United States. Even if Trump wanted to do it, which he kind of clearly doesn’t.

S6: I mean, I think, though, what we’ve seen globally is that no matter what government someone has, except perhaps in South Korea or like Singapore, it has been very, very hard to deal with this crisis in the developed world. You simply don’t have cultures and societies used to this type of government control. And so I. You’re not wrong. But I do think there are elements of the U.S. system that make it more complicated. However, you the fact that you at least do have city and state governments who have the ability to push back on what the federal government is doing is useful. You wouldn’t I mean, you wouldn’t want just from what is coming down from the top. I mean, during the Spanish flu, like part of the reason the Spanish flu spread as far as it did was because you had all of these top down governments, including United States, that they were all at war and they wouldn’t allow anybody to talk about it. Dwight called the Spanish flu the only country that wasn’t at war it.

S1: So I guess there are there are good and bad things about having the type of federal system.

S3: I mean, I would come out and say that like looking at Europe, I think that Germany and Denmark have both reacted pretty well. And the number of cases and the number of deaths in Germany is incredibly low for such a huge country, and partly because they just have a seemingly a much more effective and health system, which took it much more seriously much earlier than most other countries.

S5: I think you’re right that on some level, this sort of distributed democracy in America, it makes Singapore style response where everyone has to download an app and you know, you do contact tracing that way, extremely unlikely, if not downright unconstitutional. But I do think that we are way off to the other extreme, even compared to other Western democracies.

S8: I recommend that everyone listen to the episode of FRESH AIR from Tuesday with Max Brooks, who is Mel Brooks, his son, but also turns out to be an expert in viral pandemics, which is fictionalized, but also teaches about at West Point. And he made this really interesting point about how different countries are responding to Corona virus. And he pointed out that countries that are in more of have more of a siege mentality that are like in wars or kind of cold wars like Israel or South Korea are doing a better job marshalling their citizens and getting them to sort of do what they have to do to fight the virus. Because these are populations that are kind of used to being under siege and at war. And the United States in 2020 is not that kind of population at all. In fact, we’ve like relaxed all these different things that, you know, we used to do to be ready for nuclear war and stuff like that. So I thought that was sort of an interesting corollary to that, that everyone’s sort of saying, you know, our democracies are like uniquely bad at this, but a part of it is like that peacetime attitude. We’re not really prepared to sort of like get all together as a country and fight a thing like that’s just not our jam anymore.

S6: Well, I also think that you have a lot of Asian countries, democracies and less democratic that also went through SaaS, that also have been through things like this before. So it was easier to respond.

S3: Yes. Yes, that too. So all of that stipulated. Is this two trillion dollars from Congress going to hell?

S5: I mean, will it at least allow companies to keep their employees on payroll to get through the crisis for, you know, when the vaccine finally arrives or we come out the other side or that seven-time or something like can we at least say, well, Congress has done something useful here and we should be very happy that it has?

S8: Well, we should say first we’re taping this Wednesday morning and when we got on. No one had actually seen the bill as written. However, it does look like there are some good things in it, specifically from my point of view, the unemployment insurance. I think Schumer called it unemployment insurance on steroids or something. It basically beefs up so that some people who get laid off can get 100 percent wage replacement for the law on the lower end because it adds like $600 a week to unemployment insurance benefits, which aren’t really that great. So I think that’s a good thing. I have nothing bad to say about that and even extends unemployment insurance to dig workers and contract workers, which is a big deal. So that seems good. But as far as the loans to companies, I was curious what you guys thought about that because it’s gone through some stages. At first it was going to be like no string loans to companies and they wouldn’t even have to disclose it for six months. But I guess. There is a lot of pushback from Democrats, so that piece has gotten better, but I don’t know what to make of it yet.

S3: I mean, the classic thing that happened on Tuesday was that the new Boeing CEO, Calhoun, came out on CNBC.

S5: I think it was saying like, well, if the government wants to take any kind of an equity stake as part of this bailout, we will just cope without that bailout. Thank you very much. We don’t need that money as everyone’s great. In that case, don’t take their money. No one laid. There is still this weird sense of sort of denial floating around the court. There’s fear. And there is also, I think, this feeling that in two trillion dollar bill, there’s going to be so much random pork that lobbyists can just give themselves whatever they want without people really noticing. We’ll see what finally happens for Boeing and the airlines and the cruise industry and the other people sort of more directly affected. But in general, I think the way that the structure has been put together is that the government wants to give secured loans, basically super senior loans, which means that if, you know, there’s there’s relatively little risk.

S3: And if the company does sort of wind up going through bankruptcy or something, then the government will wind up with an equity stake and will wind up owning some of it. And I think it’s a relatively sensible way of doing it. The same way that they want to do the small business loans is to say this is a forgivable loans, but they’re still loans. And if you manage to keep everyone on payroll, if you wind up employing everyone on the other side, we will forgive the loans. But if you just fire everyone and run off with the money, you know, then you owe us the money back.

S8: Yeah, I think it’ll be interesting to see what happens to big versus small companies coming out of this because you’d think the big companies are going to make it through loans, Federal Reserve, blah, blah, blah. They’re really big. Amazon’s going to do awesome. Seems like Wal-Mart’s doing great. But then all these little companies, it’ll be interesting to see who makes it and what kind of society we come out with after that. Like how how much inequality is exacerbated by this crisis will be something to watch and try and, you know, account for and not have happened so much as speaker.

S6: I mean, I know, but I think that this you know, if we see the type of GDP contraction that you have, a lot of analysts forecasting, this is going to be rough for all companies, you know, regardless. Right. You know, companies are just not designed for these types of numbers. So I think what the government is doing in terms of stimulus, what the Fed is doing is right. But there is going to be pain down the line from the top to the smaller companies. And I agree with you that I think smaller companies, despite these loans, are really going to struggle. And I do think that perhaps one of the things that will come out of all of this is that, you know, we’re already seeing policies being put forward that would have seemed unimaginable a month ago. So you do wonder if maybe I don’t know, like maybe when we come out of this policies such as giving better access to health care and these kind of things could actually be more possible because we have, you know, not just like widen the Overton Window, we’ve just like broken it with a sledgehammer.

S1: I think you’re absolutely right. And we’ll see what happens to the health care bills in a few months.

S5: We don’t know what’s going to happen yet, but there will be massive hospital bills for that, for, you know, hundreds of thousands of people which they won’t be able to pay. And the government is going to have to do something about those bills. And that thing that the government does about those bills, whatever it turns out to be, could well end up becoming the basis of the way that the US health system evolves over the long term, or at least the medium term, which we all talk about more on our full length episodes of Slate Money coming out on Saturday morning.

S2: And Emily, thanks for joining me today. Thank you. Bye.