October 26, 2021 @ 7:00 pm
This material originally appeared on the OnTheTopic blog at https://onthetopic.org/2020/08/13/proposal-to-reopen-by-first-saving-america/. It is re-posted here by permission.
The current debate about when and how to reopen schools and colleges misses the point. Of course we have to reopen schools. Just like we have to reopen businesses. Not only do we have to educate our kids, but parents can’t work without schools for their kids. Schools and the economy are linked: No schools, diminished economy; diminished economy, too little money for feeding, housing, and educating kids and their families. It is a downward cycle.
As businesses are pushing workers to return, helped by pressure from expiration of enhanced unemployment benefits, workers will get sick and neither be able to work nor to care for their children. And, customers will be afraid because of the sick workers, further driving business down. As more workers become ill, more customers will be afraid. Another downward cycle.
School, business, and health are inextricably linked. You can’t solve one problem without solving them all. This may sound hopeless, but it’s not. It is a national emergency that requires bold, direct action. First save America, then reopen.
Here’s my proposal in a nutshell: Implement a strict nationwide lockdown to defeat the virus and support people’s needs during the lockdown with large, direct payments.
The rest is detail. (But I hope you’ll read it!)
The solution is simple, but difficult. It will take courage, real patriotism (not just the flag-waving kind), and shared purpose across the land. Here are the steps:
Our nation’s political leaders must admit, at least to themselves and in their hearts, that we’ve bungled our response to COVID. The disease is spreading fast, many people are dying, many more are being damaged for life, our kids aren’t being educated, and our real economy (not the stock market) is failing. Our country is being diminished by the day and we can only solve it by working together and with urgency.
Good leaders have the courage to admit error and to change course. Voters can forgive making mistakes, but they won’t forgive leaders who stick their heads in the sand while awaiting a magical solution.
All of our political leaders must tell the truth going forward. Our leaders must establish credibility, which is sorely lacking now. Credibility will encourage people to follow the “tough love” needed to get through this crisis together. Lack of credibility will even make people reluctant to accept good news, like an effective and safe vaccine, because we won’t know whether the good news is true or yet another lie.
We know the drill. Only “essential” businesses, or businesses where work-from-home is possible, stay open. Define “essential” narrowly, based on what’s needed to keep people fed and housed. People generally stay at home. Require masks and social distancing elsewhere.
We started this in March, but didn’t follow through nationwide and reopened too quickly. But our experience this spring and the experience in other countries shows that a lockdown will stop or nearly stop the spread of the disease, saving many lives. Moreover, reducing transmission to a low-enough level is the only way to get schools open and the economy going again.
This second lockdown can’t be half-hearted like the first one. Bombard the public with specific, consistent, insistent messaging through all channels. Political leaders of all persuasions need to get on board and lead by example. Everywhere. All the time. This is what patriotism is about: shared sacrifice in service to the nation. We’ll know this is happening when we see the talking heads on both CNN and Fox News giving the same recommendations to their viewers.
Define stringent criteria for when lockdown can be eased and when it must be strengthened. Listen to the epidemiologists. Intuition from politicians doesn’t pass muster in such a complex situation. We have people who know how to model transmission and can tell us when it is safe to reopen various sectors of our economy. Listen to them.
The direct impact of a lockdown on people already living paycheck-to-paycheck is devastating. To make a lockdown feasible, the federal government must sustain such people. This is a big topic, which I discuss next.
Let’s keep in mind the goal — sustaining people — and ignore the side goals that have plagued previous COVID relief bills. We’re not trying to prop up large corporations, the stock market, or even the local pizzeria. Such goals might be laudable, but that’s not what I’m talking about here. I’m talking about how we keep people fed and housed.
The simplest approach is to give everyone money. Yes, I said everyone. Why? Because determining who really needs support is complex, politically charged, and bureaucratic. Just look at the CARES Act Payroll Protection Program’s (PPP) attempt to help small businesses: In practice, getting money required that a small business had the right kind of relationship with a bank and access to knowledgeable help from lawyers or accountants. The result was that many businesses that needed help didn’t get it and many that didn’t need help got it anyway. Making it simple helps make it fair.
Making it simple also eliminates the need to pay large fees to banks ⏤ PPP fees could exceed $24B.
So, let’s just bite the bullet and support everyone.
Reasonable people will choose different subsidy amounts depending on their priorities. My priorities are that no one should go hungry for lack of money, people should not face eviction and homelessness, and our consumer-based economy should not totally collapse. Here’s my rationale.
Median personal income in the US was $33,700 per year in 2018. By definition, half of working-age individuals earn less than this and half earn more. Let’s give each individual the median income, $2,800 per month, for the duration of the lockdown.
The lowest-earning half of individuals, those most likely to face hunger, eviction, and homelessness without help, would be better off than before, even if they lost their jobs. The lockdown would no longer throw them and their families into dire poverty. Some would even be able to accumulate some rainy-day savings or pay down high-interest debt.
The higher-earning half of individuals would be better off if they kept their jobs, but not if they lost their jobs.
In December 2018, there were 206.7 million working-age people. So, this level of support would cost about $579B per month. Federal income tax revenue on these payments would offset some of the cost.
Yes. As a comparison, the CARES Act is estimated to cost about $1.8 trillion, assuming that some federally-guaranteed loans are paid back, more if the loans are not repaid. If we can afford the CARES Act, we can afford to do this. A three-month lockdown would cost less than the CARES Act.
We could get into a political argument about whether it is good for the US to increase its deficit spending. For 40 years, Republican dogma has been that deficits cause inflation, yet when Republicans are in power they increase deficit spending, primarily to help corporations and the very wealthy, giving us many data points about deficit spending and inflation. There’s no evidence that deficit spending in the US causes inflation.
This is especially so now, when the Federal Reserve has been “printing money” by making huge bond purchases. These bond purchases prop up the economy by keeping interest rates at historic lows (around .5% for 10-year Treasuries). Most of that printed money is flowing into the stock market, not helping people. If we can “afford” to spend money for that purpose, we can afford to spend money to help people directly.
We must stop the pandemic. If we continue to let it fester, it will destroy our country, much like other plagues and cataclysmic events throughout time have destroyed past empires. Self-preservation demands that we take action and the only action we can take now is to follow public health recommendations for a lockdown.
But we can only implement a lockdown if we reduce its devastating impact on much of the populace. If we fail to help people through the lockdown, we will not be able to sustain it for long enough to defeat the pandemic, which will again send the economy into a tailspin.
Moreover, we have to keep services provided by local and state governments alive. Taxes, mostly sales and property taxes, fund these services. If people are not earning, they’re not spending and paying sales taxes. If people are not able to pay their rent or their mortgages, they’re not paying property taxes. Putting money in the hands of the populace not only keeps them fed and housed, but keeps critical services funded. (Further help to state and local governments may nevertheless be necessary.)
There is no other choice if we want to save America.
The political issue is whether Congress is willing to spend money to directly help people as opposed to the usual indirect approach of funneling money to banks and well-connected large corporations, and hoping it trickles down. The CARES Act shows that there is some hope for the more direct approach: About a quarter of CARES Act money went directly to people (see a breakdown here), so there’s some willingness to spend money to help people.
But, the news is not all good. Republicans in Congress are now worrying out loud that enhanced unemployment benefits cause recipients to be lazy and not want to work. Even if their worry were justified (there’s evidence that it is not), so what? When the lockdown is over, people will need to return to work.
Importantly, we need to recognize that during the lockdown we want most people to stay at home, not showing up at work while possibly infected because they need money to pay the rent and feed their family. That’s why generous, direct funding of households is essential.
Congress (both parties) seems happy to send huge amounts of money to large corporations that don’t really need it. Why would we do that but at the same time only help people who “need” it?
One rationale politicians use is to preserve jobs. But large corporations have access to private sources of funding. Corporate borrowing is as cheap as it has ever been. Besides, it would be good if some corporations restructure through bankruptcy: Maybe corporate leaders would learn to keep adequate cash reserves rather than spending too much of their earnings on stock buybacks.
Importantly, the absence of strong opposition to the CARES Act’s Economic Impact Payments to most households ($1200 per adult earning $99,000 or less, $500 per child), regardless of income level under $99,000 or employment status, gives hope that members of Congress could be comfortable that their electorate would perceive this proposed program as fair.
Businesses only survive if they have products or services to sell that attract customers with money to spend. Consumers drive large parts of our economy. Ensuring that consumers have money to spend will help most of our businesses. And, ultimately, no subsidy will help businesses that don’t have customers willing and able to buy. One way to support local businesses during the lockdown is for households who don’t need their whole subsidy to give money to support local businesses that are important to them. This seems preferable than the bureaucracy-heavy PPP approach.
There will still be people who believe in the (discredited) trickledown theory of economics, that the best way to help others is to give money to corporations and the wealthy. Such people, especially those in high-income households who will receive but not need the subsidy, should put their money where their mouth is by donating their household subsidy to their favorite businesses or corporations.
Since everyone will be receiving a subsidy payment, why would anyone want to work in an “essential” job? There are several reasons. First, employees will know that they’ll need employment post-lockdown, which might provide incentive to keep working. Second, and more importantly, essential businesses that need more employees during the lockdown will raise wages to attract them. Individuals will balance extra earnings against risk, with workers in different risk categories possibly making different decisions.
Likewise, essential businesses will make varying decisions about how they operate during the lockdown. Some may cut back products and services that they provide to avoid needing to hire more workers; others may raise wages to attract more workers so they can maintain their usual services. Among those that raise wages, some may raise prices to maintain or increase profits, while others will absorb the temporarily increased labor costs as a way to endear customers to them post-lockdown.
In the 2007 recession, banks were pummeled by inadequate capital with which to withstand the deluge of loan defaults. Supposedly, they’re in better shape now, but we shouldn’t count on them having adequate capital to withstand massive defaults. This proposal puts money into the hands of people with credit card and mortgage debt, which will reduce the risk of bank failures or the need for federal government bank rescues.
This is a two-step proposal to save America: (1) Defeat the virus by a serious lockdown and (2) help people through it by giving them plenty of money to meet their needs (and possibly more) during the lockdown.
It gives money directly to the people and it gives every working-age person the same amount regardless of whether or not they “need” it. This keeps the program simple, free of excessive bureaucracy, and fair. It costs a lot but delivers a lot. It puts decision-making about what businesses to support in the hands of the people who know best, not in the hands of lobbyists and campaign contributors. Both Democrats and Republicans should like parts of it.
The Progressive Democrats of Orange County are deeply disappointed with and condemn Representative David Price’s vote to approve the disastrous 2020 National Defense Authorization Act (NDAA). The day after the Democratic House introduced articles of impeachment, which charge Trump with High Crimes and Misdemeanors, they then gave him $738 Billion to continue our endless wars, stripped the amendments that would have ended our involvement in the Saudi-led humanitarian disaster in Yemen, reversed the Transgender Ban, and forbade the President from going to war with Iran without congressional approval. They also approved the creation of a new military branch to oversee the satirical-sounding Space Force. Was all of this just in exchange for 12-weeks of paid parental leave for Federal employees and a meager pay increase for military service members?
Interestingly, there were no questions about how we would pay for all of this. When it comes to war and feeding the military industrial complex, money is never an issue.
Representative Price’s vote also comes just days after a bombshell report by the Washington Post that shows that the Afghanistan War has been a multi-trillion-dollar utter disaster and failure.
One of the most powerful tools available to the Congress is the power of the purse, and with this shameful vote, Congressman Price has abdicated his responsibility to be a watchful steward of our public dollars.
Watch Congressman Ro Khanna’s passionate remarks against the NDAA:
Please call Representative Price at 202.225.1784 to tell him how you feel about this awful vote.
Dear PDOC member – Please see Action at the end of this post.
Many state and local governments have a fiscal year ending this month AND are required to have balanced budgets. This means that a tsunami of government layoffs is about to hit, and drive the entire economy deep into an economic depression. (The layoffs have already started – 1.5 million state and local government employees have been let go in the past two months).
This economic catastrophe will strike in the next few weeks as state and local governments struggle to balance budgets while experiencing an unprecedented collapse in revenues. Many states are reporting an expected drop in tax receipts of as much as 25 percent. County governments are also reporting the same size negative impact on their revenues. With state and local governments accounting for 14 percent of US GDP, we are about to see three to four percent of the national economy wiped out.
The Federal Reserve has the power and authority to head off this catastrophe in one 8 hour workday, as David Dayen explained in “The Federal Reserve Can End the State Fiscal Crisis Today.” In the CARES Act, Congress authorized the Fed to establish a $500 billion Municipal Lending Fund (MLF). The Fed has used that MLF authority only once – to provide a $1.2 billion loan to the state of Illinois.
Moreover, the Fed can structure the MLF in any way it wants. It can effectively turn all loans to state and local governments into grants by eliminating the interest rate, indefinitely rolling over principal payments; or make them optional; or extend the maturities to 100 or 200 years, or any period selected.
On June 16, 2020 in “Growing Pressure on the Fed to Save State and Local Governments,” Dayen described a campaign now underway to create grassroots pressure on the Fed to provide large-scale emergency funding to state and local governments to avert this looming budget catastrophe. This campaign invokes the Federal Reserve’s legal mandate to maximize employment.
“Letters are being distributed among city and state officials right now urging the Fed to either fix the MLF or move to a 14(2) swap line with indefinite rollovers. This is an active and extremely worthy fight. The Fed is designed to protect employment and prevent recessions. State and local funding is the biggest threat out there. The Fed needs to do its job, not trifle with asset inflation.”
The full text of the letter was written by Cornell University Law School professor Robert Hockett, who has served as an adviser to Congresswomen Alexandria Ocasio-Cortez. Hockett’s six-page letter is addressed to Federal Reserve chairman Jerome Powell, and goes into minute detail about the Fed’s authority, how it has structured the Municipal Lending Fund (MLF) so far, and what changes the Fed can make to immediately solve the looming catastrophe to state and local government budgets. Hockett’s letter was printed in full in Forbes magazine on June 14, 2020, as “Optimize Community QE – An Open Letter to Fed Chairman Powell.”
Below is a one page letter and a brief phone script to Fed Chairman Powell, drafted by the Progressive Democrats of Orange County, urging Chairman Powell to immediately implement Hockett’s recommendations.
We are asking you to forward it to Fed Chairman Powell, and to Federal Reserve Bank of Richmond President and Chief Executive Officer Tom Barkin. (The Federal Reserve Bank of Richmond is one of the 12 regional Federal Reserve banks and covers the state of North Carolina.)
We also strongly recommend its distribution to elected officials including state legislators, county commissioners, city and town mayors, and council members.
Jerome Powell, Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue N.W.
Washington, DC 20551
General operator: 202-452-3000
Live person will answer and ask who you would like to reach.
Calls to Powell will probably be sent to Fed Public Affairs to leave a message
Tom Barkin, President and Chief Executive Officer
Federal Reserve Bank of Richmond
Post Office Box 27622
Richmond, VA 23261
General operator: 804-697-8000
Dial 1 (one) to request by name
Say “Tom Barkin” when prompted
Confirm “Yes” when asked if you want to reach Barkin
Letter to Federal Reserve Chairman Jerome Powell and
Federal Reserve Bank of Richmond President and CEO Tom Barkin
Dear Chairman Powell:
We are writing to request that you move promptly to use the authority given the Federal Reserve by the CARES Act to avert a national economic catastrophe that could occur when the fiscal years of many state and local governments come to an end on June 30, and they are forced to drastically cut services and employment to meet legally-mandated balanced budgets for the upcoming year.
Just in the past two months, state and local governments have dismissed 1.5 million employees.
As you know, one of the most severe drags on recovery from the 2007-2008 Great Recession, was the budget austerity imposed on state and local governments, which crimped spending and hiring. Under the authority granted by the CARES Act, the Federal Reserve can move immediately to prevent this from happening again, as well as to prevent the present situation from rapidly deteriorating,
We wish to bring to your attention the letter addressed to you, published on Forbes magazine website June 14, 2020, by Cornell University Law School professor Robert Hockett, “Optimize Community QE – An Open Letter to Fed Chairman Powell.”
Very briefly, Prof. Hockett recommends the Fed extend MLF assistance as widely as possible by
Prof. Hockett explains each of these points more fully in his “Open Letter to Fed Chairman Powell.” We urge your immediate and careful attention to Professor Hockett’s letter, and the prompt implementation of his recommendations.
Progressive Democrats of Orange County
Chapel Hill, NC
Suggested Phone Call Script:
Hello! This is _____ calling from _____, _____, I want to urge Chairman Powell (or President Barkin) to use the Federal Reserve’s authority under the CARES Act to lend to state and local governments, which are now in crisis because of the collapse of revenues due to the epidemic and the economic shutdown. As Cornell University law professor Robert Hockett explains in an article on the Forbes magazine website this past week, there are a number of changes the Fed can make to the $500 billion Municipal Lending Fund, to rescue state and local governments and prevent catastrophic damage to the economy. The article is entitled “Optimize Community Q E – An Open Letter to Fed Chairman Powell.” I request your immediate attention to Professor Hockett’s open letter, and the prompt implementation of Professor Hockett’s recommendations.
Please tell Chairman Powell (or President Barkin) I request their immediate attention to Professor Hockett’s open letter, and the prompt implementation of Professor Hockett’s recommendations.
Injustice anywhere is a threat to justice everywhere.
The Reverend Dr. Martin Luther King, Jr.
The Progressive Democrats of Orange County stand in solidarity with our brothers and sisters who continue to be the victims of racially motivated discrimination, violence and murder. We add our voices to the millions of Americans who believe in and fight for an end to the historical and institutional racism that is a bloody stain spread across our nation.
We add our voices to the calls for justice. We will not be silenced until systemic racism is banished and every person has the basic human rights of a free and fair society – equal justice, access to quality health care, housing and education, equal opportunities for employment and equal environmental protections. We must undo economic oppression from a system that flows profits from the hard work of the many into the hands of the few.
We mourn with the families and communities whose men, women and children have been murdered by the racist police state, died from neglect by the racist health care industry and wrongly incarcerated by the racist criminal justice system.
We will remember and speak the names of George Floyd, Ahmaud Arbery, Breonna Taylor, Philando Castile, Eric Garner, Trayvon Martin, Jonathan Ferrell, and so many more.
This litany of death and devastation must end. White Supremacy must end. Discrimination against people of color, oppression of those living in poverty and gender-based injustice must end.
We call on all of those who care about justice to raise their voices, loudly and continuously, until our country dismantles all racist and oppressive systems, and to exercise our rights by voting out any leaders who will not immediately work to undo all forms of discrimination, including voter suppression.
We are better than this. It’s time to prove it.
On behalf of PDOC – Rebecca Cerese, Susan Siegel, Tony Wikrent, Keith Cartwright, Kathy Kaufman, Wamiq Chowdhury, Dan Brenner, Marguerite Most, Lee Nackman
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