The Coronavirus Aid, Relief and Economic Security (CARES) Act Is Not Enough

A Statement by the Progressive Democrats of Orange County
March 27, 2020

How we as a society respond to the COVID19 crises depends on how we answer what should be a simple question: Does the economy serve human beings, or do human beings serve the economy? But, to be brutally honest, there are differing views over what is most important: the people, buildings and capital equipment that comprise the real economy that actually produces and distributes the goods and service that support and sustain human life, or the financial values tracked in the financial and accounting ledgers that supposedly represent the real economy. 

The economy is the people in the economy, not the numbers in ledgers. It is people who make and consume every single service and product. Capital goods and real-estate are not killed by the coronavirus. If you want to protect the economy what you do is protect the people. If the people are still there at the end of the pandemic you can have the economy back… ” — Ian Welsh

On March 24, 2020, statements by President Donald Trump made clear that his administration believes the financial values are more important than human life. A chorus of voices in the Republican Party arose to support him.  

As progressive Democrats, we unconditionally reject the values reflected in President Trump’s statements and actions in these crises. In our view, Trump, and the Republican Senators and Representatives who support him, have fundamentally violated their oaths to uphold the Constitution’s mandates to provide for the common defense and promote the general Welfare. Despite clear and repeated warnings of the inevitability of a global pandemic, they have defunded and dismantled the government agencies and programs that had been built to protect the American people from pandemics, and, from the very beginning of this crisis, they have ignored and marginalized the medical and scientific experts who have tried to reason with them and persuade them to take the steps needed to protect the public’s health. 

The scope of the economic crisis upon us is unprecedented. The collapse in employment, production, sales, and distribution — and in the financial markets — now exceeds what occurred at the beginning of the Great Depression. But that collapse occurred over two years, beginning in October 1929. The collapse we are living in has occurred in two weeks. In 1933 the highest rate of unemployment during the Great Depression was 24.9%. Federal Reserve Bank of St. Louis President James Bullard warned on March 22 that unemployment may reach 30 percent within the next month. On March 26, it was reported that 3.28 million Americans filed for unemployment benefits the previous week, nearly five times the previous worst report of 695,000 in October of 1982. Over 37 million U.S. jobs have been identified as vulnerable to layoffs in the next few weeks.

In response, on March 25, the Senate unanimously passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, providing $2 trillion in aid and stimulus. However, White House economics advisor Larry Kudlow announced it is a $6 trillion package, because it includes authority for the Federal Reserve to lend up to $4 trillion to corporations, and also to state and local governments.  

The Progressive Democrats of Orange County (PDOC) are greatly concerned that in this $6 trillion package, the amount allocated to assist Americans through direct payments is only $300 billion. What is the remaining $5.7 trillion actually for? Are we about to experience a repeat of the 2009 bailouts, in which the Wall Street banks were bailed out, ten million Americans lost their homes, millions more lost all or much of their savings, and the big banks and Wall Street firms that caused the 2008 crisis emerged larger and richer than before?

It is not clear if and how the CARES Act will ensure that this $2 trillion in public money will be directed toward saving the lives, jobs, and wages, of working Americans, rather than the wealth of shareholders, creditors, and corporate executives.

Here is what a government that truly serves the people must do:

  • Ensure vital medical supply needs are being met. Medical care providers are already experiencing shortages of supplies, equipment, and drugs. War powers acts must be used to order and coordinate the manufacture of ventilators, masks, gloves, gowns, goggles and other supplies and equipment.  The Atlantic reported “A recent analysis from the University of Pennsylvania estimated that even if social-distancing measures can reduce infection rates by 95 percent, 960,000 Americans will still need intensive care. There are only about 180,000 ventilators in the U.S. and, more pertinently, only enough respiratory therapists and critical-care staff to safely look after 100,000 ventilated patients.”
  • Prepare for a spike in critically and terminally ill patients. Expedite the deployment of the Navy’s two hospital ships to coastal cities. Prepare the Army for the building and staffing of temporary field hospitals, drive-through clinics, and emergency health centers. The Defense Logistics Agency managed logistics during the 2014 Ebola outbreak and its expertise and resources should be used, 
  • Make direct payments to individuals and families.  A Universal Basic Income of $2000 to $4000 per household per month for the next three months would be a good start. The Supplemental Nutrition Assistance Program (food stamps) should be extended and broadened as well. This is the only way to ensure that families’ basic needs will be met while the crisis is ongoing. If we do not do this, we will have a desperate, hungry, and destitute populace.
  • Publicly fund emergency hiring. Millions of American were saved from literal starvation by President Franklin Roosevelt’s Civilian Conservation Corps and Works Progress Administration. If jobs continue to be lost at the rates they are now, there must be direct emergency hiring by the federal government. This will help to adequatly staff health facilities, and provide support services for the sick, elderly, hungry, homeless, and most vulnerable. And it will help meet the enormous manpower requirements needed to disinfect hospitals, care centers, airports, schools, and critical public places. Emergency hiring by state and local governments should be mostly or fully funded by the federal government. 
  • Protect workers. Workers must be assured that they will be given protections when they return to work, and will not be at risk of contracting COVID19. Almost 56% of US production and non-supervisory jobs (about 59.5 million jobs) pay less than the national average. Many of these are front-line, customer-facing jobs, such as clerks and stockers in grocery stores and gas stations. Governors of some states have already declared these jobs as “essential.” 

Since Trump and the Republicans refuse to provide national leadership, it falls to state and local governments to do what they can to protect the citizens resident in their jurisdictions.

The federal government should also fund responses at the local level

  • Healthcare. Testing and treatment occurs at the local level, and health care and health insurance are regulated at the state level. To stop the epidemic, people without health insurance must have their COVID19 tests and medical care completely covered. There should be no question about payment: it is a national health emergency cost. Otherwise, people without health insurance are unlikely to seek medical care until it is too late, and more likely to place a crushing burden on emergency rooms. An uninsured person is likely to be a sick person, and a vector for additional infections.
  • Keeping businesses alive. Businesses are licensed at the state, county and city levels. Counties and cities have the records of what businesses are legitimately operating, and what their revenues are. Local officials are therefore better and faster at assessing the conditions and needs of the businesses in their jurisdictions.  

    We highly commend the recent actions taken by the Orange County Board of Commissioners, as communicated in a March 25, 2020 message from Commissioner Sally Greene. Not only has the OCBC issued a “stay at home” order for Orange County residents, OCBC has repurposed the county’s Article 46 sales tax revenue to aid local businesses crippled by the sudden loss of revenues as their customer base disappears under social distancing.  

    Orange County’s Article 46 sales tax revenue amounts to only $300,000 however — about what a single local business, such as a restaurant, beautician, or physical fitness center might see as total revenue in a single month. The county itself simply does not have the resources required to keep small businesses open. Nor does the State of North Carolina. According to one estimate, at a national level, “the cost of replacing 80 percent of the revenue for three months of private-sector firms with fewer than 500 employees, excluding the manufacturing, health, education, and finance industries, [is] $1.2 trillion.”

    The hundreds of billions of dollars earmarked in the CARES Act for bailout of large companies should be immediately redirected to funding programs run by state, county, and local governments. The response by Orange County should be modified to pass through federal funding, and offered as a model to the nation. 
  • Unemployment insurance is administered at the state level. People who have lost jobs or working hours still need an income to buy food and pay mortgages, rent and other bills. The federal government should provide states with ample funds to replace workers’ lost wages, and require that the funds be directed to workers. (Several European countries are replacing 80-90% of wages for their citizens during this crisis). 
  • Moratoria. We want to prevent anyone from losing their home, their business, their apartment, their vehicles, and their health insurance during these crises, which may last for months. It is unlikely that a one time payment of $1,500 — or any similar amount — will suffice. The CARES Act already includes a 60 day foreclosure moratorium on homes with mortgages backed and held by the government sponsored agencies Fannie Mae and Freddie Mac, or insured by the Department of Veterans Affairs or the Department of Agriculture. What is really needed is a debt jubilee, or at the very least, a bank holiday like Roosevelt imposed in 1932. There has to be a complete moratorium on foreclosures, evictions, debt collections, etc. This should be the minimum accomplished by any bailout package.
  • Demand an equity stake from companies. The current corrupt legislative process in Washington makes it impossible to avoid the hundreds of billions of dollars of corporate pork inserted by lobbyists. Therefore, a minimum requirement for any bailout must be that any corporation accepting government assistance gives our government an equity stake. As the Economic Policy Institute explained in a report on March 25, 2020: 

“[Impose] a key test for whether corporations genuinely need public aid or are simply trying to exploit this crisis to grab public money by demanding these companies give the federal government equity stakes in exchange for immediate aid. By granting the government equity, these companies would dilute existing shareholders’ claims on future profits. If these existing shareholders are unwilling to allow this dilution, this is a clear sign that they firmly expect the company to continue operations even without a bailout. This can be seen in Boeing’s response to suggestions of granting equity stakes in exchange for aid—the company said clearly they would find other ways to cope. But if there are other ways to cope, then a bailout is, by definition, not needed.”

  • How do we pay for it all? The COVID19 crises are forcing Americans to realize that the past half century of attacks on “big government” have crippled the ability of our national government and our economy to protect us from pandemics and other non-military threats. Since the financial crash of 2007-2008 there has been a war of ideas and ideologies over the role of government in the economy, and the danger of deficits. It is clear to all but the most ideologically blinded that organizing an economy only on the principles of selfishness and self interest does NOT create the most optimal social results. It is similarly clear that making the principles of selfishness and self interest paramount creates harmful and unwanted social, psychological, emotional, health, and environmental results. In a republic, the people have the sovereign power to collectively use government to reshape and direct the economy in ways to ensure better social results.

    As economic anthropologist David Graeber wrote in December 2019

We now live in a different economic universe than we did before the crash. Falling unemployment no longer drives up wages. Printing money does not cause inflation…. The question of money creation became a critical bone of contention. The overwhelming majority of even mainstream economists [have] long since rejected austerity as counterproductive (which, predictably, had almost no impact on public debate).

Our national government is not like a household. Our national government has no constraints on how much money it creates or how much it spends other than whatever limits we choose to impose. Up to now, those limits have been based on ideas of economic governance that have been proven by events to be faulty and misleading. These crises can only be solved by discarding those faulty ideas and replacing them with the direct government interventions outlined above.. 

FURTHER READING

Mitch McConnell Is Robbing Taxpayers to Bailout the Rich Creditslips 3-24-20

Congress to bail out firms that avoided taxes, safety regulations and spent billions boosting their stock Jonathan O’Connell, Washington Post, March 25, 2020

Stop the $6 Trillion Coronavirus Corporate Coup! By Matt Stoller, March 25, 2020

Republicans are angry that Democrats want to do too much for the economyWashington Post lists some of the things that separated the two parties…

Against Economics, by David Graeber, December 5, 2019 issue of New York Review of Books, 

A review of Money and Government: The Past and Future of Economics, by Robert Skidelsky (Yale University Press, 2019)

We are all Modern Monetarists now

Daniel Alpert, March 22, 2020 [Business Insider, via The Big Picture 3-24-20]