- The US economy is facing a pandemic-induced fiscal cliff, and Republican bickering about to handle it is likely to push it over.
- In a few weeks the extra boost the federal government was giving to unemployment checks will run out, and state and local governments will have to balance their budgets.
- But the coronavirus pandemic is still raging, with an average of 20,000 cases nationwide per day. Federal Reserve Chair Jerome Powell says that means economic activity is likely to stay muted.
- So Republicans should stop being delusional and join Democrats in passing another rescue bill, fast.
- This is an opinion column. The thoughts expressed are those of the author.
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Dithering and bickering from President Trump and Senate Republicans could push the US economy off a cliff. Instead of joining with Democrats in the House to pass another economic rescue bill, they’re fighting about what kind of aid to give and when, about whether the pandemic is over or not.
No one has time for this.
In seven weeks, the extra $US600 dollars a week in unemployment benefits that millions of Americans are relying on to help them through the coronavirus will expire.
At the end of the month states and local governments will need to somehow balance budgets with the incomes decimated by a lack of tax revenue and economic activity.
And sooner rather than later the money the government was handing out to small businesses in the form of Paycheck Protection Program loans will run dry.
All of this will happen long before the coronavirus pandemic has finished ravaging our nation, and our economy with it. This week 1.5 million more Americans applied for unemployment benefits. It’s better than the week before, but still a stunning number. Meanwhile, states like Arizona, Florida and Texas are seeing COVID-19 cases explode like never before. This is not a second wave. Their first wave has just begun.
So one would think that, seeing that the crisis is not yet over, President Trump, Senate Leader Mitch McConnell and their fellow Republicans would be rushing to extend the programs that have been keeping our economy on life support. But they’re not. They’re slow walking any proposals that would continue aid, or pushing back against additional aid altogether, threatening to pull the cord before the EKG machine is showing any real signs of life.
Numbers that matter, and numbers that flatter
On Wednesday Federal Reserve Chairman Jerome Powell testified before the Congressional House Banking Committee. It was just a day after retail sales numbers showed a 17% increase in activity from April to May, and it gave Republicans at the hearing hope that the economy was on the mend.
To think that is complete and utter folly. While month-to-month retail sales numbers show improvement, a year-over-year comparison shows retail sales down 6% from May 2020 to May 2019. Retail sales from March 2020 to May 2020 were down 10.5% compared to the same period the year before.
That’s the comparison that really matters – the comparison between what are economy was doing before the coronavirus and what it can do while we’re still trying to fight it off.
Of course, Republicans don’t see it that way, and they did not want Chairman Powell to see it any other way either. Throughout the hearing Powell tried to say in a bunch of different, delicate ways, that the economy still desperately needs fiscal help in the form another bill from Congress reupping rescue programs for individuals, small businesses, and state and local governments.
He tried to explain that until the coronavirus pandemic is over the country will not return to full economic output. He said that the pandemic remained “acute” risk to small businesses that often represent the work of generations. He reminded Republicans that state and local governments employ 13 million Americans and that layoffs would be catastrophic for communities nationwide.
Powell said that the CARES Act, which provided the assistance America continues to need was making a “critical difference…in limiting long lasting damage to our economy.”
To all that North Carolina Rep. Patrick McHenry, the Ranking Republican on the Banking Committee, simply told Powell to “stick to monetary policy.”
The pandemic decides when the pandemic is over
Despite surging cases in states across the country President Trump told the Wall Street Journal this week that the coronavirus pandemic is basically over. He wants to move on, and it’s clear his party of zombies is willing to move on with him.
Unfortunately, they don’t get to decide that. Only the pandemic decides when the pandemic is over – at least, until there’s a vaccine. Until there’s a vaccine there will be muted demand as people consume and travel less. Paying people to go back to work, as some in the White House has proposed, will not change that demand picture. Again, this country is still losing over 1 million jobs a week.
Trump and his party’s magical thinking is not only belied by the dismal year over year comparisons in our economic data, but also by what’s happening in China – the country with the most experience with this pandemic. There, fears of a second wave are just beginning.
Last week Beijing went from an emergency response level three to level two after an outbreak of coronavirus at a local market. Cases related to that outbreak have already been reported in other provinces. This after the city had reported zero domestically-transmitted cases in 57 days.
Now Beijing schools have been closed, ride sharing cars and taxis have been ordered not to leave the city. Chen Bei, deputy secretary-general of the Beijing municipal government described the situation as “grim.” Even after the draconian action China took forcing the entire country into their homes for months, China is still at the pandemic’s mercy.
This is what makes it all the more surreal and absurd that the President of the United States considers the pandemic basically over. It’s not, and legislating like it is will only lead to economic ruin. Cases are still averaging at about 20,000 per day nationwide, and it seems like the coronavirus is taking its time. Our economy does not have the same luxury.