March 16, 2020 (Monday)
I am obsessed with the stock market. Not because I gamble there, or because it gives a true picture of our economy. I am obsessed with it because its rise and fall gives a good sense of how the elites who benefit most from Trump’s policies feel about the current economy. They have stuck with him no matter what else he did so long as their investments paid off. But once those people turn on him, he cannot win reelection. So the volatility of the stock market these days is about politics as well as economics. Trump knows this very well indeed.
The economy is increasingly paralyzed by the world pandemic of novel coronavirus. First supply chains out of China were disrupted, and now our domestic economy is hurting as restaurants close, airport travel declines, and authorities tell people to stay home. Today the administration called for closing schools, avoiding groups of more than 10 people, and ending discretionary travel, eating out, and so on for fifteen days to try to slow the virus, but this will also slow the economy.
This drop has been reflected in the stock market over the past few weeks. To counter that drop, Trump has been badgering the Federal Reserve Board to lower interest rates to free up money for investment. Yesterday, the Fed slashed interest rates almost to zero and pledged to buy at least $700 billion in bonds, which would inject cash into the country. In theory, the loosening of money should pump up the economy and keep the U.S. from falling into a recession (generally defined as a decline in the Gross National Product—that is, the total value of all the products and services produced in a certain period-- for two consecutive quarters, or six months).
But, rather than rising in response to that stimulus, the stock market today began sliding as soon as the opening bell rang. (At the New York Stock Exchange, there is indeed a physical brass bell that sounds, although the ringer is automated.) It slid so fast and so far—more than 2,250 points on the Dow Jones Industrial Average-- that it triggered a trading halt to try to reset the market. The halt stopped the free fall, but the market dropped over the course of the day, ending up 2,997 points down in its worst day since the market crash of 1987. And that’s it. There is little else the Fed can do to shore up markets directly.
So all eyes are turned to Congress, to see if it will pass the relief measures necessary to enable sick workers to stay home, and those hurt by the economic downturn to make payments and eat until the pandemic eases. On March 14, the House of Representatives passed a bipartisan measure by a vote of 363 to 40 (and one vote of present) to provide such financial assistance, and to fund free testing for Covid-19. It strengthens unemployment insurance and food security, requires some paid sick leave, and puts money into Medicaid. At the time, news reported that Trump had agreed to sign the bill.
But it has run into trouble. First, opponents tried to kill it by claiming that House Speaker Nancy Pelosi was trying to sneak abortion funding into the bill. That boiled down to the fact that the bill provided up to $1 billion to reimburse laboratory claims, but it did not include the Hyde Amendment, first passed in 1977, which prohibits the use of federal money to pay for abortions except in rare circumstances. That amendment has been attached as a rider to every appropriations bill since, including that for the 2020 fiscal year. The coronavirus bill did not have it, because of course it is designed to combat this pandemic, not to override the 2020 budget. To address these concerns, House Democrats amended the bill so that funds could only be used for costs related to Covid-19.
A second issue arose when the House tried to pass as a package a number of technical fixes. Under the rules for unanimous consent, so long as a single representative objects, the bill cannot move to the Senate. Representative Louie Gohmert (R-TX) insisted on a public reading of all 87 pages of text, which would delay the bill for days. Gohmert apparently backed off after talking with colleagues and Trump.
So the bill is headed for the Senate. Before the House passed a final version, Senate Majority Leader Mitch McConnell (R-KY) dismissed it as a Democratic “ideological wish list” that was unlikely to pass the Senate. The situation has deteriorated since then, though, and the president has thrown his weight behind the bill, so perhaps that is no longer McConnell's angle.
In the meantime, Senate leaders and Trump are working on another relief package for businesses and families. White House legislative affairs director Eric Ueland said that “The president has instructed his team to look very expansively at what we need to do and not be impeded by the potential price tag of what’s necessary here.” In addition to overall stimulus in the bill, Trump has called for targeted aid to the airline, cruise, and hospitality industry.
The administration’s response to this crisis reveals its priorities: use the federal government to protect business, not people. That reflects a certain ideology, one that says economic growth comes from the top, as a small group of elites runs the economy, using their money, knowledge, and connections to organize the rest of us into an efficient means of production. If that’s the case, government’s job is to protect property and the businesses that enable property to accumulate.
That ideology stands in contrast to a different one that says economic growth comes from the bottom. If the government simply protects equal access to resources and education, and guarantees equality before the law, those with good ideas and the capacity for hard work from all walks of life will innovate and drive the economy forward.
It is well documented by now that Trump did not want to acknowledge the depth of the coronavirus danger because he was worried it would rattle the markets, frittering away weeks that could have bought us more time before Covid-19 got a foothold here. Under Trump, then-National Security advisor John Bolton got rid of the White House pandemic team and White House staff turned over so frequently that those who had been prepped by the Obama administration to combat disease are largely gone.
Left are those with a keen focus on business. When news began to spread of the deadly epidemic in China, if you recall, Commerce Secretary Wilbur Ross—who attended the Obama administration’s epidemic prep meeting but dozed off—speculated that the coronavirus would be a good thing for the U.S. because it would help bring back American jobs as manufacturers had to figure in the cost of epidemics when they thought about moving their operations to China.
The administration is interested in the stock market, and what it says about the faith of business leaders in the economy, but not terribly interested in leading the fight to save lives. Today, on a phone call with state governors who are scrambling to get adequate equipment to fight Covid-19, Trump told them: “Respirators, ventilators, all of the equipment—try getting it yourselves. We will be backing you, but try getting it yourselves. Point of sales, much better, much more direct if you can get it for yourself.”
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Notes:
Defining recession: https://www.nytimes.com/1974/12/01/archives/the-changing-business-cycle-points-op-view.html
Bill passes House: https://www.nbcnews.com/politics/congress/house-vote-friday-democrats-coronavirus-relief-package-n1158306
https://www.washingtonpost.com/business/2020/03/16/congress-fiscal-coronavirus/
Get it yourself: https://www.nytimes.com/2020/03/16/us/politics/trump-coronavirus-respirators.html
Ross: https://www.washingtonpost.com/business/2020/01/30/wilbur-ross-coronavirus-jobs/
Pandemic prep: https://www.politico.com/news/2020/03/16/trump-inauguration-warning-scenario-pandemic-132797
McConnell: https://thehill.com/homenews/senate/487235-mcconnell-house-coronavirus-bill-an-ideological-wish-list