Why Paul Krugman Thinks The Recent Unemployment Report Is A Negative Indicator Of Economic Recovery

Incredibly,  the stock market and Wall Street continue to party (e.g.'Wall Street Parties Despite Turmoil'  WSJ, June 5, p. B11)  despite an ongoing pandemic, a cratered economy, great Depression unemployment numbers and civil  unrest in dozens of cities. It is as if the stock market and Maul Street are totally divorced from the realities of Main Street.   Or, to put it into the context of WSJ columnist James Mackintosh (ibid.):

"Why is the market rising even as U.S. cities burn and the prospect of a second round pf coronavirus infections remains real?....It is deeply uncomfortable to watch Wall Street party while Main Street  emerges from lockdown into tear gas."


But the other side of the economic coin which does apply to Main Street is the unemployment report which came out Friday, and saw a figure: 13.3 % - significantly less than what most economists and pundits projected (19%) . For example, when the report was released I watched CBS finance guru Jill Schlesinger fumbling for words to account for the difference from what was otherwise expected.    Of course, the Right was jubilant because to them  the premature WSJ editorial:  'The Economy Rises From The Dead", (June 6-7, p. A12)  blathering "the job market heals faster than expected"  meant no further government money to be doled out to American workers.  Thereby ending further threats of encroaching "statism", or god forbid, socialism.  (Note: a same day column elsewhere in the Journal stated:"The jobs report is subject to revisions.....which given the difficulty in collecting data in the midst of the Covid-19 crisis, can be enormous."

I confess that my first inclination, and Janice's, was to suspect that the BLS fudged the numbers the way they do unemployment stats in general, i.e. dropping people off the rolls if they cease job searches for 6 months.   Paul Krugman - Nobel winning economist and NY Times columnist- had a different take, however. This was expressed at the end of All In last Friday.

He warned the Right and Republicans will use the report "positive" result to  rationalize why no more stimulus checks - or continued higher unemployment checks - will be needed.  Which would be a dreadful mistake.  Because we aren't out of the dire conditions by a long shot.   As a Business & Investing piece in the WSJ Friday noted (p. B12):

"The boost from the stimulus checks most Americans received last month is already waning. A recent analysis found that people with less than $500 in their bank accounts spent nearly half their stimulus payments within ten days of receiving them,"

Meanwhile, as reported in The Denver Post Sunday (Business, p. 1K) according to Ali Wolf , chief economist with Meyers Research:

"Many consumers remain unable or unwilling to spend as they did before.  

This is serious because it is consumer spending that props up nearly 70 percent of the American economy.  But Americans are keeping their money in their wallets because they have no idea when the next income check, or stimulus check will arrive  - if at all.   As one economist put it in the Post piece (ibid.):

"Normally, savings are good, but they can be too much of a good thing in an economy that relies on consumer spending for 70 percent of its activity. Anything consistently above 15 or 20% is a dangerously high level."   (Consumer spending plunged 13.6 % in April)"

But you can't blame Americans for pulling in the spending strings -even if it means keeping the economy at low throttle - if they can't depend on congress (namely the Repukes) to cough up the extra money they need. And as Krugman noted, by the end of July all the unemployment bonus checks will also cease, leaving millions in the lurch. Combined with the GOP using the  "better" unemployment numbers to keep money tight - we may be seeing a downturn by the end of the year. As pointed out by economist Wolf (ibid.), given people expect that government support will dry up soon they are stockpiling money to get them through the months ahead.   But this will ensure a prolonged downturn and more serious 'W' -shaped recession.

Reinforcing that view, we now know-  as per a '60 Minutes' report on Sunday -  that the unemployment report was indeed bogus. As CBS' Scott Pelley reported, the BLS had admitted to a "misclassification error"  which saw an additional 5 million Americans uncounted as unemployed.  The BLS conceded the actual unemployment was three percentage points higher, or 16.3 percent - actually in line with what most serious economists believed. The highest since the great Depression.

Never mind, the GOP will still argue that it doesn't matter and the numbers are on their way to improvement, so Americans still don't need more gov't support. Well, tell that to the tens of thousands who have had to take money from  their 401(k)s to stay afloat,  such as one Heaher Semler - identified in a WSJ piece from last Friday about workers raiding retirement accounts.  As the piece noted:

"Ms. Semler withdrew $14,000 from one of two 401(k) retirement accounts she had. She used it to pay credit card bills and buy a car, keeping $3,000 for emergencies."

And Semler is one of the lucky ones given she had a retirement account to raid. Millions more Americans don't - or not enough to cover expenses, including utilities, groceries and medical.  So no wonder they are in the mode of stockpiling any money they get.   Why be surprised when Bankrate estimates that a quarter of U.S. households had no emergency savings even before the lockdowns went into effect?

Who to blame? The tight-fisted Republicans, of course! As I wrote in earlier posts the unemployment check bonuses need to continue at least through September, and at least three more stimulus checks of $1,200 each are needed.  I referred to such a program as temporary "universal basic income". 

But what is the Republicans' solution?    According to a WSJ piece from June 2, p. A5:

"Democrats want to send another round of stimulus checks to U.S. households..Republicans argue that the stimulus is to encourage people to return to work, as well as liability protections as businesses across the country reopen."

In other words, the Republicans are more concerned with protecting businesses in case employees returning to work get infected and even die from Covid-19.  Since they realize telling Americans to get their asses back to work is the way to get more $$$ carries more risk - for business, employers - if customers and workers get ill. 

Moral of the story? Don't hold yur breath for the GOP to do the right thing.  Keep stashing your money, your cash from the unemployment checks and stimulus money from CARES 1.  If that saving means a further downturn or exacerbated recession, so be it.   Blame the Repukes!

See also:

• No RV for Melania: The unemployment rate is really 3% higher than Trump claimed 

And:

• Fewer hours, less pay and more anxiety greet returning workers

And:

Conservatives and the Right | Economic Policy

Meet the Hidden Architect Behind America’s Racist Economics

Savaging The Right's "We're Tougher Than You Pansies!" Meme On Reopening - And The REAL Risk Of a Second Wave

"The whiteness of the protests alongside the stark racial disparities in COVID-19 mortality underscores that the desire to reopen businesses is rooted in white supremacy. " - Sonali Kolhatkar, smirkinghcimp.com blog

"The coronavirus has exposed this delusion of individualism for what it is. For one thing, the virus doesn't care if you pop on a tricorner hat and declare yourself a rugged individual. It'll infect you just as easily as it infects a person who stays home, wears a mask and pays their taxes without complaint. Individualism can't stop the virus — only collective action can.

But on a deeper level, the virus has exposed the incoherence of the individualist ideology. Right now, the same people who fueled the Tea Party protests, including Trump himself, are out there insisting that the lockdowns end - Amanda Marcotte, 'Right Wing Individualism Is Just Selfish Garbage' 

"It's obvious there's a huge disconnect between those willing to follow our state's guidelines and those who feel their rights are being violated...I suggest those in the latter group - who refuse to wear masks or obey social distancing, offer to volunteer at one of our hospitals.  Maybe if they spent time with the health care workers risking their lives every day they might understand why the people working to save us are pleading for us to stay home." - Rebecca Cook, letter to Sunday Denver Post, p. 3E.

"In some places you see reopenings that respect Mother Nature’s power, are coordinated and grounded in science, and in other places you see crowded restaurants or a gym owner defying his governor’s guidelines as cheering demonstrators waive signs that read “My freedom doesn’t end where your fear begins.  The people making those signs, and the morons on Fox cheering them on, don’t get it. We’re not up against each other. We’re all up against Mother Nature".- Thomas Friedman, NY Times

"The whole point of the shutdown was to buy ourselves time so we could do it right the second time after we muffed the first response. It's not only important to avoid opening up too aggressively but  if you don't have a good amount of testing, tracing and isolation, you won't be able to keep infected people away from susceptible people. The basic biology then is the infection is just going to take off again-  Dr. Ashish Jha,  Professor of Global Health, Harvard University, on 'All In' , April 27th


As all fifty states have reopened in some form, and we learned yesterday that 3 million more Americans have joined the unemployed, the Right's propaganda mills and talking heads (as well as scribes) are working overtime. They want to paint reality to conform to their myth that it is the "tough Americans and freedom lovers" - also most "real workers" who need $$$- who demand states reopen now.  That as opposed to the "elite, blue state pansies" who prefer security to being warriors for the economy ....oh yeah, and "personal liberty".

One headline in the NY Times 2 days ago blared:

Mnuchin Warns of ‘Permanent Damage’ to Economy if Lockdowns Persist

Suggesting that it's got to be workers' lives instead of dollars to be sacrificed. Or as Sen. Sherrod Brown asked: 'How Many Workers Should Give Their Lives To Increase The GDP By One Half A Percent?

In a forgettable column titled “Scenes From the Class Struggle in Lockdown,” The Wall Street Journal’s Peggy Noonan wrote: “Here’s a generalization based on a lifetime of experience and observation. The working-class people who are pushing back have had harder lives than those now determining their fate.”  Incredibly, Noonan then added a bone to the "he-men" of the Right with this balderdash:

"Since the pandemic began the Overclass has been in charge - scientists, doctors, consultants - calling the shots for the average people. But personally they have no skin in the game."

And this piffle at the end:

"This is no time to make our divisions worse. The pandemic is not only about our health but our humanity".

As if the two can be conveniently separated, so Noonan feels obligated to create another false choice.  The fact is there need not be such a false choice if we'd had our heads on straight from the get go. But as Rachel Maddow so often puts it, we've been saddled with the worst, god-awful government at the worst moment in our recent history - when extraordinary leadership skills were needed.  

Don't believe it?     The fact is that 99 percent of the chaos, ineptitude and division falls on Trump himself. He repeatedly undermined the guidance and credibility of his own health officials including by initially dismissing the pandemic as  a "hoax".  Then fomenting anti-quarantine protests - even as he incited his latter day Tea Baggers to flout the reopening guidelines his own administration released.   Then to top it off, this criminal loser buried a detailed CDC document showing states how to reopen by minimizing risk.  Oh, and he's now hawking an unproven malarial drug that he claims he's taking for prophylactic reasons.

The mistake of Noonan and others mocking the lockdowns as the product of effete snobs is that they forget or discount certain pertinent facts.  That is, that more blunt options were needed to prevent the spread of the virus-   and the collapse of our health system - once the Trumpies fucked it all up. Meanwhile, in South Korea massive testing and contact tracing kept deaths to a minimum in relative terms - and far less per capita than the U.S. Further, only recently when a new outbreak threatened S. Korean officials using GPS directed contract tracing were able to immediately track the new emergence to one source: a 29 -year old male  with the virus who'd visited a series of Seoul nightclubs.  The process uncovered 102 infected individuals and a total of 5,500 who'd been in contact with the infected subset -initially infected by the 29 year old.  The new cluster was a setback but also marked a success story in that officials were able to rapidly contain the virus.  THIS is what the U.S. under Trump has been unable to do, and why the reopening in too many red states is premature. 

 It's not because blue state "commies"  and "pansies"  are trying to control the red staters and gut their freedoms, but because the critical jobs of testing and contact tracing still lag behind those states' capabilities. (So much so that Georgia, for example, has stooped to publishing spurious graphs to try to show it's flattened the infection curve). In other words, by recklessly reopening before those processes are in place we risk a second wave wiping out all the progress made thus far- and even worse economic fallout.  And mammoth consequences especially when idiots in crowds disregard masks and social distancing.  

As reported today (WSJ. p. A1) "a study published last week by the National Academy of Sciences found that one minute of loud speech was enough to produce thousands of virus droplets that remain in the air for about 12 minutes, potentially able to infect anyone in the area."

The phenomenon also most likely to give rise to high viral loads and "superspreaders" -with the capacity to infect hundreds. Hence  blue state governors and citizens are not against opening up but against opening up stupidly - with no adequate testing plan - and no means to contact trace any outbreaks.  The smart reopening also includes social distancing  and mask wearing, As former CDC Director Tom Friedan explained yesterday morning on CBS:

"It's not open versus closed. It's not health versus economy. It's  gradual, stepwise, data driven, science driven reopening that takes account of both health and the economic impacts of the virus and our response to it. This is doing three things: we empower people to protect themselves, we hold governments accountable for getting data and sharing it openly and we accelerate toward a new normal"

So it is NOT a case of the "elites" lording it over the "salt of the earth" types to keep them locked down and unable to earn a living and feed their families - or just get outside.   Rather, the issue is  opening recklessly devoid of any sound plans to track or detect the virus.   A goal already hobbled by a dysfunctional administration which has operated below even minimal competence  levels needed to ferret out the virus., turning the whole national response into a side show. At least on the Right.  Given the above, we can say a recent comment by  W. Bradford Wilcox, a sociologist at the University of Virginia, (published in NY Times yesterday) is total hogwash.  That comment is::

Progressives have grown more likely to embrace a culture of “safetyism” in recent years. This safetyism seeks to protect them and those who are deemed the most vulnerable members of our society from threats to their emotional and physical well-being.

But it isn't a case of "safetyism" at all, but science-driven SANITY, as former CDC Director Tom Friedan already noted.  NY Times columnist Michelle Goldberg aptly spelled it out 3 days ago:

"The assumptions underlying this generalization, however, are not based on even a cursory look at actual data. In a recent Washington Post/Ipsos survey, 74 percent of respondents agreed that the “U.S. should keep trying to slow the spread of the coronavirus, even if that means keeping many businesses closed.” Agreement was slightly higher — 79 percent — among respondents who’d been laid off or furloughed.

Researchers at the University of Chicago have been tracking the impact of coronavirus on a representative sample of American households. They’ve found that when it comes to judging policies on the coronavirus, “politics is the overwhelming force dividing Americans,” and that “how households have been economically impacted by the Covid crisis so far” plays only a minimal role.

Donald Trump and his allies have polarized the response to the coronavirus, turning defiance of public health directives into a mark of right-wing identity. Because a significant chunk of Trump’s base is made up of whites without a college degree, there are naturally many such people among the lockdown protesters."

Basically, she nailed it, unlike a Texan turkey by the name of  Dan Crenshaw -  who belched out the following op-ed  codswallop ('Why Does Reopening Polarize Us?, WSJ, May 19, p.A17)

"It isn't obvious that such a debate should be partisan yet it is. Why? One popular explanation is that all roads lead to Trump. Whatever he says, the left will say the opposite."

This cornpone knucklehead, so far up Trump's ass he can't see the Sun,  doesn't seem to know it wasn't the "left" that screwed the response up to a far- thee-well.  It was his lord and master Dotard - ignoring warnings, babbling that the virus "will just go sway like magic".  Oh, and then dismissing it as a hoax, before then forgetting Harry Truman's maxim that  "the buck stops here". Essentially frittering away weeks we had to get our act together - thanks to the Chinese lockdown of their own nation- as well as isolating the infected from their families also to contain spread. All immensely effective despite Holman Jenkins Jr. further yammering (WSJ, p. A15 yesterday) the Chinese failed and oh, by the way, "the U.S. and China are in a contest now to see which world power can emerge from this chaos with the most realistic policy toward the virus".

Obviously scribbled while popping his usual opioids, speed and MJ candies. Because the efficacy of the Chinese response was exactly what gave us time to get our own act together instead of fucking it up.  As proof, a new Columbia University study released yesterday showed that up to 54,000 lives might have been saved had restrictions - including lockdowns - started two weeks earlier.  So, the total deaths now might have been 40,000 as opposed to 94,000.   But this is what the white boy conservative death mongers like Jenkins Jr. chide liberal state governments about, and ceaselessly.

 Potentially 54,000 fewer deaths but the dyspeptic Trump was unable to summon one ounce of  minimal leadership and consistent national planning or leadership. Instead babbling back in January that the U.S. "has it totally under control"  and in February blabbed that  "within a couple of days the cases will be down to zero."  And a week later,  "One day it's gonna disappear ...like a miracle."   As Chris Hayes put it on 'ALL IN'  last night:

"Well there have been no miracles, just mass unemployment and mass death"

Facts the Reepo Trump asslickers and opinion propaganidists just can't face, so they have to deflect.  Which explains why  this Texas yokel Crenshaw feels compelled to write this twaddle:

"The far left is treating the lockdown and the consequent economic devastation as an opportunity to restructure America into a socialist utopia."

Uh no, asshole. We just want to ensure the 39 million people who've now lost their jobs - thanks to Trump's tomfoolery and haphazard response-  get the money they need to buy groceries, pay utility bills and keep a roof over their heads. Get it?  Again, Michelle Goldberg does - parsing both Noonan's canards and Crenshaw's as she observes:

"But it’s a mistake to treat the growing ideological divide over when and how to reopen the country as a matter of class rather than partisanship"

 Apart from that this yahoo doesn't get the connection between controlling the virus and successfully opening the economy. As the Times Paul Krugman notes:

"One thing I keep hearing, however, is that we must reopen for the sake of workers, who need to start earning wages again to put food on their families’ tables. So it’s important to realize that this is a really bad argument.  For America is fully capable of shielding workers idled by the lockdown from severe economic hardship. As Jerome Powell, the chairman of the Federal Reserve, said in a TV interview aired Sunday, we can and should pursue policies that “keep workers in their homes, keep them paying their bills. Keep families solvent.”

A salient point I made in another post not long ago, i.e.

• Why Holman Jenkins & His WSJ Wrecking Crew Want T...

Noting:

"So whisking millions back to work prematurely serves two main purposes for the WSJ's hacks: 1) Disabling any need for the govt' to step in again to send relief checks or expand food stamps etc., and 2) To provide more billions for the rich, the one percent, hedge fund owners, Repuke donors and the like.. "

Also quoting Nobel winning economist Paul Romer who posited over 300 million tests were needed nationwide before we could even think of returning to business as usual. We haven't even met one hundredth that standard, so we are asking for it. This is given the virus is ready to roar back at the slightest hint of relaxing our efforts, and slacking off means letting millions resume work without proper safeguards.

But, incredibly, one must evidently - and in addition to the usual political polarization- factor in a "white male"  tribal factor as well. (According to a Times article 'When The Mask You're Wearing Tastes Like Socialism')  This is derived from a contingent of knuckle dragging, conservative white males who see those advocating for mitigation and safeguards as embracing a "feminine"  stance.  Much like these mutts (brainwashed for years by Limbaugh etc.) who believe any gov't help amounts to a 'nanny state" interfering.  Peter Ditto, a psychologist at the University of California-Irvine, posits that:

"While liberals adopt their nurturant role, bemoaning the climbing infection and death rates and are willing to accept economic carnage in favor of minimizing the loss of human life, conservatives are more likely to, in effect, tell the American people to “walk it off,” increasingly staking out the position that some loss of life must be endured for the greater economic good."

  Which is preposterous, and why I believe it more important than ever these "macho" white boy conservos be dragged into a Covid ward to see the intubation process, and men their age having to be on dialysis, and otherwise put into a medical coma.  All of which brings Janice's favorite cartoon to mind;

The cartoon perfectly embodies the ultimate "feminization" these wannabe tough guys face as they continue their ludicrous risk taking.  A pose especially choice given most of these macho apes run for cover and scream like little girls when you show them the face of even a 2 -inch diameter spider, i.e.

 But especially now in the midst of a virus they know nothing about, their fake bravado is laughable, given they also feel the need to march with their guns.  But then are reduced to hapless, impotent invalids after Covid lays them low.  Especially justified after we read that they regard the CDC, WHO scientists as (ibid., 'When The Mask You're Wearing Tastes Like Socialism'):

 " typical liberal pansies who just can’t accept the reality that people die."

Yeah, but not 93,000 in 3 months!  Headed for 100,000 plus by June 1.  As Janice puts it, all this posturing makes her want them to "choke on their own snot" - to see what  a Covid death is like.

All of which brings up a timely warning from Krugman (ibid.):

 "Suppose, after all, that the epidemiologists are right, and that premature reopening leads to a second wave of infections. What we’ll need in that case is a second lockdown. But all indications are that Republicans are totally opposed to extending benefits. What they want, instead, is legislation that would protect businesses from liability if their employees get sick.  That is, they want to force Americans to go to work even if it kills them."

But, of course, the Reeptard tough guys love that stuff, that hyping of faux masculinity - part of which entails an anti- expertise mindset, which itself reflects a long -standing anti-intellectualism in American life.   In the end it's all well and good for this sliver of non- college educated white male miscreants to parade their imbecility. It's a "free country" as they like to say.  But that doesn't mean the rest of us ought to follow like freaking lemmings, or buy into their batshit crazy conspiracy ideations - like the medical workers are behind the pandemic and making it appear worse than it is.  

Fortunately, it looks like the sensible, cautious segment of the nation is in the majority - for now.  According to a new AP-NORC poll 83 percent of Americans are concerned lifting restrictions will lead to many more infections.  53 percent are prepared to continue those restrictions indefinitely.  So the racist death mongers on the Right don't yet realize their precious corporate economy will still founder if so many lack the confidence to engage with it - never mind the minority of loudmouth simpletons now getting all the press coverage.  What we need more of is sane voices like that of Dr. Richard Besser, former CDC head, who said last night ('All In'):

"Public health is not about keeping people unemployed... But you need to dial this up slowly and carefully, so that we don't see major outbreaks occurring and going back to the same situation of everyone under lockdown."


This was reinforced last night by Jeffrey Shaman,  the lead researcher of the Columbia University study, which showed 54,000 lives could have been spared had the lockdowns begun 2 weeks earlier.  In Prof. Shaman's word, from his MSNBC appearance:

"This pandemic is not over by any means, and most of the country has not been exposed, not been infected. So it's really vital that we actively seek it out in our communities and monitor what is happening as we loosen restrictions.  Especially as we open the economy further and further to make sure we don't have flare ups. And if we identify any growth in cases we have to respond more quickly, That's because if you stop the virus in the early stages you will limit the number of deaths that occur over time. Important because the growth process can sneak up on you,

I like to use the illustration of  a pond and there's this invasive lily flower that gets into it.  Every day it doubles in size, the number that are there. By day 30 the entire pond is covered with lilies. And the question is 'On what day was it halfway covered?'  Well, on day 29, just the day before, because it is a doubling process.  So we can't get complacent particularly as we're moving into summer.  We need to squash this virus, at least until a vaccine is available."


See also:

The Great and Grand Re-Opening of America

by Jaime O'Neill | May 20, 2020 - 6:32am | permalink

AND:

Covid-19 | Economic Policy

Florida, Georgia and Trump Are Lying. COVID Is Far From Over.

And:

Economic Policy

Why Are Working People Forced to Sacrifice for the Common Good But Not the Titans of Capitalism?

And:

Conservatives and the Right

Bamboozler-in-Chief and Council on National Policy Recruiting Pro-Trump Doctors To Promote Rapid Re-Opening

And:

Donald Trump

Never Have So Few Done So Much to Destroy America

If The Fed's Powell Is Ready To 'Print Trillions' To Help The States, Tightwad GOP Should Let Him!

Fed chairman Jay Powell, makes an excellent case for providing a safety net to states, as well as corporations.

"Congress seems to be at war with the states. Only $150 billion of its nearly $3 trillion coronavirus relief package – a mere 5% – has been allocated to the 50 states; and they are not allowed to use it where they need it most, to plug the holes in their budgets caused by the mandatory shutdown. On April 22, Senate Majority Leader Mitch McConnell said he was opposed to additional federal aid to the states, and that his preference was to allow states to go bankrupt"- Ellen Brown, today, 'Crushing The States, Saving The Banks', smirkingchimp.com blog


'Powell Urges Policy Makers To Spend More'  (WSJ, April 30, p. A2)  shows that Fed Chairman Jerome ('Jay') Powell has a much deeper appreciation of the financial straits the nation is in than the Repuke bean counters, Scrooges and austerity clowns. Right now, the greatest imperative is to get money to state and local governments, which the earlier CARES act omitted.  Why infuse  more $$$ for the states and local governments? Well, because they embody the essence of what government is about.   I mean, what citizen in his or her right might wants to see schools, law enforcement, fire departments and utilities shut down - because of lack of funding?  That way madness lies.   

To fix ideas, as reported in The Denver Post (p. 1A,  5/2) , Colorado's state government is now planning some $228 million in spending cuts that could affect everything from police departments, to schools, to health clinics to correctional facilities and even Medicaid.   In Maryland, the state we used to live (before coming to Colo. in December,  2000) 90 days of shelter in place orders are forecast to blow a $3 billion hole in its $90 b annual budget.   That will mean severe cutting of vital services. Other states are having to do the same with no federal lifelines in the pipeline.   Do people in these states really want to do without police, fire depts. and schools?

But this is the gist of the Republican penny-pinching strategy which -  if it succeeds - will see the U.S. end up in a 2nd Great Depression, not just a bad recession.   In fact, while the austerity -minded Repubs have resisted calls for additional funding, citing added debt burdens,  Jay Powell pointed out (ibid.):

"This is not the time to act on these concerns. This is the time to use the great fiscal power of the United States to get through this with as little damage to the longer run productive capacity of the economy as possible."

It's incredible that the Scrooge clones like Mitch McConnell don't grasp this, and would rather put us into another Depression but there it is.  They would rather be chintzy now - especially with the states, local governments-  and pay ten to fifty times later to dig out from the carnage.   Which is why it's good we didn't have these losers in power after the credit meltdown in 2008.

Across the country now there are  massive budget shortfalls  in state and local governments arising from cratering tax revenues. 21 states will have to fill budget gaps of at least ten percent to avoid furloughs of police, firemen and other critical service workers.  And don't even think the existing federal benefits are enough. For example, just applying for and renewing the SNAP (food stamps) requires overcoming a host of bureaucratic hurdles.  And even the fraction who qualify must also rely on food banks given the average monthly SNAP benefit amounts to $134.

In truth, we desperately need not just a $1, 200 one off payment to each American, but a universal basic income (UBI) of at least $2,000/ month for the next 6 months.  (As policy analyst Heather McGee noted on 'All In' last week). So despite the caterwauling and gaslighting from the Repukes, it is clear we need a massive infusion of at least $800 b to help the states, and possibly another $2 trillion more by the end of the fiscal year.  This despite the endless austerity whining of the likes of The Wall Street Journal (e.g. 'The Government Economy',  April 30, p. A14) who bellyache the states "contributed only 0.2% to  the CARES Act".  Well, duh! That's because THEY took the brunt of the lockdown hit ("economy put into the equivalent of a medical coma"), and also they have laws that require balanced budgets -  so must cut if spending exceeds a certain threshold. Also they have no latitude to print money like the Federal Reserve.

Playing into the WSJ editors' hands, Moscow Mitch and his sidekick in stupidity, Rick Scott, blame many blue states for "mismanagement" of their money to explain the predicament and having to cut services, furlough state employees. That is bollocks.  As  NY Gov. Andrew Cuomo  has acidly observed (according to Joe Conason), New York pays $116 billion more than it gets back annually, while Kentucky, the deadbeat home of Senate Majority Leader Mitch McConnell, gets $148 billion more than it pays each year. By that reckoning, New York has kicked in far more over the past few decades than any of the states whose Republican leaders criticize supposed liberal profligacy.

McConnell, meanwhile, doesn't get the dire straits states are in could lead to a true Depression era, and collapse of remaining demand.   The goober with the mouth of a drunken Guppy blabbed:

"We're not interested in borrowing money from future generations to send down to states to help them with bad decisions they've made in the past, unrelated to the coronavirus."

But this is horse manure. As economist Paul Krugman pointed out Friday on Morning Joe , there is no "borrowing from future generations" since we are  borrowing  internally and in our own currency - not from outside creditors like the IMF or other nations. The truth is there is almost no limit to what can be borrowed given we are borrowing  from ourselves, and also interest rates are effectively zero.   Other nations like Great Britain and Japan have done it, and the U.S. can do the same. As Krugman has recently  written in the WaPo:

"Deficit obsession was deeply destructive in the years that followed the global financial crisis, helping conservatives push for austerity measures that held back economic recovery for years." 

And on 'Morning Joe' last week Prof. Krugman made it clear deficit spending was the primary way to alleviate hardship for the 30 million now unemployed, as well as the states.  As he told Joe Scarborough, who mentioned his abiding concern over the deficit for 25 years and asked why we shouldn't be concerned now:  

"If  you ask what is the future burden on the budget by the borrowing we're doing now, it's negligible, a rounding error.  It's just not going to matter.   Yeah, the headline numbers will be large and debt as a percentage of GDP will be as larger or larger than during World War II.  But everything we know about advanced nations that borrow in their own currency - like Great Britain and Japan - shows they are able to carry very high debt loads without crisis.  Even when interest rates aren't as low as they are now they are consistently below the growth rate of the economy.  So the debt will erode over time relative to GDP so long as you aren't totally irresponsible.   

Yes, there must be some limit but looking at the historical record it's very hard to find it. Look at Japan, its debt is 200 percent of GDP and no problems.  We came out of World War Two with debt at 100 percent of GDP and which everyone thought was terrible, but it turned out to be no problem at all.  And by the way we never paid that debt back, we just grew out of it.  Britain had debt that was 270 percent of GDP and they grew out of it too, after a few years down to 50 percent of GDP.

If there is an upper limit it should be so far from where we are that it shouldn't  bear on our policy decisions now."

The  responses to deficit worries given above also comport with what Krugman wrote for the Guardian not long ago:

In such an economy (with zero interest rates) the government does everyone a service by running deficits and giving frustrated savers a chance to put their money to work. Nor does this borrowing compete with private investment. An economy where interest rates cannot go any lower is an economy awash in desired saving with no place to go, and deficit spending that expands the economy is, if anything, likely to lead to higher private investment than would otherwise materialize...  

Why does deficit obsession and pandering to austerity work, say in the public debate sphere? Krugman again:

"Part of the answer is that politicians were catering to a public that doesn’t understand the rationale for deficit spending, that tends to think of the government budget via analogies with family finances."


The point Krugman is making is that while family finances are limited by the family income, and hence a family cannot spend more than it earns (unless it uses credit cards and runs up debt and a greater likelihood of delinquency), the federal gov't can print as much money as it needs to. Yep, debt is generated but in its own currency.  Also the debtor here is also the creditor so there's no problem. But the family has to answer to outside banks, credit card issuers, collectors etc.  So the family debtors are not the same as the creditors.   Nor can the family just print money to pay off its outside obligations, whether an auto loan, mortgage or medical bill.


Bottom line? If we measured national debt and deficits in the standard ways other nations do, i.e. to external  nations, or agencies like the IMF (like Barbados, when it needs loans)  there wouldn't be  half the kerfuffle about it.  Rather than wasting time fretting over an increase in the national debt that amounts to a "rounding error" we need to help the states and 30 m suffering citizens get the money they need.  And in the process help the whole nation avoid an economic calamity.  

All the Fed needs is the green light from congress (namely the GOP run Senate), since it cannot lend or provide money to states on its own, only to businesses. 

   See also:

Economic Policy | Mitch McConnell

As McConnell Tries to Hold Aid to States and Cities Hostage, Mass Layoffs of Public Employees Begin

Excerpt:

"People like having their garbage collected, their roads plowed, and their 911 calls answered. They want their cities to function. They like their kids' teachers. They know all these people in their communities. That's the fire Mitch McConnell is playing with, and you can bet more than one vulnerable Republican senator recognizes that."

And:

Economic Policy

Republicans Are Indulging in a Nasty Gambit — but They Won’t like the Final Endgame