On August 8th, Donald Trump’s 2020 presidential campaign reached a critical juncture in the struggle to stabilize the U.S. economy.  Faced with an epic financial crisis, Trump had a leadership opportunity, a chance to bring Republicans and Democrats together to develop a realistic recovery plan.  Instead Trump opted for a political stunt, signing four faux “executive orders.”  It was a “tipping point.”

In his 2000 book, “The Tipping Point: How Little Things Can Make a Big Difference,”  Malcolm Gladwell defines a “tipping point” as a moment when there’s a critical change of social perspective because a key determinant has reached critical mass.  For a long time, Trump’s political strength has been his perceived handling of the economy.  Now he’s lost that.

The Economy:  In June, the U.S. officially entered a recession (https://www.cnbc.com/2020/06/09/the-us-is-officially-in-a-recession-will-it-become-a-depression.html).  In the first quarter the real GDP decreased by 5 percent and in the second quarter it decreased by a whopping 32.9 percent — the worst plunge ever recorded.

The current unemployment rate is 12.1 percent but that doesn’t count Americans who have given up looking for work.  To get back to where we were before the pandemic, the U.S. economy has to add 30 million jobs.

The Washington Post (https://www.washingtonpost.com/business/2020/08/13/recession-is-over-rich-working-class-is-far-recovered/?) detailed a new labor study that says the U.S. is in the midst of a “K-shaped” recovery: “As much of the economy has moved to work-from-home mode, the shift has mainly benefited college-educated employees who do most of their work on computers.”  Workers whose wages are over $32/hour have seen jobs increase.  All other workers have seen employment decrease: “Employment is still 20 percent below pre-pandemic levels for workers earning under $14 an hour, and 16 percent down for those making $14 to $20 an hour.”

Donald Trump doesn’t understand this.  He does not have a plan to deal with this recession. The latest Quinnipiac poll indicates that only 44% of people approve of the way Trump is handling the U.S. economy.  To date, it’s his lowest rating — on this parameter.

The Democratic Stimulus Response: To understand where we are now, it’s useful to reconstruct how we got to this point.  On May 15th, the Democratically-controlled House of Representatives passed HR 6800, the Health and Economic Recovery Omnibus Emergency Solutions or “Heroes” Act.  This includes:
1. $1.13 trillion of emergency supplemental appropriations to federal agencies, as well as economic assistance to governments at the state, local, tribal and territorial levels.
2. $485 billion in safety net spending, including the expansion of unemployment benefits, increased Supplemental Nutrition Assistance Program (SNAP) benefits, increased funding for utilities payments and job training for low-income individuals, and a 25% increase in aid to disabled veterans.
3. $435 billion for additional rebates, which would include an additional $1200 stimulus check per individual.
4. $382 billion for health care, which would include reimbursing health care providers for lost revenue, covering the COBRA premium costs for employees laid off between March 2020 and January 2021, increasing funding for testing and contact tracing, eliminating cost-sharing for coronavirus treatment, and increasing funding for health agencies and centers.
5. $290 billion to support small businesses and employee retention, with modifications to the Paycheck Protection Program. This would expand employee retention credit, provide credits for employer expenses, extend and expand paid leave (such as paid sick days, family and medical leave), and provide a 90% income credit for self-employed individuals.
6. $290 billion to reduce income taxes.
7. $191 billion for student loan relief and funding for higher education.
8. $202 billion for housing-related costs and expenses, including the establishment of a emergency rental assistance fund and a homeowner’s assistance fund. Some eviction and foreclosure moratoriums would be expanded as well, being extended for up to another year and expanding the moratorium to cover all renters and homeowners rather than specific cases as previously done in the CARES Act.
9. $190 billion for hazard pay for essential workers.
10. $32 billion for communication systems (such as the U.S. Postal Service), $48 billion for pensions and retirement relief, $31 billion for agricultural spending, and $25 billion for limited business loss deductions.

The HEROES act allocated $3.4 trillion for relief from the pain caused by the pandemic.  The bill wasn’t perfect, but it provided a good starting point for discussions with Republican legislators.

The May Republican Response: After the HEROES bill passed the House, President Trump and Senate Majority Leader McConnell declared it “dead on arrival” at the Senate.  Republicans proposed a “pause” before they considered an additional stimulus package:  Sen. McConnell remarked, “I don’t think we have yet felt the urgency of acting immediately,” and a White House spokesmen noted the administration had “a little bit of a luxury to watch and see” before further action on the economy and public health.

At the time — late May — the official Republican position was that the pandemic was winding down and the economy was ramping up.  (During the next 60 days, Donald Trump played golf 15 times.)

The July Republican Response: In mid-July Republican Senators finally began to work on a response to the HEROES act.  Even though they started with a modest proposal they were divided.  (The initial Republican proposal included a second round of stimulus checks, a reduction to the federal jobless benefits, funding for schools and universities to reopen, more money for the Paycheck Protection Program and liability protections for businesses, hospitals and education institutions operating amid the pandemic.)  Unfortunately, roughly half the Republican Senators had become deficit hawks and resisted any further stimulus action because they bemoaned increasing the Federal deficit.

McConnell and company punted to the White House.

The Trump Administration response: On July 20th, the Trump Administration began negotiating with Democrats on a response to the HEROES bill.  Trump assigned Treasury Secretary Mnuchin and White House Chief of Staff Mark Meadows.  (Senate Majority leader McConnell was not involved because his caucus is split; Donald Trump was not involved because he does not talk to House Speaker Nancy Pelosi — Trump last spoke to Pelosi on October 16, 2019.)

The negotiations went on  for two weeks but did not result in a compromise bill.  There are many differences between the Democratic and Republican positions but the foremost two are the size of the unemployment benefits and economic assistance to governments at the state, local, tribal and territorial levels.  Republicans favor lower benefits because they believe that the current level of benefit, $600 per week, “disincentivizes” workers from returning to their jobs — that is, the Trump position is that workers are staying home because they are lazy rather than the obvious: either it’s not safe for them to return to work or their jobs have disappeared.  Trump: “There was difficulty with the $600 number because it really was a disincentive.” (Salon reports that well-connected conservative groups, like the Chamber of Commerce and Club for Growth, lobbied to slash the unemployment benefit (https://www.salon.com/2020/08/07/right-wing-groups-took-millions-in-pandemic-aid–and-spent-millions-lobbying-for-unemployment-cuts/ )).

Republicans do not want to provide economic assistance to state and local governments because they consider them to be poorly run. (Trump: “What [Democrats] really want is bailout money for states that are run by Democrat governors and mayors, and that have been run very badly for many, many years — and many decades, in fact.”)

Trump’s “Executive Orders”: On August 8th, Donald Trump responded to the HEROES bill with four sham “executive orders.”
1. Unemployment benefits:  Trump reduced benefits to $300 a week for a brief period.  (The $44 billion in new funds—whose reapportionment is constitutionally murky, at best—will run out in around a month.)
2. Student Loan Payments:Trump deferred these payments until the end of the year,
3. Eviction Ban. This order doesn’t actually ban evictions; Trump settled for asking officials to “consider” whether a ban is even needed. The executive order provides no financial support for the 30-40 million renters currently at risk of eviction. Instead, it instructs administration officials to see if they can locate additional money to help out.
4. In addition: Trump delayed collecting payroll taxes (which fund Social Security and Medicare) from workers making under $104,000 per year.Although some workers would see their paychecks temporarily increase under the second executive order, they’ll still owe that extra money back at the end of the year barring congressional action.

Feedback:  Republican Senator Ben Sasse blasted Trump’s action, “The pen-and-phone theory of executive lawmaking is unconstitutional slop.  President Obama did not have the power to unilaterally rewrite immigration law with DACA, and President Trump does not have the power to unilaterally rewrite the payroll tax law.” [Emphasis added]

Summary: The website 538 (https://fivethirtyeight.com/features/what-economists-fear-will-happen-without-more-unemployment-aid/) predicts dire consequences if $600 in federal unemployment aid isn’t renewed by September 1st: “decline in personal consumption, increased food insecurity, a wave of evictions, and more job losses.”

We are at a tipping point .  Trump did not respond to the HEROES bill; he tried to stage a photo op and failed.  Republican legislators don’t have a response to the HEROES act.  America needs another stimulus bill and the Republicans can’t get their act together.

On Trump’s watch, the recession will turn into a depression.  Americans won’t forget.

Written by : Bob Burnett