Over the next year, the United States will almost certainly go through a depression. Economists at Goldman Sachs currently expect the U.S. economy to shrink by an unprecedented 24% next quarter. They’re optimists compared to Morgan Stanley, which expects a 30% drop, and Federal Reserve Bank of St. Louis President James Bullard, who predicted a 50% decline.
Even the best response from our government cannot prevent some form of catastrophe. But what Congress does next could mean the difference between millions of families muddling through and millions of families being bankrupted and evicted. Swift, serious action is needed to support ordinary people through the coming disaster, and to get American medical infrastructure up to speed ― manufacturing the supplies we are already running short on and training the personnel who are already overworked.
But one thing is extremely clear: Large American corporations are not in immediate jeopardy. Despite the recent stock market crash, we are not currently experiencing a financial crisis ― a breakdown of the credit system in which healthy companies cannot obtain loans to continue operations. With the Federal Reserve’s announcement on Monday that it would be providing unprecedented, direct support to both small business and large corporations, the central bank ensured that firms can get access to government-backed loans with no strings attached.
The Fed has never done anything like this. Usually the Fed supports banks, not manufacturers, airlines, hotels and retailers. But the American central bank recognized the scope of this crisis and acted accordingly.
Given the Fed’s support, there is no excuse for the corporate bailout legislation that Treasury Secretary Steve Mnuchin and Senate Majority Leader Mitch McConnell (R-Ky.) are pursuing. It offers too little help to the people who need it most, and outrageous gifts to monopolists, billionaires and corporate deadbeats. Republican leaders are demanding $500 billion to distribute as Mnuchin sees fit, with no disclosure for six months, no curbs on executive compensation, no limits on shareholder giveaways, no requirements to retain workers, and no meaningful oversight mechanisms. The public would receive no share in the upside to its investment. If companies on public support go bust, we eat the losses. If they prosper, we don’t even get an interest payment.
It’s ridiculous. The terms McConnell and Mnuchin want are substantially worse than those included in the infamous 2008 bank bailout bill. The last go-round, we at least got to know where the money went. The GOP wants a blank check, to be kept secret for six months.
Yes, the federal government will need to support businesses large and small through the coming months, if not years. But the Fed is already doing that. Democrats and responsible Republicans ― there are a few! ― have no business supporting this slush fund for the super-rich. Only about one-fifth of American households own $25,000 or more in stock. The government could help ordinary people much more easily by just cutting them monthly checks over the coming years. A pandemic should not be a pretext to shovel money at rich people.
Democrats, led by Sen. Elizabeth Warren (D-Mass.) are holding the line on corporate giveaways. They should continue to do so. The Republican proposal includes spartan benefits for ordinary people ― expanding the duration of unemployment benefits for people who lose their jobs by an extra month, plus a one-time $1,200 check for individuals ― an amount rightly recognized by Republicans including Sens. Mitt Romney (R-Utah) and Josh Hawley (R-Mo.) as an insult to the millions of households that will be struggling through the coming months. Anything short of $2,000 a month for every family in America isn’t a serious plan.
The Fed has given corporate America its relief. Congress needs to work for working families.
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