Few people are publicly considering what the COVID-19 pandemic is doing to the American economy. Paul Krugman is not optimistic. I agree with him. The country will, arguably, have less money to spend in the future, although there are many caveats to that.
The right, in the past, has used crises to justify radical social changes. It’s time for progressives to do that. A Democratic sweep in November makes many things possible. Let’s assume that can happen.
To start, we need to know some numbers, to get a handle on the scale of things.
National Debt $24.95 trillion
Deficit in 2019 $984 billion
Wealth of top one percent (Exceeds wealth of bottom 80 percent) $25 trillion
Department of Defense 2019 budget $686.1 billion
Department of State 2018 budget $52.4 billion
Amount spent on policing 2017 $115 billion Corrections $79 billion
Community colleges $126 billion*
Student debt $1.5 trillion
Healthcare $3.5 trillion
_____________________________
* Calculated from the report as 9 million students x $14,000 per student per year
Cross-posted to Nuclear Diner
Emma from FL
And on that note I shall scurry to my room, get under the blankets and shiver and moan for a while.
pamelabrown53
Joe Biden is right now giving a speech on COVID19. It’s live on at least MSNBC and CNN. Hope some of us will tune in and talk about it.
Thanks.
Just Chuck
The GOP is concerned with #3 and #4 and wondering why it doesn’t just include all the other numbers.
LuciaMia
Biden on CNN now : Trump should fix the shortage of PPE “before you tee off for another round of golf, Mr. President.”
Zing!
Quaker in a Basement
Just saw a short piece over on Bloomberg titled “Coronairus Brings American Decline Out in the Open.”
https://www.bloomberg.com/opinion/articles/2020-06-29/coronavirus-brings-american-decline-out-in-the-open
The writer opines that we’re well on the way to “developing nation” status, but not with an upward, developing trajectory.
NotMax
Mentally pencil in another what – $15 bilion? $60 billion? $90 billion? – for black budget.
JPL
Cheryl, New reporting from the NYTimes about the Russian Story.. link
Spanky
Thanks for these Cheryl, but I’m curious about one more number. Something that’s been a topic this AM. What is the cost across the 51 states for public K-12 ed?
Jeffro
For those of you willing/able to access it, here’s the NYT “you fix the (national) budget” calculator
link
If I were king (sort of a Perma-pinkmandias, as opposed to an Orangemandias ;) we’d be out of this mess within a decade.
Another Scott
One needs to put $BIGNUMBER in context.
BEA:
Much of Teh Debt is money we owe ourselves, and is due in 10-30 years. It’s not a concern.
Money is free now, and has been for a while. We should be spending much, much more even if Teh Deficit and Teh Debt increases. There is no sign of inflation, and we have needs that need to be addressed.
Countries and societies do not get richer by not spending money.
/DeanBaker
Cheers,
Scott.
Spanky
@Jeffro: Did you factor in the follow-on pandemics and the asteroid, Pinkymandias?
Brachiator
I think that Krugman is wrong. Yeah I got some nerve.
I would never question his analyses of the national economy. On macroeconomics he is untouchable.
But he is often wrong on policy prescriptions.
Economists are struggling to understand the economic impact of the pandemic. We have not had a deliberate shutdown of the economy before, and many economists I see interviewed insist on comparing this to a traditional recession.
I’ve mentioned before that we should ignore unemployment figures, except for the relative degree of improvement or lag. And we should also ignore GDP numbers. The Dow is important only to investors, but is useless as an economic indicator.
These numbers are reported because business reporters are used to regurgitating them. But these dopes are bad at providing context.
schrodingers_cat
@Another Scott: Agreed deficit financing the likes we haven’t seen since WWII.
Butter Emails
@Another Scott:
With all deference to Dean Baker, 25 Trillion is probably a bit higher debt level than we should be carrying. I’m not going to rend my garments and gnash my teeth about it like Republicans will start doing the moment Biden is sworn into office, but we probably want to get on a path where the real growth rate of the national debt is less than the real growth rate of US GDP.
Quick Edit – I don’t mean during the current crisis, but rather when things get sorted out again and the economy is humming along.
Martin
@Brachiator: The problem I see is that a deliberate shutdown should have come with a deliberate startup plan. A few things would have made that feasible – furloughs instead of layoffs with guarantees for return to work. As it stands, the friction for people to get rehired is going to be massive. And instead of injecting liquidity, the Fed should have guaranteed certain classes of debt, and allowed everyone to defer mortgage and rent. If you can borrow for free, then this has almost no cost steady-state.
But it wasn’t a controlled shutdown, it was a panicked one, and that turned it into a conventional economic problem.
WaterGirl
@LuciaMia: I put up a thread.
Van Buren
The near equal values of the wealth of the top 1% and the debt just cry out for an obvious solution.
azlib
@Brachiator:
If (and it is a big if) McConnell stirs himself and allows unemployment benefits and aid to States and Cities to go through then we can possibly avoid the worst outcomes. Krugman is basically not optimistic about McConnell acting on anything that benefits the working class.
Remember right now there is a lot of things being propped up by the CARE Act as imperfect as it is. If there are massive loan defaults because unemployment benefits run out that will ripple through the economy in a very bad way.
If we had a rational government it would be spending a massive amount of money right now. Money right now is free. In a real sense all those wealthy folks putting money into T-Bills with negative real interest rates are begging the government to spend a lot of money.
Cheryl Rofer
@NotMax: That’s a good point. I think there are other costs that are not included in that number. Right now, I’m just trying to get a general feeling for the numbers.
Xavier
Actually we have all the money we need right now, it’s just that people won’t spend it if they think they will be risking Covid19. Take away that risk and the economy will come back. A problem is that many otherwise viable businesses will close permanently if they are not helped through the interim.
The National Debt and the deficit are red herrings. If the hoped-for Democratic trifecta happens, the worst thing we could do would be to impose austerity.
If you have five minutes, read this: https://docs.google.com/document/d/e/2PACX-1vRuUokm5LrVYsu-tRQ4pJvjbq4B24zt434b9VtiSQtS06LgdiGoHA_I6ZacY–LWF2AkmsvTw3pxuon/pub
Cheryl Rofer
@Spanky: I’d like to have that number, but it seems more difficult to find than the ones I posted.
Cheryl Rofer
@Another Scott: Thanks! GDP is another number I should have included.
Brachiator
Here’s the weird thing. For a good chunk of people, savings actually increased during the recession. Obviously, this was mainly the case for people who still had jobs, including those who were working from home. And a substantial portion of these people saved their stimulus payments. They did not need to spend the money.
Consumer demand has been banked. People had money, but during the lockdown, there was no place to spend it.
But with the re-opening (even though ill advised), we saw evidence of consumer confidence, even in dumb behavior. In California, 500,000 people rushed to bars, wineries and breweries. Residential real estate and car sales are trending higher.
Recovery is extremely asymmetrical, but it is real.
I live in Southern California, and it still boggles my mind that so much of the economy here is still shut down. There are a shit ton of Hollywood blockbuster movies stacked up like delayed flights at a busy airport, with nowhere to go. And all of the people in the entertainment industry, including the kid who sells you popcorn and drinks, are without jobs. Sports, still shut down.
But no one can predict when these areas will open up again.
I saw recently that folks are allowed to book rooms for the next Doctor Who convention in Los Angeles, scheduled for February, 2021. Maybe somebody jumped into the TARDIS and took a look at the future.
Cheryl Rofer
@Brachiator: Basically, nobody knows how this is going to go economically. I found Krugman’s analysis to be something of a sanity check on what I’ve been thinking.
We need to consider a range of scenarios, of which this is one. I think it’s the most realistic, but there’s a wide area in which opinions will differ.
And it’s not what I want to discuss.
?BillinGlendaleCA
@Martin: I agree, the economy should have been put in a suspended animation rather than a shutdown. A good number of small businesses won’t be coming back.
Xavier
Obviously I should have pointed out that many individuals would also be damaged if they are not supported financially through the pandemic. This is entirely within the fiscal capability of the Federal Government, and not doing so would be criminally pathological on the part of the Government.
e julius drivingstorm
This article by Mike Norman from Real Money (Oct. 2016) helped me gain perspective on these staggering numbers. I haven’t figured out how to link to it but it googles easily:
The National Debt: Why Fret Over Something That Doesn’t Exist
I’d probably mess it up if I attempted to summarize but it’s short and I hope the smart people here would give it a look and maybe see if they agree with him somewhat.
Brachiator
@Martin:
Yeah. I looked at what Canada, Denmark and other countries were doing and noted here that I wished we were doing more to subsidize employees instead of depending on traditional unemployment compensation schemes. But in the UK and other countries, layoffs are increasing despite furlough programs. You cannot guarantee jobs when the underlying business collapses.
Local governments are trying for mortgage and rent deferrals. But a national program would have been interesting.
The GOP largely had bad ideas, and the Democrats had to react to Republican proposals.
If the Democrats win, I would like to see them propose some immediate plans, not wait until January. Force the GOP to fall in line or be defiant.
WhatsMyNym
@Brachiator:
They should be reservation only, so they can control their numbers and not have lines waiting to get in.
scuffletuffle
Jobs or income for everyone who needs it, until we are in better shape. It’s our own money we will be spending, so we should be proactive, not cowardly.
eddie blake
@Another Scott:
totally on the, er…money.
+1!
O. Felix Culpa
What should Joe Biden do to kickstart the economy after his inauguration? One of the first steps will probably be to get the pandemic under control, since the bloated orange fool has walked away from that little problem. What should be next? I’d suggest radical expansion of the ACA, followed by relief for student debt which would help liquidity for a lot of people. (Disclosure: I have a son whose law school debt exceeds my mortgage and at a much higher interest rate. He doesn’t anticipate ever paying it off under current conditions.) What would you recommend Joe and our Democratic House and Senate do?
Brachiator
@azlib:
McConnell’s head is up his ass, but any smart administration has roughly three big priorities: stimulating the economy, supporting state and local governments, and providing assistance for individuals and businesses.
The GOP is not up to the task. The Democrats have got to be better.
The Federal Reserve has promised to do whatever it takes. President Biden will be happy to work with them.
Feathers
@WhatsMyNym: They tried that here in Massachusetts and had a real problem with the customers who just showed up becoming abusive.
This country has a real asshole problem.
Another Scott
@e julius drivingstorm: Thanks for the pointer. I think he makes some decent points, but in a very slanted way.
Yes, as someone points out in the comments, $94T in new debt was issued, but $92T in old debt was redeemed. Lots of that debt has maturity periods of 1-90 days, so there’s a huge amount of churn. That’s only possible because people and institutions are willing to buy that debt, because they know that eventually they will get their money back (with interest).
The level of debt only matters when it becomes impossible to make the necessary service payments. Since the US Government has a monopoly on creation of dollars, it’s hard to see that it’s ever going to “run out”. Especially when the US net worth is over $120T.
My $0.02.
Cheers,
Scott.
eddie blake
@Another Scott:
MMT 101.
+2?
VeniceRiley
Facebook is telling me that Bernie is live on the Senate foor. Step on Biden’s toes, dude. And isn’t FB supposed to have great analytics? I don’t like and Sanders pages and I don’t join JDems groups. I’m old. I’m not a member of any Occupy group either. So why are they pinging my notifications with this ish?
Another Scott
@VeniceRiley: FB thrives on rage. They must know you don’t like St. Bernard.
;-)
Cheers,
Scott.
Dan B
Cheryl; Do you want a discussion about priorities for government spending in the various big ticket areas like defense vs. College, or debt service vs. mortgage support?
Bill Arnold
This is not hard, at least not for those made stupid by a strong tribal affiliation coupled with stupidly selected tribal markers[1], but maybe with Goldman Sachs behind it mandatory face coverings will get more traction. (It’s also been obvious for a few months.)
Goldman Sachs says a national mask mandate could slash infections and save economy from a 5% hit (JUN 30 2020, Thomas Franck)
[1] I will not be surprised if analysis shows that there were significant non-US anti-masking influence operations. Easily-pushed wedge issue that would damage the US economically.
Xavier
@e julius drivingstorm: The National Debt does exist; it is by definition the total of all outstanding Treasury securities, $22 or 23 odd trillions now. What is misunderstood is the consequences of that debt.
When the Federal Government wants to buy something or hire somebody, it creates dollars out of thin air and offers them to the private sector (us) as payment for goods and services. It motivates us to accept the dollars by requiring us–under threat of force if it comes to that–to pay taxes with those dollars. Most of the dollars the Government creates are in the form of Treasury bonds, which are simply “future money” that we eagerly accept*. The National Debt represents the amount of money that the Treasury has created and spent and not yet taxed back. This is, by accounting identity, also the amount of Government dollars held by the private sector (us)**. As Another Scott points out at 35, the Government is a monopoly supplier of US Dollars. The National Debt is the only source of Government dollars for the private sector, and the only way our supply of US Dollars can increase is for the National Debt to increase. Conversely, the only way the National Debt can decrease is by taxing dollars out of the private sector. Doing so generally causes an unwanted economic slowdown.
*If for convenience we need current money, we take Treasuries to the Fed and sell them to the Fed for reserves and cash.
**Some Treasury securities are also being held on our behalf in the Social Security trust fund.
Cheryl Rofer
@Dan B: I plan another post.
I like to see numbers and get a feel for them before I do anything else, just to let them sink in.
Redshift
This is good.
Redshift
@Redshift: Whoops, wrong thread.
e julius drivingstorm
@Another Scott:
Thanks, Scott. Xavier has some interesting input.
e julius drivingstorm
@Xavier:
Thank you for this analysis. When you say that raising taxes generally causes an unwanted economic slowdown, can you see any way to raise taxes in certain ways that may not adversely effect activity?
Recently corporate tax rates were lowered from 35% to 21% if I’m not mistaken, with some talk now about going back up to 28%. Why can’t it be progressive from 21 to 35, or 15 to 50 for that matter and on a sliding scale instead of plateaus. (If you get what I’m saying, I think personal income tax could also be based on sliding scale instead of sharp brackets – our computers do have algorythms.)
And maybe assign lower tax rates to crucial industries such as Medical and higher rates to Yacht construction – not so high as to destroy the industry but enough to see how much extra Betsy DeVos might pay.
Lacuna Synechdoche
Cheryl Rofer @ Top:
I think I see a solution here …
J R in WV
@Xavier:
Too bad, so sad, we have a criminal psychotic in charge of the Federal Government at this time!!!
I guess I am agreeing with you, but it doesn’t feel like that ~!~
Dan B
@Cheryl Rofer: The numbers are also the product of creative accounting. There are some accounts that defense is much higher a portion of GDP than the Pentagon wants reported. The numbers for cleanup costs from the military at bases and other sites, and many other sectors of the economy like Veterans, are omitted or downplayed. It could be valuable to weight some sectors accordingly. Also separating sectors by existential value to lower income groups versus entertainment, sports, office expenses, and other things that are not directly tied to survival. Some sort of handicapping could be important as would the costs of investments in infrastructure to prevent future existential crises like climate disruption and pandemics 2 -12 and beyond.
And how to keep from making the data crunching too complicated?
Xavier
@e julius drivingstorm: Every dollar that is taxed is a dollar that is not available for the private sector to spend. But distribution of the tax burden certainly matters. As it happens, over the last 50 years the tax burden has increasingly been shifted from capital to labor, and from upper to middle and lower income brackets. This is a big cause of inequality and needs to be reversed. A legitimate purpose of tax policy is certainly to express public purpose in the distribution of income and wealth.
Dan B
@Xavier: Succinctly put. It’s not just how the money is spent (distributed) but what sectors does it come from. What’s the flow. What sectors benefit and are their continued imbalances that will, or are already, causing societal problems.