Trump administration: U.S. Economy 2019-20 Chapter IV

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Trump administration: U.S. Economy 2019 Chapter III

BCA’s Peter Berezin comments:
• Both public opinion polls and betting markets suggest that Joe Biden will become President, with the Democrats gaining control of the Senate and retaining the House of Representatives.
• Such a “blue wave” would have mixed effects on the value of the S&P 500. On the one hand, corporate taxes would rise under a Biden administration. On the other hand, trade relations with China would improve. The Democrats would also push for more fiscal stimulus, which the stock market would welcome.
• The odds of Republicans and Democrats agreeing on a major new stimulus deal before the November elections look increasingly slim. In a blue wave scenario, the Democrats will enact $2.5-to-$3.5 trillion in pandemic relief shortly after Inauguration Day. Joe Biden‘s platform also calls for around 3% of GDP in additional spending on infrastructure, health care, education, climate, housing, and other Democratic priorities.
• Unlike in late 2016, the Fed is in no mood to raise interest rates. Large-scale fiscal easing will push down the value of the US dollar, while giving bond yields a modest boost. Non-US stocks will outperform their US peers. Value stocks will outperform growth stocks.
• Looking further out, Republicans will move to the left on economic issues, leaving corporate America with no clear backer among the two major parties. As such, while we are constructive on equities over the next 12 months, we see grave dangers ahead later this decade.

Wall Street Got What It Wanted From Trump and Is Ready for Biden
Once upon a time, Wall Street was afraid of Donald Trump. It was 2016, and every time he got closer to winning, stock prices fell — then plummeted on Election Night when the unthinkable happened. Four years later, the markets have made peace with the human-wrecking-ball president, steadily climbing to new highs and even shaking off the coronavirus crash. So why aren’t they falling in tandem with Trump’s chances of reelection? As Intelligencer columnist Josh Barro explains, corporate America got what it wanted from him — an enormous tax cut — and even a Joe Biden landslide won’t dare take it all away.

Trump calls off aid talks
(Reuters) U.S. President Donald Trump, still being treated for COVID-19, abruptly ended talks with Democrats on an economic aid package on Tuesday, drawing criticism from presidential rival Joe Biden that he was abandoning Americans in the midst of a pandemic.
Trump’s tweet breaking off talks for a new round of stimulus spooked Wall Street, sending stocks down as much as 2% from their session highs and tarnishing one of the metrics that the Republican president has touted as a sign of his success.
Late Tuesday, Trump in a series of tweets urged Congress to quickly pass $25 billion in funding for passenger airlines, $135 billion for small businesses and provide $1,200 stimulus checks for Americans. “I am ready to sign right now,” Trump wrote.
Trump Turning Down Pelosi’s Stimulus Deal Is the Worst Political Blunder in History
In May, the House of Representatives passed a $3 trillion economic relief bill. Over the next four and a half months, Republicans in the White House and Senate dithered, alternating between good-faith engagement and lethargy. The apparent final blow came in the form of a series of tweets by President Trump announcing an end to negotiations.
It is possible Trump — who just yesterday declared his desire to cut a deal — intends this as one of his “clever” negotiating ploys, enabling him to turn around and make a deal that he can paint as a capitulation by his panicked foes. But even if that happens, the window to boost the economy in time to help him (obviously the only consideration Trump cares about) is closing fast. Walking away from the extended hand of an opposition party willing to pump trillions of dollars into the economy may go down as the single greatest political blunder in the history of presidential elections.

6 August
Paul Krugman: Coming Next: The Greater Recession
The suspension of federal benefits would create damage almost as terrifying as the economic effects of the coronavirus.
The 2008 financial crisis and the sluggish recovery that followed weren’t that long ago, and they taught us valuable lessons directly relevant to our current plight. Above all, experience in that slump demonstrated both that economic depressions are no time to obsess over debt and that slashing spending in the face of mass unemployment is a terrible mistake.
But nobody in the White House or on the G.O.P. side of Capitol Hill seems to have learned anything from that experience. In fact, not having learned anything from the last crisis almost seems to be a requirement for Republican economic advisers.
So at the moment we seem to be headed for a Greater Recession — a worse slump than 2007-2009, overlaid on the coronavirus slump. MAGA!

30 July
3 Months Of Hell: U.S. Economy Drops 32.9% In Worst GDP Report Ever
(NPR) The coronavirus pandemic triggered the sharpest economic contraction in modern American history, the Commerce Department reported Thursday.
Gross domestic product — the broadest measure of economic activity — shrank at an annual rate of 32.9% in the second quarter as restaurants and retailers closed their doors in a desperate effort to slow the spread of the virus, which has killed more than 150,000 people in the U.S.
The economic shock in April, May and June was more than three times as sharp as the previous record — 10% in 1958 — and nearly four times the worst quarter during the Great Recession.
Economy Shrank At 32.9% Rate In 2nd Quarter

July-August Issue
The Looming Bank Collapse
The U.S. financial system could be on the cusp of calamity. This time, we might not be able to save it.
(The Atlantic) American citizens are well aware of the toll [the coronavirus pandemic] has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there’s another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed.
After the housing crisis, subprime collateralized debt obligations (CDOs) naturally fell out of favor. Demand shifted to a similar—and similarly risky—instrument, one that even has a similar name: the CLO, or collateralized loan obligation. A CLO walks and talks like a CDO, but in place of loans made to home buyers are loans made to businesses—specifically, troubled businesses. CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world.

10 June
Federal Reserve predicts slow recovery with unemployment at 9.3 percent by end of 2020
(WaPo) The central bank pledged to continue boosting the economy by keeping the benchmark U.S. interest rate near zero through at least 2022.
Federal Reserve leaders predict a slow recovery for the U.S. economy, with unemployment falling to 9.3 percent by the end of this year and to 6.5 percent by the end of 2021, after millions of Americans lost their jobs in the stunning recession caused by the coronavirus outbreak.
Fed Chair Jerome H. Powell stressed Wednesday that the economy is likely to need aid from the central bank and Congress for a long time. He repeatedly highlighted his concern that millions of Americans will become permanently unemployed during this crisis as companies that employed them go out of business or their old jobs are eliminated.
The Recession Started in February — and Is Probably Already Over
(New York) The economy seems to have bottomed out in April and has been growing again, as seen not just in reports from retailers and airlines and car dealers about business starting to grow again (from a much-reduced base) but also in Friday’s employment report, showing very strong job growth (also from a much-reduced base.)
That report surprised analysts…. Much of the attention has been on “misclassification error,” a real problem where some people who have been temporarily laid off from work give answers that lead the BLS to count them as absent from work but employed. But this problem was even more severe in April than in May, meaning that any way you slice the numbers, employment rose and unemployment fell from April to May. Barring a second coronavirus wave severe enough to cause a national reclosure of huge swathes of the country, the economy has returned to expansion after the shortest recession on record, lasting only two months.

6 June
Is This What a Recovery Looks Like?
Eric Levitz
(New York) Apparently, U.S. companies were better off with an uncontained epidemic paralyzing their Chinese operations than they had been months earlier, when the novel coronavirus was still just a twinkle in Satan’s eye. Morgan Stanley assured its clients that markets had nowhere to go but up. After all, the investment bank reasoned, “the pace of infection has slowed” and U.S. equities were “the appropriate asset to own if rates continue to fall so long as we don’t have a recession.”
Four months, $3 trillion in stimulus, and 100,000 U.S. coronavirus deaths later, Wall Street is sanguine once again. The 50 trading days between March 23 and June 3 were the best the S&P 500 has ever seen. A rally that began in tech stocks has spread to frontline sectors, with airlines and hotel chains finding renewed appetite for their shares. As American states reopen their economies, JP Morgan CEO Jamie Dimon  has declared that the U.S. boasts “pretty good odds” of a “rapid economic recovery.”
It isn’t that hard to see what Dimon does if you look from the proper vantage (through the window of a private jet, for example): Analysts had expected Friday’s jobs report to show the U.S. economy shedding 7.5 million jobs in May; instead, it showed employers expanding their payrolls by 2.5 million, as the first round of reopenings brought furloughed workers returned to their posts. Meanwhile, personal income in the U.S. rose by a record-high 10.5 percent last month, thanks to stimulus checks and enhanced unemployment benefits. As a result, millions of displaced workers actually gained purchasing power despite their ongoing joblessness. Which means that U.S. consumers are now flush with disposable cash that is sure to flood the economy the minute the pandemic has passed – or, perhaps, before.
A ‘misclassification error’ made the May unemployment rate look better than it is. Here’s what happened.
When the U.S. government’s official jobs report for May came out on Friday, it included a note at the bottom saying there had been a major “error” indicating that the unemployment rate likely should be higher than the widely reported 13.3 percent rate.
The special note said that if this “misclassification error” had not occurred, the “overall unemployment rate would have been about 3 percentage points higher than reported,” meaning the unemployment rate would be about 16.3 percent for May. But that would still be an improvement from an unemployment rate of about 19.7 percent for April, applying the same standards.
Ryan Cooper: Will Republicans doom Trump by declaring premature economic victory?
(The Week) the pandemic has not remotely passed. The easing of lockdowns appears to be backfiring in many states, including California, Texas, North Carolina, Arizona, South Carolina, Utah, and Alaska. The ongoing wave of mass protests and cavalier police brutality in response may further fuel infection. There is a strong chance that at least some social distancing measures will remain in place or be reimposed in most states over the coming months, especially after summer passes — further holding back recovery.
The most reliable rule of thumb in politics is that lousy economic conditions are bad for incumbent presidents and parties. If they had any sense, Republicans would be eagerly taking up Democratic proposals to get more money into the hands of the citizenry, so as to give Trump the best chance at winning re-election. But because this stimulus must come in the form of spending instead of tax cuts for the rich, Republicans have a strong ideological resistance to it. If no more stimulus is passed, and Trump loses thanks in part to a wretched economy, he will only have himself and his party to blame.

3 June
Politico: All of the awful elements plaguing us right now — the pandemic, the economy, police brutality, looting — have the potential to feed into one another, particularly if mass gatherings in the streets lead to a new outbreak of the coronavirus. That would extend and worsen the economic pain, not to mention the horrible health toll of the disease. Some small businesses are suffering from property damage, but the big economic concerns from the protests and clashes with police over the past week are driven by public health, not broken windows.

27 April
American Winner Treasury Secretary Steven Mnuchin embodies the plutocratic principle that a crisis is a terrible thing to waste.
A GOP president and Senate majority were always going to comfort the comfortable and toss crumbs to the afflicted. And when Congress approved $2.2 trillion in coronavirus relief funds last month, nurses were intubating patients without proper PPE, grocery-store clerks were jeopardizing their health to keep others fed, and delivery drivers were forfeiting the security of social distancing so others could more comfortably enjoy it. The legislation included zero dollars in hazard-pay benefits for those workers. It did, however, provide $90 billion in tax cuts to the owners of pass-through businesses, such as, for instance, the Trump Organization. Such “relief” was necessary, the American Enterprise Institute later explained, to mitigate the “penalty” on economic risk-takers.

16 April
Trump’s Coronavirus Economic Council Was a Disaster Before It Began
(New York) The origin story of the president’s Opening Our Country Council does not foretell success for the group. Last Friday, Trump announced that on April 14 he would debut a team full of “doctors and business people” to advise him in his rush to defibrillate the economy. Despite the five-day head start to assemble the team, the White House skipped a few recruiting basics for the group — like actually contacting council members to inform them of their membership, or sticking with the same name.
Trump’s ‘Opening Our Country Council’ Runs Into Its Own Opening Problems
Instead of a formal council, the president created several industry groups, and joined four calls with them. But some participants had no notice they would be included, and others could not join in.
(NYT) … the rollout of what the president referred to last week as his “Opening Our Country Council” was as confusing as the process of getting there. Instead of a formal council, what Mr. Trump announced on Tuesday was a watered-down version that included 17 separate industry groups, including hospitality, banking, energy and “thought leaders.” And on Wednesday, a bipartisan group of lawmakers received emails inviting them to join another task force.
In the first call of the day, Mr. Trump talked Wednesday morning with many of the big-name business leaders…but encountered some resistance to his enthusiasm for reopening the country quickly, even as the executives offered some praise for his administration’s response.
Mr. Trump opened the call by saying that “testing is under control” in the country. But after each executive was given a minute or two to provide his or her overview of what was needed to reopen the economy, there was a wide consensus that more testing was needed before the economy could reopen.
Another issue of great concern to the executives on the call, one participant said, was the need to address the liability companies could face if employees got sick after returning to work, given the possibility that workers who felt that they were brought back too soon — or were not placed in a safe environment — could sue en masse.

Battle between insurers and US business has just begun
(FT) Because of variance in contract wordings and uncertainty over the ultimate scale of losses, the potential insured business interruption losses for Covid-19 are hard to estimate. According to the American Property Casualty Insurance Association, a trade group, the prospective cost of paying business interruption coverage just for businesses with 100 or fewer employees would be in the range of $255bn to $431bn per month, or up to $5.2tn per year.
Such payments would eliminate the entire capital position of the industry in short order. Capital and surplus for the US industry was about $860bn at the end of 2019.
The insurers have prepared a defence in depth. The most significant and up-to-date contract language they have incorporated was developed by the Insurance Services Office, which provides actuarial services, in 2006 after the Sars epidemic. These boilerplate contract additions called “new endorsements filed to address exclusion of loss due to virus or bacteria” were intended to defend insurers from claims such as those for post-Covid-19 business interruption.
The claimants and their lawyers are not deterred. The Business Interruption Group, composed mostly of celebrity chefs such as Daniel Boulud and Jean-Georges Vongerichten, had a conference in late March with US President Donald Trump to make their case.
Mr Trump, some of whose properties incorporate restaurants, took BIG’s side. As the president said to the cameras: “When they [businesses] finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”
Actually, under the US federal system, if any government power is going to let, or not let, non-payment on business interruption insurance due to exclusionary language it is the state courts and their judges and juries.
A number of state legislatures are working to amend their laws to effectively override the insurers’ exclusionary language. Trump’s opinion is not legally binding.

Seven U.S. states extend coronavirus shutdown to May 15, as Trump prepares to map out plan
(Reuters) – Seven Northeastern states on Thursday extended a shutdown to contain the coronavirus pandemic until May 15, even as President Donald Trump prepared to detail his plan to end the lockdown in the least-affected U.S. states as early as May 1.
Later on Thursday, Trump was expected to detail his strategy to begin reopening the devastated U.S. economy by May 1, despite concerns from health experts, governors and business leaders about the dangers of lifting restrictions without widespread testing in place.

15 April
Think This Pandemic Is Bad? We Have Another Crisis Coming
Addressing climate change is a big-enough idea to revive the economy.
By Rhiana Gunn-Wright, director of climate policy at the Roosevelt Institute.
Pandemics like the coronavirus may occur more often when climate change is unabated. Warming and changing weather patterns shift the vectors and spread of disease. Heavily polluting industries also contribute to disease transmission. Studies have linked factory farming — one of the largest sources of methane emissions — to faster-mutating, more virulent pathogens. The same corporations that exacerbated the climate crisis are literally helping to create deadlier diseases, more quickly, in a world that keeps changing how they spread.
Similarly, the same populations that are bearing the brunt of the health and economic effects of the coronavirus are the same populations that bear the brunt of fossil fuel pollution — which, in turn, makes them more vulnerable to serious complications.
If history is any indication, rebounding from an economic disruption this large requires an equally large spike in demand and production. Outside of war, climate change is the only issue large enough to provide such a spike. Now is the time to create policies that provide immediate relief to communities, such as federal assistance to transition homes and businesses to renewable energy; give “green” fiscal aid to states; and fuel economic recovery with the creation of federally funded green jobs. But none of this can happen so long as our leaders keep convincing themselves that the greatest country in the world cannot walk and chew gum at the same time.

6 April
Coronavirus Survey Round Two: Unemployment Doubles, More Americans Worried About Retirement
Two weeks after the first one was published, LendEDU’s second Coronavirus survey of 1,000 adult Americans also found that more consumers have dipped into their savings to cover expenses, while recent student loan changes may be helping.
Both worldwide and at home in the United States, COVID-19 cases and deaths have risen dramatically since LendEDU published our first Coronavirus survey on March 23rd.
Federal guidance was extended until the end of April at least, the largest economic stimulus package in American history was signed by President Trump, and a mind-numbing 6.6 million Americans applied for unemployment benefits in a single week.
With the situation being so fluid, LendEDU has again conducted a survey of 1,000 adult Americans to see how the finances of Americans are being impacted by COVID-19.
And compared to our first survey from two weeks ago, the financial situation for most Americans is getting a lot worse due to the outbreak. full survey results

30 March
The Fed Transformed: Jay Powell Leads Central Bank into Uncharted Waters
(WSJ) The 107-year-old institution has moved faster and farther in just weeks than it did during the entire 2008 financial crisis.
Max de HaldevangReporter at Quartz: The Fed has taken radical action to combat Covid-19. As Donald Trump dawdled, Fed chair Jay Powell began cutting interest rates to near zero, buying more than $1 trillion in debt, and propping up lending markets. The Wall Street Journal gives a blow-by-blow account of how the “mild-mannered,” guitar-playing lawyer has handled the crisis from his home in the Maryland suburbs—and won the begrudging praise of Trump, a longtime critic.
Pentagon watchdog tapped to lead committee overseeing $2 trillion coronavirus package
Glenn Fine will join nine other inspectors general on the new committee.
Fine will lead a panel of fellow inspectors general, dubbed the Pandemic Response Accountability Committee, and command an $80 million budget meant to “promote transparency and support oversight” of the massive disaster response legislation. His appointment was made by a fellow committee of inspectors general, assigned by the new law to pick a chairman of the committee.
The Pandemic Response Accountability Committee is one of three major prongs in the new law meant to provide oversight of the enormous sums to be doled out by the Trump administration. The others include a new “special inspector general” to oversee the Treasury Department’s disbursal of $500 billion in funds to support distressed industries and shore up the collapsing economy. Trump is slated to nominate that inspector general, who will then face Senate confirmation.

29 March
Trump Extends Social Distancing Guidelines Through End of April
The president, facing grim figures from his health advisers, starkly reversed an earlier upbeat assessment that the country could relax the guidelines by Easter.
The grim recommendation, which the president made in the White House Rose Garden, came just a day before the end of a two-week period in which the world’s largest economy has largely shut down with staggering consequences: businesses shuttered, schools and colleges emptied, and social life all but suspended.
Mr. Trump said repeatedly last week that he wanted to reverse such drastic measures soon, perhaps by Easter, on April 12, in the hopes of restarting the economy. But public health experts — including the president’s own advisers — had warned that trying to return to normal life too quickly risked allowing the virus to rage, increasing the likelihood of more infections and raising the number of deaths.

28 March
The coronavirus recession is exposing how the economy was not strong as it seemed
A record-long expansion and years of ultra-low interest rates could make it harder to recover from a recession, economists said.
(WaPo) The coronavirus has left businesses from giant corporations to the corner bar struggling for survival. But along with dealing millions of Americans an unexpected blow, the pandemic exposed vulnerabilities that had accumulated during a record-long expansion and years of ultra-low interest rates — and which now could make it harder to recover from a recession, economists said.
… The record-high stock prices the president routinely touted became disconnected from companies’ underlying value, obscuring warning signs such as excessive borrowing, according to economist Michalis Nikiforos of the Levy Economics Institute of Bard College. Total corporate debt surged past $10 trillion, equal to nearly one-half the nation’s annual output.
On the eve of the crisis, one-quarter of the country’s largest companies had more cash going out than coming in, according to Goldman Sachs. The economic shutdown will quickly cause the share of American companies that are cash-flow negative to nearly double, meaning they could be in danger of starving for funds.
The unappreciated frailties did not cause the downturn. The pandemic is responsible for that. And no business can stockpile enough cash to ride out an indefinite shutdown.
But the financial weaknesses surfacing may determine how the United States weathers its worst economic calamity in a century — and which companies survive.

27 March

Trump signs $2 trillion coronavirus bill into law as companies and households brace for more economic pain

The new law amounts to the largest emergency spending measure in U.S. history.
President Trump on Friday signed a massive $2 trillion emergency spending bill into law, promising to deliver a tidal wave of cash to individual Americans, businesses and health care facilities all reeling from the coronavirus pandemic.
His signature came just hours after the House of Representatives passed the massive package by an overwhelming voice vote, and less than 48 hours after it received unanimous approval from the Senate.

26 March
How the Fed’s Magic Money Machine Will Turn $454 Billion Into $4 Trillion
The central bank takes Treasury Department loan guarantees and uses them to stand up huge programs. Here’s how that works.
(NYT) The Treasury and the Fed will work together to decide how the $454 billion should be deployed. The central bank designs and runs the programs, but Treasury consults on the broad-brush outline and must sign off on any plan.
The Fed has already announced a number of emergency lending programs in recent weeks, including one that supports corporate debt issuers and another meant to keep money flowing in the market for short-term business loans. It has said it will establish a “Main Street” lending facility for small businesses, though details on what that will look like are scant.

25 March
Frank Rich: What a Plague Reveals
Though coronavirus cases continue to climb in the U.S., a number of businesspeople and commentators have begun to talk about “restarting” the economy, even at the cost of American lives. If even non-Trumpists are in part echoing Trump’s views on this, should we take them seriously?
when someone like Lloyd Blankfein proposes that we “let those with a lower risk to the disease return to work” in “a very few weeks,” it’s another story. They are revealing their arrogance, of course — masters of the universe know more than, say, a mere civil servant like Anthony Fauci — but also their own economic isolation from the masses they are purporting to help. It’s behavior reminiscent of the titans who tried to rally Wall Street after the 1929 crash by making a big show of buying large blocks of stock. And let’s face it: Most, if not all, of these public notables who are preaching get-back-to-work-soon schemes have a cushion most Americans don’t — the means and the clout to cut the line for a coronavirus test and to secure immediate and attentive medical care away from an overflowing public hospital.
POLITICO Playbook: We have a deal
Here are the items Schumer’s team says they’ve secured in the last few days:
an extra month of unemployment insurance; $55 billion more for hospitals; $150 billion for states, localities and tribes; $10 billion in SBA grants of up to $10,000 for small business costs; $17 billion for SBA to cover six months of payments for businesses with current SBA loans …
… $30 billion in emergency education funding; $25 billion in transit funding; $30 billion for the Disaster Relief fund; the ban of stock buybacks for companies that received government assistance; real-time reporting of Treasury loans, investments and assistance; an IG for the $500 billion to lend to corporations; a tax credit that would encourage employers to keep workers on the payroll; a tax exclusion for people who are receiving student loan repayment from their employer.
Senate Democratic Leader Chuck Schumer has secured a provision in the agreement that will prohibit businesses controlled by the President, Vice President, Members of Congress, and heads of Executive Departments from receiving loans or investments from Treasury programs. The children, spouses and in-laws of the aforementioned principals are also included in this prohibition.
White House and Congress Reach $2 Trillion Stimulus Deal

23 – 24 March
Republicans are angry that Democrats want to do too much for the economy
(WaPo) …there’s one critical thing to understand about how this all played out: In almost every case and on every question, Democrats wanted to spend more and do more than Republicans did

  • Democrats wanted $150 billion for hospitals and health centers to deal with the virus; Republicans wanted $75 billion.
  • Democrats wanted to give families checks for at least $1,500 per person; Republicans wanted $1,200.
  • Democrats wanted $500 billion in aid to small businesses; Republicans wanted $350 billion.
  • Democrats wanted a requirement that large companies given assistance keep their workers on the payroll; Republicans would have left open a loophole companies could have used to take the money and lay off workers anyway.
  • Democrats wanted to require companies that got aid to pay a $15 minimum wage and agree to strict requirements limiting executive compensation and stock buybacks.
  • Democrats wanted more money for states to help them deal with sudden costs and avoid a budget spiral that would lead to severe cutbacks in state services.
  • Democrats wanted four months of extended unemployment benefits; Republicans wanted three months.
  • Democrats wanted help for people to pay their utility bills and would bar utilities from cutting off people’s service during the crisis.
  • Democrats demanded oversight of the “slush fund” that in the Republican plan would have let the Treasury Secretary distribute half a trillion dollars to corporations at his own discretion, with no oversight. When asked about it on Monday, President Trump said, “I’ll be the oversight.”

On that last point, as on many others, the Republicans eventually gave in.
Politico Nightly Newsletter:  Hopes that the economy will make a swift recovery after the worst of the crisis passes are quickly fading. On Thursday, economists are expecting the largest U.S. jobless claim number ever reported, smashing previous unemployment records. The word “depression” has been seeping into more long-term forecasts as fears grow that the virus could continue its spread — and that’s even factoring in the multi-trillion dollar response from Congress and the Fed.

21 March
The Economic Devastation Is Going to Be Worse Than You Think
The coronavirus’s overwhelming toll on jobs and businesses has only just begun.
NOTE: The Atlantic is making vital coverage of the coronavirus available to all readers. You can follow the link from this article.
“This is a tsunami, with a number of big waves dead ahead.”
Mark Zandi … is the chief economist at Moody’s, an analyst highly regarded by both political parties, and generally not prone to hyperbole. Yet when I spoke with him on the phone yesterday, he immediately reached for the metaphor of a devastating natural disaster to describe the toll that the pandemic will take on American commerce—the businesses it will destroy, the jobs it will wipe out, the retirement nest eggs it will crack and shatter.

15 – 16 March
America’s Economy Begins to Shut Down as Pandemic Measures Take Hold
The fast-spreading virus has put an end to movies, date nights and other economic activity, prompting some economists to call a U.S. recession.
(NYT) In some places, public officials and private business owners moved with stunning speed. In others, paralyzing hesitancy, defiant bravado or blithe disregard dominated. But by Monday, it was clear everywhere that most of the American economy was grinding to an unparalleled halt and would remain that way for months.
Fed slashes interest rates to zero in massive intervention
(WaPo) The Federal Reserve announced on Sunday it would drop interest rates to zero and buy at least $700 billion in government and mortgage-related bonds as part of a wide-ranging emergency action to protect the economy from the impact of the coronavirus outbreak.
The moves, the most dramatic by the U.S. central bank since the 2008 financial crisis, are aimed at keeping financial markets stable and making borrowing costs as low as possible as businesses around the country close and the U.S. economy hurtles toward recession.
The Fed, led by Chair Jerome H. Powell, effectively cut its benchmark by a full percentage point to zero. The benchmark U.S. interest rate is now in a range of 0 to 0.25 percent, down from a range of 1 to 1.25 percent.
In addition to rate cuts, the Fed announced it is restarting the crisis-era program of bond purchases known as “quantitative easing,” in which the central bank buys hundreds of billions of dollars in bonds to further push down rates and keep markets flowing freely. the Fed is also giving more generous loans to banks around the country so they can turn around and offer loans to small businesses and families in need of a lifeline.

9 March
The markets are sending a message about coronavirus: The recession risk is real
(WaPo) The stock market drop is ugly. But one big threat to the economy is a slew of defaults — both personal and business.
There’s still a chance the coronavirus runs its nasty course and the world returns mostly to normal by the summer, which could trigger a global financial rebound. But experts widely expect the U.S. economy will stall to zero — or even turn briefly negative — in coming weeks. When that happens, it would not take much to fully knock it into a recession. That’s why there’s so much panic in the markets.
White House advisers to give President Trump policy options for coronavirus response, including paid sick leave
Congressional Democrats are also pushing for a new legislative package to address fallout.

28 February
Stocks Suffer Worst Week Since Financial Crisis Amid Coronavirus Fears
The S&P 500 tumbled for a seventh day, and other economic indicators are flashing warning signs.

10 February
Trump offers $4.8 trillion budget plan that seeks big cuts to domestic programs
Democrats widely panned the proposal, which they said would hurt low-income families
(WaPo) The White House on Monday proposed a $4.8 trillion election-year budget that would slash major domestic and safety-net programs, setting up a stark contrast with President Trump’s rivals as voting gets underway in the Democratic presidential primary.
The budget would pursue hundreds of billions of dollars in cuts to Medicaid and also seek reductions in the Children’s Health Insurance Program, while wringing some savings from Medicare despite Trump’s repeated promises to safeguard the program for older Americans.
The budget is a proposal to Congress, and lawmakers have mostly rejected the White House’s proposed cuts in the past. Still, the budget plan sets up the Trump administration’s policy priorities heading into the November election and is likely to draw scrutiny in Washington and on the campaign trail. Trump has in the past not shown much interest in pursuing the budget cuts his aides have offered, and he didn’t make any public comments about the plan Monday.

4 February
Though he’ll never admit it, Trump is riding economic trends he inherited
Jared Bernstein
(WaPo) In many cases, including Trump’s, presidents ride trends they inherited. If those trends change for the better, as with Barack Obama and Bill Clinton, they get credit (sometimes deservedly, as per their anti-recessionary interventions). If they worsen, as with George H.W. Bush, they get blamed. What makes Trump unusual is not that he’s riding favorable trends that predated him, nor that he’s claiming credit for them. It’s that he lies about them, claiming that the economy was awful until he saved it.
A typical Trumpian refrain maintains, totally against the facts, that when he took office, “America was stuck in a failed recovery and saddled with a bleak economic future.” In Davos, Switzerland, last month, Trump falsely claimed that the economy he inherited was “in a rather dismal state.” He claims to have “accomplished an economic turnaround of historic proportions.” … The analysis shows a (truly impressive) 15 percent annualized growth rate for real net worth over the first three years of Trump’s term. The key omitted fact is that this was precisely the growth rate when Trump took office. If we back this indicator up over the final three years of Obama’s presidency, the growth rate is exactly the same: 15 percent, annualized. That’s solid evidence of trend-riding.
If we do the same exercise for the decline in unemployment and the growth in jobs — compare the past three years with the previous three years — we see that unemployment fell less quickly under Trump than it did under Obama (down one point under Trump and two points under Obama). Job growth under these comparable periods was faster under Obama than Trump (up 6 vs. 5 percent).

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