issue: Economy

The Uneven Distribution of Pain: Healing the Broken Labor Market

Posted on by The Progressive Policy Institute

The Covid recession is the most uneven economic downturn in history. Take a look at the following table, which we calculated from last Thursday’s employment data.

 

The table compares occupational employment in the second quarter of 2020 with the second quarter of 2019.  On the one hand, some occupations, like computer and mathematics-related jobs, have seen a significant employment gain over the past year of almost 10%. On the other hand, food preparation  and personal care jobs  saw an almost inconceivable plunge in excess of 40%.  Production jobs are down more than 20%.

This differential frames the economic task ahead.  How can we make sure that these workers, detached from the labor force, can find new jobs quickly when the economy starts to recover? Moreover, many of the businesses where they were formerly employed are likely to have disappeared as the country continues to stagger under the pandemic.

PPI has identified several policy prescriptions that can help. Just to summarize here:

First, policymakers must make it easier for the small businesses that survive to quickly expand to fill the void, especially in the hard-hit restaurant and personal care industries. Elliott Long describes how adopting a “startup tax credit” can help encourage small businesses to grow. Designed like the earned income tax credit, but only for businesses, the startup tax credit helps give small companies a boost in the right direction. In addition, state and local governments need to be wary of regulations that make it harder for companies to expand.

Second,  the U.S. has to adopt policies to encourage shorter supply chains and  manufacturing entrepreneurship, It should be a national imperative to help small manufacturers adopt digital technologies that make them more flexible and able to compete with foreign suppliers, and then connect them up with larger buyers.

Third,  any economic recovery and infrastructure legislation should include large investments in clean manufacturing, as Paul Bledsoe of PPI has advocated in a recent report.  That means many more production and construction jobs building  electric vehicles, charging stations and other elements of green technology, while upgrading all of our essential infrastructure.

Fourth, digital technologies can help connect up workers with open jobs much faster. We’ll be writing more about that soon.

The UK Online Ad Market

Posted on by The Progressive Policy Institute

Last year I did a paper entitled The Declining Cost of Advertising: Policy Implications. Not surprisingly, I was intrigued by the new report from the Competition and Markets Authority in the UK, entitled Online platforms and digital advertising market study . I’m still going through the report, which exceeds 400 pages, not including multiple appendixes.

But I just want to highlight one important point. The report repeatedly alludes to the impact of advertising on consumer prices for goods and services. For example:

The costs of digital advertising, which amount to around £14 billion in the UK in 2019, or £500 per household, are reflected in the prices of goods and services across the economy. These costs are likely to be higher than they would be in a more competitive market, and this will be felt in the prices that consumers pay for hotels, flights, consumer electronics, books, insurance and many other products that make heavy use of digital advertising.

But here’s the thing—ad spend in the UK, measured as a share of UK GDP, is more or less flat over the past thirty years (chart below). There’s no evidence that the burden on advertisers or consumers has increased because of the arrival of Google and Facebook to the UK ad market.  Indeed, it may have gone down a bit,  comparing the 1.1% peak in 2019 with the 1.2% peak in 2000, before Facebook existed and when Google advertising was first getting started.

 

Given how many places ads appear these days, it’s reasonable that advertising in the UK has become much more intensive over time–that is, in real units advertising has grown faster than overall real UK GDP. If so, then the shift to digital advertising has coincided with a fall in the price of advertising relative to other UK goods and services. The easiest interpretation, at least for me, is that advertisers are consistently getting a bigger bang for their buck from digital advertising, without paying more in total.

A Transatlantic Digital Trade Agenda for the Next Administration

Posted on by The Progressive Policy Institute

CAN A NEW DEMOCRATIC ADMINISTRATION RECONSTRUCT DIGITAL TRADE POLICY WITH EUROPE FROM THE ASHES OF TTIP?

As the global leader in digital trade, the United States has a big stake in ensuring that international rules facilitating its continued expansion are put in place.

The Obama Administration’s bold agenda to establish these rules across Europe and the Asia-Pacific did not yield lasting success, with the failure of the Transatlantic Trade and Investment Partnership (TTIP) negotiations and the Trump Administration’s withdrawal from the Trans-Pacific Partnership (TPP). Nonetheless, the key elements of US digital trade policy enjoy bipartisan policy support, providing a promising basis for the next Democratic administration to re-engage with Europe, our biggest digital trading partner.

Part 1 of this issue brief explains why international rules are needed to protect and facilitate digital trade. Part 2 describes the turbulent past decade in transatlantic trade relations and the growing importance of US digital trade with Europe. Part 3 explains why the US government and the European Union (EU), during TTIP negotiations, were unable to agree on a digital trade chapter, including a key provision guaranteeing the free flow of data. Finally, Part 4 suggests how two parallel sets of trade negotiations beginning early this year — between the EU and the United Kingdom (UK) and between the United States and the UK — may help a future US Administration end the transatlantic stand-off over digital trade.

1. THE CASE FOR DIGITAL TRADE AGREEMENTS

The United States leads the world in the fast-growing digital economy.1 Digital services include not just information and communications technology (ICT) but also other services which can be delivered remotely over ICT networks (e.g. engineering, software, design and finance).2 Although trade in digital services is hard to measure precisely, there is no mistaking that it has become one of the fastest-growing areas for the United States internationally. In 2017, all types of digital services made up 55% of all U.S. services exports, and yielded 68% of the U.S. global surplus in services trade.3 The beneficiaries of this burgeoning area of trade are not just the U.S. technology giants, but also many smaller and medium-sized companies that develop and sell digital services or use ICT networks for marketing products to consumers.

More than a decade ago, the Office of the US Trade Representative (USTR) recognized the US comparative advantage in digital services trade and began to pursue binding rules with a number of foreign governments. TPP negotiations were the first major step in this direction. The TPP agreement signed by the Obama Administration included provisions designed to protect against practices harmful to digital trade. It prohibited:

  • Customs duties and other discriminatory measures on digital products like e-books, movies, software and games;
  • Requirements that data or computing facilities be localized in the foreign jurisdiction;
  • Discriminatory treatment of crossborder data flows;
  • Obligations to use local technology, content, or suppliers;
  • Discriminatory foreign standards or burdensome testing requirements; and
  • Requirements for disclosing source code and algorithms.

TPP also included facilitative measures:

  • Requiring governments to adopt measures to protect against on-line fraud and guard consumers’ personal information;
  • Promoting cooperative approaches to cybersecurity; and
  • Facilitating the use of electronic authorizations and signatures for e-commerce, electronic payments, and other on-line applications

President Trump’s decision to withdraw the United States from TPP left US digital services companies exposed to these harmful practices in the Asia-Pacific region. From the perspective of liberalizing and expanding US digital trade, it was a spectacular own goal.4 However, USTR quickly set out to partially mitigate its effect by seeking bilateral trade accords with some TPP signatories. Digital chapters in the updated Korea-US Free Trade Agreement (KORUS), the new US-Mexico-Canada Free Trade Agreement (USMCA), and, most recently, the Japan-US Digital Trade Agreement largely duplicate the TPP’s digital trade provisions.

2. THE TRANSATLANTIC TERRIBLE TEENS

Transatlantic trade politics also has seen its share of drama over the past decade. The comprehensive TTIP negotiations begun in 2013 badly backfired. Popular fears of US corporate domination flared across Europe, the EU’s member states failed to back the project enthusiastically, and progress between US and European Commission negotiators on the many subject-matter chapters proved glacial. As the Obama Administration came to an end, TTIP talks were quietly shelved.

The Trump Administration’s trade agenda for Europe has been strikingly different. It has concentrated on rectifying the sizeable US deficit in merchandise trade with the EU, which reached an estimated record high of $168 billion in 2018.5 The President demanded that the EU, which is solely responsible for the bloc’s international trade relations, address the imbalance in such areas as steel, aluminum and automobile trade. (He also somewhat mystified Germany by insisting that it negotiate directly with the United States to reduce the U.S. goods trade deficit.) The US Government determined that a number of jurisdictions including the EU had engaged in trade practices unfair to US steel and aluminum, and imposed higher tariffs on these imported products as a consequence; higher tariffs on European autos so far remain a threat.

In the summer of 2018, European Commission (then-)President Jean-Claude Juncker managed partly to defuse transatlantic tensions by agreeing to negotiate with the United States on increasing EU purchases of US-made industrial goods and on related regulatory standard.

Juncker also committed to greater European purchases of US natural gas and soybeans. Trump in return agreed not to proceed with unilateral tariff increases for the time being. Since the advent of new EU leadership late last year, USTR Robert Lighthizer and his Commission counterpart Philip Hogan have stepped up efforts toward reaching, before the 2020 US presidential election, a limited accord in the areas identified by Trump and Juncker.

Throughout the decade, the volume of goods and services trade across the Atlantic has continued to grow steadily. The United States and the European Union are still each other’s largest trading partners. US goods exports to the EU grew to $293 billion in the first eleven months of 2018, a 13% increase over the previous year.6 US exports of all types of services to the EU reached a record $298 billion in 2017, resulting in a $66 billion surplus in 2017.7 European countries comprise four of the top ten export markets for US services, and in 2017 the Union as a whole absorbed 37% of US services exports.8

Despite the continuing growth in trade, the next Democratic administration will inherit a transatlantic trade policy environment characterized by an unusually high level of tension and distrust. TTIP’s failure appears to have stifled any impulses in Washington and Brussels simply to resume the slog towards a comprehensive trade agreement. Still, there are good reasons for Democrats to not abandon the work begun on digital trade during the TTIP negotiations.

3. THE US DIGITAL TRADE IMPASSE WITH EUROPE

Since Trump’s trade ambitions with the EU remain firmly focused on the goods deficit, the question of whether the United States should resume direct digital services trade negotiating efforts with Europe seems likely to be deferred till the next administration. From an economic perspective, the case for US re-engagement is compelling. In 2017, the United States exported $204.2 billion in digital services to Europe, generating a surplus in this area of more than $80 billion.9 International data flows, measured in terms of capacity for data bandwidth, also are heavily skewed in a transatlantic direction. Cross-border data transfers between the United States and Europe, by this measure, are 50% higher than those between the United States and Asia.10 In sum, the transatlantic area is the world’s largest for digital trade.

During TTIP negotiations, the United States proposed language close to TPP digital trade provisions, but the EU objected to a number of them. One of the most important was a US proposal to guarantee cross-border ‘free flow’ of electronic information for business purposes, and to put bounds on the extent to which European public policy measures relating to personal privacy could serve as an exception to unrestricted data flows.

The United States proposed that public policy exceptions be allowed, but that they be subjected to long-established World Trade Organization (WTO) disciplines. These WTO rules allow for exceptions for legitimate public policy objectives, so long as they do not constitute arbitrary or unjustifiable discrimination or disguised restrictions on trade, and they are narrowly tailored to achieve a public policy objective.11 Alleged breaches could ultimately be addressed through a formal dispute settlement system, if necessary.

The EU regarded the US proposal as an attack upon its unfettered discretion to apply its privacy laws to data moving across the Atlantic, and it rejected the possibility of any discipline based upon WTO rules. The EU’s rejection of objective limits on its potential public policy measures leaves it free to invoke privacy rules as a basis to discriminate against US digital service providers or to protect local competitors. The issue remained firmly deadlocked when TTIP negotiations were set aside.12 Since then, the United States and the EU have not re-engaged bilaterally on digital trade rules.

Both governments are among the eighty countries participating in a low-profile multilateral negotiation on electronic commerce (e-commerce) launched a year ago under WTO auspices, however.13 In Geneva, the United States has tabled a similar proposal to its TTIP and TPP language; the EU so far has not managed to offer a counter-proposal. For the time being, it seems unlikely that the WTO negotiations will yield quick success in settling the disagreement between the EU and the United States and other like-minded countries on regulatory limits to the free flow of data.14

A new Democratic Administration should engage bilaterally with the EU to see if there might be scope for a targeted digital trade agreement, but without softening its insistence on a rigorous free flow of data obligation. Agreeing with the EU on the proper scope for public policy exceptions should not be an impossible task, as WTO rules provide a useful framework. Moreover, it is conceivable that the new leadership of the European Commission at some point will consider jettisoning its insistence on a selfjudging privacy exception, in favor of language more consistent with international trade law.

4. BREXIT AND DIGITAL TRADE

Following Britain’s January 31 departure from the European Union, it now has embarked on the urgent task of negotiating its future economic relationship with the EU. Brexit notwithstanding, the EU will remain the UK’s principal trading partner; 45% of overall UK exports in 2018 were destined for the Continent.15 At the end of 2020, however, if no accord is reached, EU tariffs and quotas on UK exports would revert to much higher WTO tariff levels, which would have a damaging effect on UK-EU trade.

In addition to fixing tariff levels, Britain and the UK also must agree on the extent to which the UK will continue to adhere to EU regulations in a host of areas – for example, workers’ and consumers’ right, the environment, and antitrust. Many observers expect the UK-EU talks on these non-tariff barriers to be difficult and drawn out, likely stretching beyond the 2020 deadline. Despite continuing tough UK rhetoric, the parties may well settle for a ‘phase one’ agreement on goods tariffs, and grant themselves an extension into 2021 or beyond to complete the rest of a comprehensive agreement.

Setting the terms for digital trade with the EU will be particularly important for Britain. UK services exports to the EU yielded a £77 billion surplus in 2018, more than offsetting a deficit in goods trade.16 Approximately three-quarters of Britain’s data flows are with EU countries17, making harmonization with the Continent on privacy regulation crucial for its thriving data-dependent businesses, such as financial services.

In its negotiating mandate for the future economic partnership agreement with the UK, the EU specifically calls for provisions facilitating digital trade, but also indicates an intention to “address data flows subject to exceptions for legitimate public policy objectives, while not affecting the Union’s personal data protection rules.”18 The UK’s counterpart negotiating mandate similarly calls for measures to facilitate the flow of data to and from the EU, and expresses an ambition to go beyond the digital trade provisions in the EU’s trade agreements with other countries.19

The Union previously had pledged to decide before the end of 2020 whether the UK’s postBrexit privacy protections are ‘adequate’ in relation to those on the continent; an adequacy determination would be by far the most favorable and efficient legal basis for data flows across the Channel.20 The EU should have leverage in this separate negotiation, and as a result the UK’s future data protection regime should remain generally close to the EU’s General Data Protection Regulation (GDPR). An adequacy finding is not a foregone conclusion, however, as Britain may be reluctant to alter its wide-ranging surveillance laws.21

The United States is also a very important trading partner for the United Kingdom, accounting for 15% of Britain’s total trade.22 Nearly a fifth of Britain’s exports head across the Atlantic, more than double the share it sends to Germany, its next-biggest trading partner.23 US services trade with the United Kingdom exceeds goods trade, and is growing; US services exports measured $74.1 billion in 2018, generating a surplus of $13.3 billion that year with Britain.24 There are more transatlantic undersea cable connections transmitting data directly between the United States and the United Kingdom than with the rest of Europe combined.25 Foreign affiliates of U.S. multinationals supply more information services in the United Kingdom than in any other European country.26

The Office of the US Trade Representative and the UK Department for International Trade started negotiations on a bilateral trade agreement in May. The United States seeks a comprehensive agreement with the British, including a chapter on digital trade in goods and services and cross-border data flows modeled on the most recent U.S. bilateral successes with other countries.27 The United Kingdom’s negotiating objectives with the United States are broadly consistent with the United States perspective on digital trade.28 They specifically mention the importance of preserving UK data protection rules in an agreement with the United States.29 The United States officially attaches the highest priority to these negotiations and aims to complete them in 2020.30 Privately, US officials acknowledge that the United Kingdom will have to give greater priority this year to redefining its all-important trading relationship with the EU, before US-UK talks can advance definitively.

The most that US and UK trade negotiators may be able to deliver this year is a partial agreement setting tariffs and quotas for goods. A new Democratic administration would be well-advised to build upon whatever progress is achieved with the UK this year, and to give particular priority in the future to agreement on digital trade. The latter could even take the form of a stand-alone agreement on digital trade, as was done in the Japan – United States Digital Trade Agreement, if a comprehensive US-UK trade agreement proves a longer-term prospect.

The United States and the United Kingdom should be able to make rapid progress on many aspects of a digital trade agreement. Historically, both governments have shared a philosophical commitment to open international trading regimes. Both have highly developed digital economies and leading-edge digital services companies. Each favor free data flows and opposes data localization measures. Intangible factors including similar legal traditions also could speed talks.

The long arm of the European Union will constrain the United Kingdom’s negotiating room on digital trade with the United States, however. The EU may insist that, as part of the price for adequacy, the UK agree not to undermine the Union’s position on data flows in any of the UK’s future trade agreements with third countries. The United States, for its part, presumably would take the same position on this issue as it took in TTIP – that legitimate privacy measures are those permitted under WTO principles rather than by EU fiat.

Still, in the short term, the United States may be better off tackling this tough issue with the United Kingdom than seeking to resolve it bilaterally with the EU. The British are in a tough negotiating position: they must find a way forward on data flows with both the EU and a range of important third country trading partners. UK negotiators will need all their creative legal talents to find a way through this intersection of digital trade and privacy law. If they succeed, the payoff in a settled legal landscape for digital trade across both the Channel and the Atlantic eventually could be substantial. Brexit has generated considerable trade uncertainty, but it also ultimately could yield dividends for digital trade.

Congress Should Stabilize The American Economy – Both Now And Later

Posted on by The Progressive Policy Institute

At the end of next month, several economic support programs created by the CARES Act in March will expire. House Democrats have moved to extend and expand these supports through January 2021 with the $3 trillion HEROES Act. Senate Republicans, however, have used fiscal cost as a pretext to oppose or scale back this and other potential future stimulus measures. The stakes are high: allowing the CARES Act programs to expire would reduce the incomes of up to 30 million unemployed Americans by more than half overnight and cut off lending programs that have helped otherwise healthy businesses stay afloat during the crisis. Fortunately, there is an opportunity for lawmakers to strike a bipartisan compromise that supports our economy in a fiscally responsible way.

Read the full article here.

America’s COVID-19 Debacle: A Chronology

Posted on by The Progressive Policy Institute

Updated on October 21, 2020.

As the coronavirus pandemic enters its 10th month, the United States continues to lead the world in deaths and infection rates. The hard truth is America ranks dead last when it comes to responding effectively to COVID-19.

As of mid-October, more than 222,000 Americans have been killed by the virus, some 70,000 more fatalities than second-ranking Brazil. The United States accounts for about one-fifth of global deaths. We have more than 8.2 million confirmed cases of COVID-19, and the number is rising as the pandemic’s “third wave” spreads throughout the Midwest and mountain West, and in rural America. 

Since the United States is rich and technologically advanced, and spends far more than other countries on health care, there can only be one explanation for our abysmal showing against the coronavirus pandemic: An epic failure of political leadership, especially at the top.

The Trump administration’s manifest inability to contain the pandemic has cost tens of thousands of preventable U.S. deaths and prolonged the nation’s worst economic crisis since the Great Depression. More than 50 million Americans have filed for unemployment, countless small businesses have gone under, and national output has plummeted. 

COVID-19 deaths have been concentrated among the elderly in nursing homes; front-line health workers and those in “essential” industries like meat packing; and, poor and minority communities where people are more likely to make medical conditions that make them more vulnerable to the virus. 

The crisis also has aggravated the nation’s pre-existing economic inequities. Layoffs have been heaviest in low-paid hospitality and service jobs, while many office workers with college degrees have been able to keep working remotely. Even as the economy has contracted, the stock market keeps rising, widening the nation’s wealth gap. 

Millions of K-12 students suffered acute learning losses when public schools closed last spring, and many disadvantaged children also lost access to school meals. Many schools remain closed this fall, putting a heavy burden on parents forced to stay home to look after their kids and help them keep up with their studies online. 

No one expected the United States to escape the ravages of COVID-19 unscathed. But the enormous scale of our human and economic losses was not inevitable. Other countries have managed the COVID-19 crisis far more effectively. For example, South Korea, which reported its first case of infection on the same day as the United States, reports less than 400 deaths and about 22,000 cases.  

In fact, the COVID-19 crisis has posed a kind of “governance stress test” to countries around the world. It is casting a remorseless light on the quality of each country’s political leadership and the competence of its national government. 

Comparing America’s performance with that of other countries, the political scientist Francis Fukuyama concludes that President Donald Trump proved incapable of rising to the challenge:  

“It was the country’s singular misfortune to have the most incompetent and divisive leader in its modern history at the helm when the crisis hit, and his mode of governance did not change under pressure. Having spent his term at war with the state he heads, he was unable to deploy it effectively when the situation demanded. Having judged that his political fortunes were best served by confrontation and rancor than national unity, he has used the crisis to pick fights and increase social cleavages. American underperformance during the pandemic has several causes, but the most significant has been a national leader who has failed to lead.”

Now, with an eye to this November’s election, President Trump and his party seek to convince Americans the debacle they have been witnessing throughout 2020 is a mirage. In a surreal spectacle, speaker after speaker in the Republican National Convention extolled Trump’s “decisive action” against COVID-19, while Trump himself bragged about ordering an “unprecedented national mobilization” against the “China virus.” 

In fact, the mobilization of national will and resources our country needed never happened. The president’s negligence and disdain for taking elementary precautions against the disease, like wearing a mask, has contributed to outbreaks in the White House itself, infecting him and his family and many top staffers.

Even now, with the rate of infection surging again, it’s painfully clear that President Trump has no plan to contain the disease. Instead he’s fighting it with happy talk and promises that a vaccine is just around the corner. He and his party have given higher priority to adding another conservative Supreme Court justice than to passing a major COVID-19 relief bill to check the disease, boost our sputtering economy and maintain unemployment benefits.

The Progressive Policy Institute believes the 2020 presidential election should be a referendum on Donald Trump’s handling of the gravest national crisis he has faced as president. To help voters distinguish fact from fiction, PPI has assembled this comprehensive chronology of key events and milestones in the COVID-19 crisis. As it continues to unfold, we will update this instant historical record as necessary. If readers think we have missed any important events or information, please notify Kate Hinsche at khinsche@ppionline.org.

*Note: The main source for each entry can be found by clicking on the date.

COVID-19: Chronology of a Debacle

2017

JANUARY 12 – Speaking at Georgetown University, Dr. Anthony Fauci, Director of the National Institute on Allergy and Infectious Diseases, urges the incoming Trump administration to be prepared for outbreaks of viral diseases. “If there’s one message that I want to leave with you today based on my experience, it is that there is no question that there will be a challenge to the coming administration in the arena of infectious diseases.” 

JANUARY 13 – Outgoing Obama administration officials run a crisis simulation for President-elect Trump’s national security team on how to react to the outbreak of a deadly respiratory disease. The incoming administration is also given a 69-page playbook with best practices for handling global pandemics.

MAY 11 – Dan Coats, Director of National Intelligence, reports to Congress about threats to the United States, including global pandemics. 

MAY 27 – In his first budget, President Trump proposes a $1.3 billion cut in the Center for Disease Control (CDC) for 2018. In each year of his presidency, President Trump has proposed similar cuts to the CDC’s funding. (2019) (2020) (2021)

 

2018

FEBRUARY 13 – DNI Coats again warns Congress about the threat of a global pandemic.

APRIL 10 – Tom Bossert, White House homeland security advisor, resigns at the request of National Security Advisor John Bolton. Bossert had repeatedly called for a comprehensive biodefense strategy against pandemics and biological attacks. 

MAY 7 – Speaking at Emory University to mark the 100th anniversary of the 1918 influenza pandemic, Luciana Borio, the National Security Council’s Director of Medical and Biodefense preparedness, warns “The threat of pandemic flu is the number one health security concern. Are we ready to respond? I fear the answer is no.” 

MAY 8 – President Trump calls for cuts in emergency funds for Ebola and other pandemics, as well as the State Department’s Complex Crisis Fund for “emerging or unforeseen crises.”

MAY 10 – As part of his effort to “streamline” the National Security Council, Bolton disbands the Directorate for Global Health Security and Biodefense and removes its director, Rear Admiral Timothy Ziemer. 

OCTOBER 19 – “In a move that worries public health experts,” the New York Times reports, “the federal government is quietly shutting down a surveillance program for dangerous animal viruses that someday may infect humans.” 

 

2019

JANUARY 29 – DNI Coats again warns Congress that the United States remains “vulnerable to the next flu pandemic or large scale outbreak of a contagious disease that could lead to massive rates of death and disability, severely affect the world economy, strain international resources, and increase calls on the United States for support.”

JULY 28 – DNI Coats, who had publicly differed with President Trump over Russia’s interference in the 2016 election, steps down.

SEPTEMBER 15 – The President’s Council of Economic Advisers (CEA) warns that an influenza pandemic could cause enormous health and economic losses. 

OCTOBER 1 – The Department of Health and Human Services (HHS) issues a draft report on a series of exercises code-named “Crimson Contagion.” The report warns that the federal government is “underfunded, underprepared and uncoordinated” to fight an influenza pandemic. 

DECEMBER 31 – China reports the outbreak of the novel coronavirus (COVID-19) to the World Health Organization.

 

2020

JANUARY 

JANUARY 6 – The CDC issues a travel notice for Wuhan, China following reports of the outbreak of a new infectious disease.

JANUARY 10 – Chinese state media reports first death in China due to the novel coronavirus. 

JANUARY 18 – HHS Secretary Alex Azar warns President Trump of the possibility of a pandemic stemming from the outbreak in China. 

JANUARY 21 – The CDC reports the first coronavirus case in the United States: An unidentified Washington State man, in his early 30s who recently had traveled to Wuhan. 

JANUARY 22 – In an interview in Davos, Switzerland, President Trump dismisses concerns about the coronavirus, saying “We have it totally under control.”

JANUARY 22 – White House officials turn down an offer to buy millions of N95 masks manufactured in America, according to the manufacturer. 

JANUARY 24 – President Trump congratulates Chinese President Xi on his handling of the outbreak in Wuhan, tweeting: “The United States greatly appreciates their efforts and transparency.”

JANUARY 29 – White House advisor Peter Navarro circulates a memo outlining the risks of coronavirus contagion. It estimates that, in a worst-case scenario, a pandemic could claim up to 500,000 U.S. lives and cost close to $6 trillion.

JANUARY 30 – Amid serious outbreaks in Italy and China, the World Health Organization (WHO) declares COVID-19 a global public health emergency. 

JANUARY 30 – HHS Secretary Azar again warns President Trump of the possibility of a pandemic. The New York Times reports, “Mr. Azar was blunt, warning that the virus could develop into a pandemic and arguing that China should be criticized for failing to be transparent.”

JANUARY 30 – In a press conference, President Trump assures Americans have little to worry about: “We think we have it very well under control. We have very little problem in this country at this moment — five — and those people are all recuperating successfully.”

JANUARY 31 – President Trump issues an executive order ostensibly banning travel to and from China. 

 

FEBRUARY 

FEBRUARY 2 – “We pretty much shut it (coronavirus) down coming in from China,” President Trump tells Fox News’s, Sean Hannity.

FEBRUARY 6 – COVID-19 claims its first U.S. victim: Patricia Dowd, 57, of Santa Clara, California. This fact isn’t disclosed until after an April 21 autopsy. 

FEBRUARY 8 – Labs receiving coronavirus tests from the CDC start to complain that they don’t work properly. The problem isn’t resolved until weeks later when the FDA waives rules against tests developed elsewhere.

FEBRUARY 10 – President Trump continues to express confidence in China’s management of the pandemic. He tells governors at the White House that President Xi of China feels “very confident” because “by April or during the month of April, the heat, generally speaking, kills this kind of virus.”

FEBRUARY 23 – Navarro sends a second memo to President Trump, warning of the “increasing probability of a full-blown COVID-19 pandemic that could infect as many as 100 million Americans, with a loss of life of as many as 1-2 million souls.”

FEBRUARY 24 – “The Coronavirus is very much under control in the USA,” President Trump tweets.

FEBRUARY 26 – President Trump introduces the White House coronavirus task force, even while continuing to minimize the danger: “The flu, in our country, kills from 25,000 people to 69,000 people a year… And again, when you have 15 [COVID-19 victims], and the 15 within a couple of days is going to be down to close to zero, that’s a pretty good job we’ve done.”

FEBRUARY 27 – “It’s going to disappear. One day it’s like a miracle, it will disappear,” President Trump declares in a White House briefing with African American leaders.

FEBRUARY 29 – Stung by criticism of White House inaction, President Trump tells the press: “We’ve taken the most aggressive actions to confront the coronavirus. They are the most aggressive taken by any country and we’re the number one travel destination anywhere in the world, yet we have far fewer cases of the disease than even countries with much less travel or a much smaller population.”

 

MARCH

MARCH 1 – First reported U.S. COVID-19 death in Washington State. The unidentified patient was a man in his 50s with serious health problems. 

MARCH 2 – President Trump predicts that a COVID-19 vaccine is imminent. “I’ve heard very quick numbers, that of months.” This contradicts Dr. Fauci’s repeated warnings that a vaccine may not be available for a year or a year and a half. 

MARCH 6 – At a press briefing, President Trump boasts about his understanding of the coronavirus: “I like this stuff. I really get it. People are surprised that I understand it. […] Every one of these doctors said, ‘How do you know so much about this?’ Maybe I have a natural ability.” 

MARCH 6 – “Anybody that wants a test can get a test,” President Trump asserts after touring the CDC headquarters in Atlanta.

MARCH 6 – The Coronavirus Preparedness and Response Supplemental Appropriations Act — Congress’s first response to the pandemic — becomes law. It provides $8.3 billion in emergency funding for federal agencies to combat coronavirus.

MARCH 9 – In a tweet, President Trump again compares COVID-19 to the flu: “So last year 37,000 Americans died from the common Flu. It averages between 27,000 and 70,000 per year. Nothing is shut down, life & the economy go on. At this moment there are 546 confirmed cases of CoronaVirus, with 22 deaths. Think about that!”

MARCH 10 – Following a meeting with Republican Senators, President Trump again praises his administration’s handling of COVID-19: “It hit the world. And we’re prepared, and we’re doing a great job with it.”

MARCH 10 – In a televised address to the nation, President Trump asserts, inaccurately, that Americans won’t have to pay for COVID-19 treatment.

MARCH 11 – In a press briefing, President Trump again downplays the danger of COVID-19. “The vast majority of Americans, the risk is very, very low. Young and healthy people can expect to recover fully and quickly if they should get the virus.”

MARCH 11 – President Trump announces increased travel restrictions for 26 European countries. In practice, however, the order is riddled with loopholes that create long lines for some and zero screening for others. 

MARCH 11 – WHO upgrades COVID-19 from a public health emergency to a global pandemic.

MARCH 11– News reports say that the United States has tested just over 7,000 people for the coronavirus, compared to 222,395 tests conducted in South Korea. Both countries reported their first COVID-19 case on the same day.

MARCH 13 – Asked by a reporter if he would “take responsibility for the failure to disseminate larger quantities of tests earlier,” President Trump replies, “I don’t take responsibility at all.”

MARCH 15 – 33 states plus the District of Columbia close their public schools.

MARCH 16 – President Trump announces self-isolation guidelines for Americans to follow for the next 15 days.

MARCH 16 – President Trump denies understating the danger of COVID-19: “I’ve always known this is a real — this is a pandemic. I felt it was a pandemic long before it was called a pandemic.”

MARCH 17 – U.S. COVID-19 death toll exceeds 100.

MARCH 18 – Congress passes a second relief bill, the Families First Coronavirus Response Act. It provides close to $3.5 billion for coronavirus testing, 14-day paid leave for workers affected by the pandemic, and removes work requirements for food stamps.

MARCH 19 – President Trump touts, without evidence, chloroquine, and hydroxychloroquine as a potential cure to COVID-19. 

MARCH 22 – In a flurry of tweets, President Trump voices frustration over governors’ handling of the pandemic. The public, however, expresses far more confidence in their governors than the president in national polls.

MARCH 23 – The first nine states implement stay-at-home orders (Washington, Oregon, California, Louisiana, Illinois, Ohio, New York, Massachusetts, and New Jersey).

MARCH 23 – The media reports that 48 states plus the District of Columbia have closed their public schools for the rest of the academic year.

MARCH 24 – In the daily coronavirus task force briefing, President Trump imagines the U.S. economy reopening in a matter of weeks: “I would love to have the country opened up and just raring to go by Easter… I think Easter Sunday — you’ll have packed churches all over our country.” 

MARCH 25 – In the daily briefing, President Trump claims the United States leads the world in testing. “We have tested, by far, more than anybody…There’s nobody even close. And our tests are the best tests.” On a per-capita basis, however, the United States ranks low on tests. 

MARCH 25 – U.S. COVID-19 death toll passes 1,000.

MARCH 26 – Twelve more states implement stay-at-home orders (Idaho, Colorado, New Mexico, Michigan, Wisconsin, Kentucky, Indiana, West Virginia, Hawaii, Connecticut, Vermont, and Delaware).

MARCH 26 – U.S. cases surge to 82,404, overtaking both Italy and China to make America the world’s leader in reported COVID-19 infections. 

MARCH 27 – Congress passes its third and largest aid bill, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act provides $2 trillion to aid businesses and workers, procure medical supplies and equipment, and expand Unemployment Insurance. 

MARCH 28 – In signing the CARES Act, President Trump claims that the Inspector General charged with oversight of the bill requires his permission before reporting to Congress. 

MARCH 30 – Nine more states implement stay-at-home orders.

MARCH 31 – President Trump concedes that COVID-19 “is not the flu. It’s vicious. When you send a friend to the hospital… And you call up the next day, ‘how’s he doing?’ And he’s in a coma? This is not the flu.” 

MARCH 31 – U.S. COVID-19 death toll surpasses 5,000.

 

APRIL

APRIL 3 – President Trump tells the public that COVID-19 is retreating. “I said it was going away – and it is going away.”

APRIL 3 – New York City COVID-19 deaths surpass the number of Americans killed on 9/11. 

APRIL 3 – The U.S. Chamber of Commerce reports that 24% of small businesses have closed due to the coronavirus lockdown and predicts another 40% could close soon.

APRIL 3 – In response to the CDC’s recommendation that Americans wear facial masks, President Trump declines to lead by example, saying, “I don’t think I’m going to be doing it.”

APRIL 4 – U.S. COVID-19 death toll passes 10,000. 

APRIL 6 – Twelve more states issue stay-at-home orders, bringing the total number to 42.

APRIL 6 – The United States overtakes Spain’s COVID-19 death toll with 13,298 fatalities, the second-highest in the world behind Italy.

APRIL 7 – President Trump ousts Glenn Fine, the DOD Inspector General picked to oversee the implementation of the CARES Act.

APRIL 9 – The United States overtakes Italy’s COVID-19 death toll with 19,802 fatalities, becoming the world leader in COVID-19 mortality. 

APRIL 14 – President Trump halts America’s contribution to WHO funding and calls for an investigation into the agency’s role in ”severely mismanaging and covering up the spread of the coronavirus.”

APRIL 14 – U.S. COVID-19 death toll passes 30,000. 

APRIL 17 – In a series of tweets, President Trump encourages protests against Democratic governors’ social distancing restrictions: “LIBERATE MICHIGAN,” “LIBERATE MINNESOTA,” “LIBERATE VIRGINIA.

APRIL 17 – The BLS reports that national unemployment grew 0.9% in March, to 7.4 million unemployed or 4.4%. 

APRIL 19 – U.S. COVID-19 death toll passes 40,000. 

APRIL 21 – Tests from autopsies performed in early February come back positive for coronavirus, revealing COVID-19 deaths before the CDC reported the first U.S. fatality on March 1.

APRIL 21 – The White House removes Rick Bright, Director of the Biomedical Advanced Research and Development Authority (BARDA). Bright had said the president’s claims for the curative powers of chloroquine and hydroxychloroquine “clearly lack scientific merit.”

APRIL 23 – In a fourth relief bill, Congress approves $484 billion in additional funding for small businesses, hospitals, and coronavirus testing.

APRIL 23 – President Trump is widely ridiculed for musing in a task force briefing that COVID-19 might be treatable with disinfectants and sunlight. “I see the disinfectant, where it knocks [the virus] out in a minute… is there a way we can do something like that, by injection inside or almost a cleaning?”

APRIL 24 – Georgia becomes the first state to start lifting restrictions and reopening some businesses.

APRIL 28 – U.S. COVID-19 death toll surpasses the official tally (58,300) of Americans who died in the 1955-1975 Vietnam War. 

APRIL 29 – The Bureau of Economic Analysis reports that the U.S. economy shrank at an annual rate of 4.8% in the first quarter of 2020.

 

MAY

MAY 1 – President Trump announces his intention to replace Christi Grimm, the Inspector General of HHS, who released a late April report documenting shortages of medical supplies and testing delays.

MAY 4 – Media reports say that almost 20 states have begun to lift social distancing restrictions. 

MAY 5 – Trump announces he’ll wind down the coronavirus task force by the end of May so that the White House can focus on restarting the economy.

MAY 5 – U.S. COVID-19 death toll passes 70,000. 

MAY 6 – President Trump again expresses impatience about opening the economy. “We can’t have our whole country out. We can’t do it. The country won’t take it. It won’t stand it. It’s not sustainable.”

MAY 10 – Two White House employees test positive for COVID-19.

MAY 11 – The BLS reports that the unemployment rate in April has ballooned to 14.7% with 20.5 million unemployed, much higher than at the peak of the 2008 Great Recession. 

MAY 11 – President Trump castigates Pennsylvania Gov. Tom Wolf for “moving slowly” to reopen his state as protestors rally. 

MAY 18 – President Trump admits he has been taking daily doses of hydroxychloroquine, which has yet to be proven effective and may even be harmful to those who contract coronavirus.

MAY 21 – President Trump, after conducting a Michigan factory tour without a face mask, explains, “I wore one in this back area, but I didn’t want to give the press the pleasure of seeing it.”

MAY 26 – U.S. COVID-19 death toll passes 100,000.

MAY 26 – 36 states have reopened or are in the process of reopening.

MAY 28 – The total number of new jobless claims surpasses 40 million.

 

JUNE

JUNE 2 – Trump suggests GOP move convention to Jacksonville, FL after N.C. Gov. Roy Cooper refuses to allow packed arenas.

JUNE 3 – According to a new study from the University of Minnesota, the malaria drug hydroxychloroquine does not prevent people from contracting COVID-19.

JUNE 6 – 35.4 million Americans are receiving unemployment benefits.

JUNE 8 – Following an easing of lockdown conditions in many parts of the country, infections are rising in 21 states.

JUNE 11 – U.S. COVID-19 cases surpass two million.

JUNE 11 – News outlets report that more than 20 European countries have reopened their schools. Most U.S. schools remain closed.

JUNE 16 – In an op-ed, Vice President Mike Pence dismisses reports about a “second wave” of coronavirus infections and boasts that the Trump administration is “winning the fight against the invisible enemy.”

JUNE 17 – Vice President Pence tells governors that an apparent rise in U.S. coronavirus outbreaks stems from an increase in testing.

JUNE 19 – Gov. Andrew Cuomo wraps up 111 consecutive days of widely praised coronavirus briefings as COVID-19 hospitalizations in New York have dropped below 1,000 for the first time since March 18.

JUNE 19 – Nine Texas mayors write a letter to the states’ residents, urging them to wear masks. Coronavirus cases in Texas continue to surge and the number of hospitalizations has been climbing since May.

JUNE 20 – Disregarding warnings from administration health officials against large public gatherings, Pres. Trump resumes mass campaign rallies in Tulsa, with 6,200 people in attendance.

JUNE 21 – President Trump complains that more COVID-19 testing is increasing the number of confirmed U.S. cases. “When you do testing to that extent, you’re going to find more people, you’re going to find more cases, So I said to my people, ‘Slow the testing down, please’,” he says at the Tulsa rally. 

JUNE 22 – Two members of President Trump’s campaign advance team, who attended Trump’s rally in Oklahoma, test positive for coronavirus. 

JUNE 22 – New data confirms that COVID-19 cases are growing in 29 states.

JUNE 23 – President Trump again insists that more tests are to blame for the increase in coronavirus infections. 

JUNE 23 – At a Congressional hearing, Dr. Fauci says U.S. health officials see a “disturbing surge” of infections in some parts of the country, as Americans ignore social distancing guidelines.

JUNE 23 – Texas tallies more than 5,000 new cases in a single day for the first time. “The coronavirus is serious. It’s spreading,” Texas Gov. Greg Abbott told a local television station.

JUNE 23 – President Trump addresses a crowd of student supporters at a tightly packed megachurch in Phoenix. Trump appeared without a mask, flouting a Phoenix rule that came into force less than 72 hours earlier.

JUNE 26 – VP Pence’s Coronavirus task force hails states for “safely and responsibly” reopening their economies. Yet Texas and Florida officials reimpose restrictions on bars and restaurants amid record levels of new cases and tightening hospital capacity.

JUNE 30 – The E.U. bloc will allow visitors from 15 countries, but the U.S., Brazil and Russia were among the notable absences from the safe list.

JUNE 30 – New York Times data confirms 40,041 U.S. COVID-19 cases.

 

JULY

JULY 2 – Daily number of new COVID-19 cases in the U.S. tops 50,000 for the first time, the largest single-day total since the start of the pandemic.

JULY 2 – The unemployment rate declines by 2.2 percentage points to 11.1 percent, and the number of unemployed persons falls by 3.2 million to 17.8 million.

JULY 2 – GOP 2012 presidential candidate Herman Cain is hospitalized with COVID-19 a week after attending the Trump rally in Tulsa, where many attendees were not wearing masks. 

JULY 5 – President Trump dismisses the impact of COVID-19 and says that while the testing of tens of millions of Americans had identified many cases, “99 percent” of them were “totally harmless.”

JULY 7 – Pres. Trump insists U.S. colleges and universities should remain open for the fall semester, citing several European school openings, “We’re very much going to put pressure on governors and everybody else to open the schools, to get them open.” 

JULY 8 – The U.S. reports more than three million coronavirus cases, with all but a handful of states struggling to control outbreaks of COVID-19.

JULY 10 – The United States reports 68,000 new cases, setting a single-day record for the seventh time in 11 days.

JULY 10 – Hong Kong shuts down its school systems, reporting more than 1,400 cases and seven deaths.

JULY 11 – Disney World reopens its gates in Orlando, Florida.

JULY 11 – President Trump appears with a face mask for the first time in public, five months after administration officials recommended that all Americans wear face masks in public.

JULY 12 – Florida reports a record 15,300 new coronavirus cases, by far the most any state has experienced in a single day.

JULY 13 – The media reports that at least 5.4 million Americans have lost their health insurance during the pandemic. 

JULY 13 – In an apparent attempt to undermine Dr. Fauci’s credibility, a White House official releases a statement saying that “several White House officials are concerned about the number of times Dr. Fauci has been wrong on things.”

JULY 17 – India reports one million coronavirus cases and 25,000 deaths. Researchers at MIT estimate that by the end of 2021, India could have the world’s worst outbreak.

JULY 17 – Israeli Prime Minister Benjamin Netanyahu announces new restrictions on gyms, restaurants and beaches. 

JULY 19 – During a Fox News interview, President Trump again asserts COVID-19 is going to disappear, “I think we’re gonna be very good with the coronavirus. I think that at some point that’s going to sort of just disappear.”

JULY 20 – U.K.’s Oxford University COVID-19 vaccine shows positive results in first phase of human trials.

JULY 21 – European Union leaders agree on a $857 billion spending package to rescue their economies from ravages of COVID-19. 

JULY 21– At his first coronavirus-related news conference in weeks, President Trump admits that COVID-19, “will probably, unfortunately, get worse before it gets better. Something I don’t like saying about things, but that’s the way it is.” 

JULY 23 – U.S. surpasses 4 million reported coronavirus cases

JULY 23 – Trump cancels Republican convention activities in Jacksonville. 

JULY 30 – Second-quarter GDP plunges by worst-ever 32.9% amid virus-induced shutdown.

JULY 30 – Herman Cain succumbs to COVID-19.

 

AUGUST

AUGUST 3 – Trump criticizes Deborah Birx after she warns the U.S. that the coronavirus outbreaks are “extraordinarily widespread.”

AUGUST 5 – Twitter temporarily restricts the Trump campaign’s ability to tweet false COVID-19 claims.

AUGUST 6 – U.S. records more than 52,000 new COVID-19 cases and 1,388 virus-related fatalities.

AUGUST 6 – Ohio Gov. Mike DeWine tests positive for the coronavirus.

AUGUST 26 – Under pressure from the White House, the CDC issues new guidance saying that people who do not exhibit symptoms after being exposed to someone with coronavirus, “do not necessarily need a test.” 

 

SEPTEMBER

SEPTEMBER 9 – Media reports revelations from Bob Woodward’s new book Rage that President Trump purposely minimized the dangers posed by the coronavirus: “I wanted to play it down. I still like playing it down because I don’t like to create panic,” Trump told Woodward.

SEPTEMBER 9 – “The president never downplayed the virus,” White House press secretary Kayleigh McEnany tells the media. 

SEPTEMBER 12 – Media reports that Michael Caputo and Paul Alexander, Trump-appointed officials at the Health and Human Services Department, pressured CDC to “revise, delay and even scuttle weekly reports on the coronavirus that they believed were unflattering to President Trump.”

SEPTEMBER 16 – Caputo takes a leave of absence from HHS after posting a Facebook video accusing government scientists of working to defeat President Trump. Alexander announces his departure from HHS.

SEPTEMBER 18 – Olivia Troye, a top adviser to Vice President Pence and member of the White House coronavirus task force, says the task force recognized by mid-February  that the virus posed a big threat to the United States. “But the President didn’t want to hear that, because his biggest concern was that we were in an election year.”

SEPTEMBER 18 – CDC reverses its August 26 guidance and encourages people exposed to someone with coronavirus to get tested, whether they show symptoms or not. 

SEPTEMBER 22 – The U.S. COVID-19 death toll passes 200,000, accounting for 21% of global deaths.

SEPTEMBER 25 – The number of confirmed U.S. cases passes seven million.

SEPTEMBER 28 – Twenty-one states report increases in cases as health experts warn of a surge in fall pandemic surge.

SEPTEMBER 29 – Seven former commissioners of the federal Food and Drug Administration accuse the Trump administration of distorting science and “eroding public confidence” in the agency. 

SEPTEMBER 30 – Olivia Troye tells NPR that CDC Director Robert Redfield has faced “very challenging dynamics, at times when you’re changing the wording and guidances to fit a narrative, to play down the severity of the virus or cases.”

SEPTEMBER 30 – In the same interview, Troye says President Trump’s refusal to wear a mask in the White House sets the tone for staff: “Even in the West Wing, …you were looked down upon when you would walk by with a mask.”

 

OCTOBER

OCTOBER 1 – White House communications director Hope Hicks tests positive for the coronavirus.

OCTOBER 1 – President Trump hosts a post-debate fundraiser at his golf club, where few attendees wear masks.

OCTOBER 2 – President Trump and First Lady Melania Trump test positive for COVID-19. Later that day the president is taken to Walter Reed National Military Medical Center. 

OCTOBER 2 – Media reports that the official U.S. unemployment rate fell to 7.9% in September. However, the labor force participation was 61.3%, two points lower than in February. 

OCTOBER 4 – President Trump temporarily leaves Walter Reed Hospital for a car ride by supporters stationed outside the hospital.  

OCTOBER 5 – Several Secret Service agents anonymously criticize the president’s “joyride,” saying it exposed members of his security disease to the virus. “He’s not even pretending to care now” said one agent. Said another, “That should never have happened. The frustration with how we’re treated when it comes to decisions on this illness goes back before this though. We’re not disposable.”

OCTOBER 5 – President Trump’s medical team confirms that he will be returning to the White House this afternoon. “Feeling really good! Don’t be afraid of Covid,” the president tweets.

OCTOBER 5 – A Cornell University study identifies President Trump’s Twitter feed as the “single largest” transmitter of false information about COVID-19. Graham Brookie, Director of the Atlantic Council’s Digital Forensic Research Lab, reaches a similar conclusion: “There is no doubt that Donald Trump is by far the largest spreader of specific and important types of misinformation today.” 

OCTOBER 6 – Stephen Miller, President Trump’s top immigration policy adviser, tests positive for COVID-19. 

OCTOBER 6 – The stock market plunges after President Trump tweets that he has instructed his representatives to cease negotiations with Democrats on a new COVID-19 relief and stimulus bill. 

OCTOBER 6 – NIH scientist Rick Bright resigns in protest over President Trump’s handling of the pandemic. “In this Administration, the work of scientists is ignored or denigrated to meet political goals and to advance President Trump’s re-election aspirations,” Bright charges.

OCTOBER 6 – In the Vice Presidential debate, Democratic nominee Kamala Harris says of President Trump’s handling of the pandemic, “The American people have witnessed what is the greatest failure of any presidential administration in the history of our country.” Vice President Pence responds by crediting Trump with “The greatest national mobilization since World War II.”

OCTOBER 7 – In a scathing letter, former CDC director Bill Foege – called the “Babe Ruth of public health” – calls on CDC Director Robert Redfield to publicly acknowledge the administration’s failure to level with the American people over COVID-19. “Don’t shy away from the fact this has been an unacceptable toll on our country. It is a slaughter and not just a political dispute.”

OCTOBER 8 – Senate Majority Leader Mitch McConnell admits he hasn’t been to the White House since August 6th, “because my impression was their approach to how to handle this was different than mine and what I insisted that we do in the Senate, which is to wear a mask and practice social distancing.”

OCTOBER 10 – The government reports a third consecutive day with over 50,000 coronavirus cases, the most since August. 

OCTOBER 11 – On NBC’s Meet the Press, Bill Gates says, “We are running the worst testing system, in terms of who gets access to it, of any country.”

OCTOBER 12 – Dr. Fauci warns COVID-19 is “on a trajectory of getting worse.” The latest data shows infections increasing in 31 states. 

OCTOBER 15 – The New York Times reports show that the autumn coronavirus surge is hitting the Midwest, mountain states and rural communities especially hard. “Of the 100 counties with the worst per-capita outbreaks in the last seven days, more than half are home to fewer than 10,000 people.”

OCTOBER 16 – More than 70,000 new cases of the coronavirus were reported today, the highest single-day increase since July. At least nine states set single-day case records, with Midwest and Mountain West states driving the surge. 

OCTOBER 19 – The Washington Post reports on Dr. Scott Atlas’s attempts to hijack the White House coronavirus task force. “Atlas shot down attempts to expand testing. He advanced fringe theories, such as that social distancing and mask-wearing were meaningless and would not have changed the course of the virus in several hard-hit areas. And he advocated allowing infections to spread naturally among most of the population while protecting the most vulnerable and those in nursing homes until the United States reaches herd immunity, which experts say would cause excess deaths, according to three current and former senior administration officials.” 

OCTOBER 19 – A new Yahoo News/YouGov poll shows that Joe Biden has a built a 19-point lead over President Trump on who would do a better job of handling COVID-19. 

OCTOBER 19 – In a call with campaign staff, President Trump asserts that voters no longer want to hear what U.S. health officials have to say about the pandemic. “People are tired of hearing Fauci and all these idiots,” said. “Every time he goes on television, there’s always a bomb, but there’s a bigger bomb if you fire him. But Fauci is a disaster.”

OCTOBER 20 – Dr. Francis Collins, director of the National Institutes of Health, defends Fauci in an NPR interview. “Tony Fauci is probably the most highly respected infectious disease expert in the world – he’s also a terrific communicator – and I think the public has actually been greatly benefitted by hearing his unvarnished, unflinching descriptions of what’s happening with this pandemic.”

OCTOBER 26 – More than half of US states report their highest single day of new cases in October.

OCTOBER 30 – US surpasses 9 million coronavirus cases, only two weeks after hitting the 8 million case milestone.

 

NOVEMBER

NOVEMBER 6 – White House Chief of Staff Mark Meadows tests positive for coronavirus.

NOVEMBER 7 – Joe Biden is projected to win the electoral college by all major news organizations, but Trump refuses to concede.

NOVEMBER 9 – Pfizer announces vaccine candidate is 90 percent effective in early trials.

NOVEMBER 16 – Early data shows Moderna vaccine candidate is 94.5 percent effective.

NOVEMBER 20 – Biden coronavirus advisory board member says lack of shared information between Trump and Biden’s team is ‘dangerous,’ as Trump continues to block the Biden transition process.

NOVEMBER 20 – Donald Trump, Jr. tests positive for the coronavirus.

NOVEMBER 23 – The General Services Administration officially designates Joe Biden as the president-elect, beginning the formal transition of power.

 

DECEMBER

DECEMBER 1 – US closes out a record-breaking month for coronavirus cases and hospitalizations.

DECEMBER 7 – President Trump’s personal lawyer Rudy Giuliani is hospitalized after testing positive for coronavirus. The 76-year-old has spent the past month traveling around the country as part of his legal efforts to challenge the November election.

 

PODCAST: Scoring a Better Future — Getting Facts on Credit Scores & How They Work

Posted on by The Progressive Policy Institute

Join Paul Weinstein, Jr., Senior Fellow at the Progressive Policy Institute in Washington, D.C., and Joanne Gaskin, Vice President of Scores and Analytics at FICO, for a discussion on the changes FICO has made to its models, and how they may impact credit scores, particularly for millennials and GenZ.

Or listen to the full audio here without a Spotify account:

Lawsuits threaten to derail economic recovery

Posted on by The Progressive Policy Institute

As governors start lifting stay-at-home orders, businesses, schools, non-profits and houses of worship are trying to figure out how to reopen safely. A driving concern for many employers has been the fear of getting slapped with lawsuits if their workers or customers contract COVID-19.

It’s a reasonable fear; the pandemic is already inflaming America’s legendary litigiousness. Hundreds of COVID-19 lawsuits have already been filed. Law firms tout their “Coronavirus Litigation Task Force” as they troll for clients. Employees and customers who do not have COVID-19 have sued businesses because they feared they were at risk of catching it. Even some factories deemed “essential” have been labeled “public nuisances” for asking courts to determine the safety measures businesses must take.

Judges are not qualified to make these calls; government health experts are. But we’re in uncharted territory. America has never experienced anything like this pandemic or virus-induced freeze on economic and social activity. The experience over the past three months has been that federal and state public health guidance is vague, variable and sometimes contradictory.

Read the full article here

How a Startup Tax Credit Can Spur Re-Employment

Posted on by The Progressive Policy Institute

As federal and state governments outline plans for reopening the economy, lawmakers will have to grapple with the challenge of getting tens of millions of Americans back to work as quickly as possible.

More than 47 million Americans have filed for unemployment since the pandemic began, with the unemployment rate at 13.3 percent in May.

The economic damage has been inflicted on both the employer and worker sides of the labor market. A mass of businesses have filed for bankruptcy as a result of the lockdown, with the American Bankruptcy Institute finding a 48 percent increase in commercial Chapter 11 filings in May compared to last year.

And many laid off workers will not be able to return to their former jobs. As many as 25 percent of jobs may never come back, Joseph Brusuelas, chief economist at consulting firm RSM, recently told Politico.

Part of the problem is that even businesses that survive the downturn are going to be wary about expanding to fill the market gaps left by their defunct peers. Small businesses, which are naturally less risk-tolerant than their large counterparts and have access to fewer resources, will be especially cautious about growth.

That’s why simply “reopening the economy” won’t put everyone back to work. We also need a strategy for incentivizing existing small businesses to swiftly scale up and make room for rehiring the unemployed.

U.S. policymakers need new tools for revitalizing entrepreneurship and leveraging its potent job-creating abilities. To that end, the Progressive Policy Institute (PPI) has proposed a new Startup Tax Credit that incentivizes entrepreneurs to quickly increase employment at their small companies, giving even existing companies a startup-like boost.

Modeled on the Earned Income Tax Credit, the Startup Tax Credit would be a refundable tax credit tied to the number of employees and payroll at a small business.

Read more here.

The HEROES Act fixes what the CARES Act broke

Posted on by The Progressive Policy Institute

Conservatives call the House Democrats’ Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act a “gigantic political scam.” Senate Republicans say HEROES, passed by the House on May 15th, is “dead on arrival when it reconvenes. As they negotiate with Democrats, Republicans should think carefully about certain student loan relief provisions in the bill.

Even in good times, a substantial portion of 45 million Americans’ paychecks go to student loan payments rather than to goods and services that keep our economy churning. There’s little doubt that this debt contributes to suppressed consumer consumption, which stifles economic growth. In this bad time, Americans collectively owe $1.6 trillion in student debt. This debt burden is now dramatically heavier with the economic shutdown and coming diminished post-pandemic employment opportunities.

Some say no additional student loan relief is needed because the Coronavirus Aid, Relief and Economic Security (CARES) Act that Congress passed in March temporarily suspended student loan payments. That would be a decent argument if CARES applied to everyone, but it doesn’t.

Read more here.

House HEROES Act Gets The Trade-Offs Wrong

Posted on by The Progressive Policy Institute

The U.S. House of Representatives is moving ahead with plans to vote today on the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act: the fifth – and potentially final – a piece of major legislation addressing the coronavirus pandemic and its economic effects. The 1800-page bill is estimated to cost roughly $3 trillion and contains a mix of both good policies and bad but is perhaps most notable for what it leaves out: automatic stabilizers.

The biggest flaw with previous relief bills was that aid was limited by the availability of funds appropriated by Congress or arbitrary calendar dates it chose instead of being based on the real needs of our economy. As a result, measures like the Paycheck Protection Program (PPP) were exhausted within three weeks and many eligible businesses couldn’t get needed financial relief until Congress took additional action. The best way to prevent this problem in the future is by adopting “automatic stabilizers” — policies that cause spending to rise or taxes to fall automatically as predetermined economic or public-health benchmarks are met. For example, a proposal by Congressman Don Beyer and Senators Jack Reed and Michael Bennet would change the expansion of unemployment benefits included in the CARES Act to gradually phase out as the economy recovers instead of expiring arbitrarily on July 31st. The centrist New Democrat Coalition has also been vocal in calling on leadership to adopt automatic stabilizers in future relief bills.

Unfortunately, the HEROES Act doesn’t include any new automatic stabilizers – reportedly because House Speaker Nancy Pelosi is concerned about the bill’s $3 trillion price tag. On the one hand, Speaker Pelosi is right to be concerned about wasting taxpayer money on unnecessary expenses given our nation’s serious long-term fiscal challenges. But the unfortunate reality is that supporting our economy during the worst public health crisis of our lifetimes is a large and necessary expense. It is no less fiscally responsible to pass one $3 trillion bill than three $1 trillion bills if the money is efficiently targeted to support our economy throughout this pandemic. Moreover, there are a number of costly provisions included in the HEROES Act that are a poor trade-off for sacrificing automatic stabilizers.

Read the full piece on Forbes.

Amazon, Antitrust, and Private Label Goods

Posted on by The Progressive Policy Institute

Yesterday, the WSJ published an investigation with the headline: “Amazon Scooped Up Data From Its Own Sellers to Launch Competing Products.” As the article notes, in a Congressional hearing last year, an Amazon associate general counsel said, “We don’t use individual seller data directly to compete” with businesses on the company’s platform. The reporter for the WSJ claims to have seen evidence of Amazon managers violating this self-imposed rule in order to improve its private label goods business (i.e., Amazon-branded products).

There are two issues at play here. First, there is the question of whether Amazon violated Section 5 of the FTC Act by engaging in “unfair and deceptive practices” in order to entice third-party sellers onto its platform. Amazon is currently conducting an internal investigation into what occurred and a Congressional committee has already said it will be looking into the matter. These investigations are necessary and worthwhile for determining what exactly happened and who knew what when.

The second issue is about antitrust law. Stacy Mitchell, the executive director of the Institute for Local Self-Reliance, said, “An exec testified in July that Amazon doesn’t use data from sellers to create its own rival products. Turns out it does. This is monopoly behavior, hence the coverup.” But as Doug Melamed, a professor at Stanford Law School, said in comments about the situation, “Using the data to improve product offerings is not, and ought not be, unlawful under US law. The issue is whether Amazon obtained the data by misappropriation or misrepresentation.” Professor Melamed is correct on the question of antitrust law. To understand why, it’s useful to discuss the history of the retail industry and how it works today.

1. All major retailers use data on what sells in stores to build their private label businesses

It is common practice for retailers, including grocery stores and department stores, to use data to develop their own store brands to directly compete with name brand products. As Benedict Evans, an independent analyst, put it in reaction to the story, “It can be pretty entertaining to watch critics of Amazon discover ‘retail.’” The practice of using information about which products are selling well to develop private label goods is nearly as old as the retail industry itself. Sears launched its catalogue business in 1888. By 1927, the retailer was selling its own tools and appliances under the Craftsman and Kenmore in-house brands.

Source: Benedict Evans 

These days, selling private label goods is practically de rigueur for a company competing in the retail industry. Here are the shares of revenue from private label goods for some leading retailers according to data compiled by Morgan Stanley:

  • Kohl’s: 46%
  • JCPenney: 44%
  • Target: 33%
  • Kroger: 25%
  • Macy’s: 20%
  • Lowe’s: 20%
  • Costco: 20%
  • Office Depot: 20%
  • Dollar General: 20%
  • Walmart: 15%

By comparison, Amazon share of total retail sales from private label goods is only 1% (excluding its proprietary electronics such as Echo voice assistants, Fire TV, and Ring doorbells). As Jack Hough writes for Barron’s, “Private labels work best for products with decent turnover and excessive margins. […] Remember when HDMI cables sold for $30 a decade ago? Now, you can find them for $7.” Most private label goods are commodities akin to HDMI cables. The large and concrete benefit of lower prices to consumers outweighs the negligible effects on innovation (the HDMI cable has reached its final state and requires no new investment).

2. Amazon is not dominant in retail

While private label goods may be ubiquitous in retail, some critics argue that Amazon is so dominant it’s qualitatively different from when other retailers do it. Hal Singer, a managing director at Econ One, argued as much on Twitter: “It’s not just that Amazon has access to better information. It’s that, unlike a grocery chain, Amazon is DOMINANT PLATFORM PROVIDER.” But retail is a much more competitive market than many realize. For instance, Amazon is still much smaller than Walmart. Here are US retail sales figures for 2018 (the most recent year of data):

  • Walmart: $388 billion
  • Amazon: $121 billion
  • Kroger: $120 billion
  • Costco: $101 billion
  • Walgreens: $98 billion
  • Home Depot: $97 billion
  • CVS: $84 billion
  • Target: $74 billion

It seems difficult to argue that it’s a problem when Amazon uses data to inform its private label business, but not when a company more than three times its size ($388 billion vs. $121 billion) does the same thing at a rate 15 times higher (15% vs. 1%).

3. Online retail platforms are more open to competition than physical stores

But maybe it’s something special about the online retail market as opposed to the brick-and-mortar retail market? Perhaps sellers feel they have no option but to sell on Amazon if they want to sell online? That doesn’t seem to be the case. According to data from eMarketer, more than half of Amazon sellers also sell on eBay. Slightly less than half sell on a personal website as well. More than a third also sell on Walmart. It also seems worth noting that prior to the internet, third-party sellers had no option at all for selling directly to consumers. They had to negotiate with one of the big box retailers for placement on store shelves. Online platforms give them a new channel for reaching customers directly.

4. Retailers don’t have private data on cost structures for manufacturers

So, private label goods are not unique to Amazon in the retail industry and the company does not have a dominant position in the market. But maybe because Amazon is a “tech” company it has much more data than brick-and-mortar retailers and therefore has an anti-competitive advantage? Shaoul Sussman, a legal fellow at the Institute for Local Self-Reliance, tried to make that argument:

The key here is ad spend on Amazon! In the past, Amazon claimed that it only uses data that is widely available to brands-including sales, product ranking, and the like. But the amount a brand spends on ads is private information that only Amazon has!

I can reverse engineer the majority of another brand’s cost-including shipping, referral, and storage fees — but the missing piece would be ad spend! That is key for 2 reasons: (1) actual margins (2) how much the brand has to boost the product to hit optimal sales volume.

Sussman’s claim that a retailer could “reverse engineer the majority of another brand’s cost” is unfounded. No retailer has nonpublic information about the vast majority of a manufacturer’s fixed costs (property, plant, and equipment) or variable costs (raw materials, labor, etc.). Knowing the amount spent on shipping, storage, and marketing is only a small fraction of a company’s cost structure. Understanding marketing costs is helpful, but that doesn’t mean Amazon knows the cost structure of manufacturing the product. In some cases, that might be publicly available information. But that means every other competitor has access to it, too.

Yes, Amazon has more data than rival brick-and-mortar retailers (particularly on what consumers look at but never purchase), but the jury is still out on how much of a competitive advantage this affords them relative to big players like Walmart (which also has its own online marketplace and spends more on IT per year than Microsoft and Facebook). And even if this is an advantage, that would not necessarily be an antitrust issue if it’s used to deliver consumer benefits. (Of course, that does not absolve Amazon of the need to truthfully represent to sellers how it’s using that data.)

5. The only difference between a platform and a retailer is inventory risk

Sussman thinks there is another key difference in Amazon relative to other retailers:

Amazon is a *retailer*, a *platform*, and a *producer*. I have no problem with them using the data they have as a *retailer* to develop products — just like Walmart. I do have a problem with Amazon using information they gather as a *platform/ad biz.*

First, it’s important to know that ad fees on Amazon are analogous to slotting fees in brick and mortar stores. Brands have been paying for promotion in retail long before the e-commerce revolution. Prime shelf space and prime search rankings are both scarce resources that are auctioned off to the highest bidder. According to data from the Center for Science in the Public Interest, food manufacturers spend 70% of their marketing budgets on these “trade promotion fees” and 30% on advertising. At the end of the day, it’s all marketing.

Second, while it’s true that Amazon is simultaneously a retailer, producer, and platform, this is not economically different from traditional retailing. I’ve already explained how legacy retailers also engage in private label and are therefore “producers.” And while they are not “platforms” in the technical sense of being open to anyone (sounds… anticompetitive), the business model is not significantly different. 

Traditional retail charges a markup on the price paid to wholesalers or manufacturers (a percentage of the final retail price). The retailer can either purchase that inventory outright and assume the risk of it not selling, or it can include a “sale or return” provision, which reserves the retailer the right to return the inventory to the wholesaler or manufacturer if it does not sell. Inventory risk is just another cost and can be traded off with other contract provisions during the negotiating process.

Platforms, on the other hand, do not take custody of the inventory and instead provide services to sellers. In exchange, the platform charges a percentage of the final retail price. Whether it’s a platform or a retailer, the business is the same: Partner with companies selling goods and collect a profit margin on the final retail price. The rest is just accounting.

Conclusion

In the debate over private label goods, it’s important to keep in mind why consumers prefer them. According to survey data from Nielsen, 70% of people say they purchase private label brands to save money. This is unsurprising as private label goods tend to be less expensive than name brand goods while offering similar levels of quality. It’s as clear an example there is of direct horizontal competition. 

While the FTC should look into the allegations that Amazon violated its own Chinese wall — and therefore misled sellers — politicians such as Senator Warren and Congressman Cicilline are conflating a consumer protection issue with an antitrust issue to support their own ideological crusade. Contrary to what they may claim, the accusations of antitrust violations in this case are dubious.

https://medium.com/@progressivepolicyinstitute/amazon-antitrust-and-private-label-goods-bf8b8cc00e99

Follow the Leaders: Workplace Safety and Pay Policy

Posted on by The Progressive Policy Institute

Here’s a good rule of thumb: The companies or industries that actively expand during a recession often become the leaders in the recovery that follows. For example, housing starts actually rose in the 2001 recession, foreshadowing the coming housing boom.  The financial crisis of 2008-09 was also marked by the early years of the Apple iPhone, leading into the App Economy and the wireless boom of the past ten years.

And now, in the middle of the pandemic-caused economic crisis, companies like Amazon, Walmart, and Target continue to hire hundreds of thousands of workers to provide and deliver essential goods. As they add new workers, they also find themselves grappling with the ever-changing medical landscape of how the virus spreads and manifests itself in order to reduce the risks for workers and customers.

Indeed,  the hiring leaders are also turning out to be the leaders in adopting new safety measures and new pay policies for dealing with the pandemic. To be sure, these safety measures are a moving target, as scientists learn more about the behavior of the virus.  What is the new standard of safety that these companies are trail-blazing?

Temperature Checks: One of the main symptoms of COVID-19 is fever.  To spot workers who were suffering from the virus, Amazon was an early adopter of daily temperature checks for workers. Walmart soon followed.  Amazon has also moved towards using thermal cameras in some locations, a technology that might be easier for more companies to adopt.

Masks: Originally the CDC was discouraging non-medical personnel from using masks. That guidance changed. What also changed was a greater appreciation of the importance of controlling asymptomatic spread.  As a result,  companies are starting to distribute masks to slow the spread of coronavirus. Target is distributing masks and gloves to all of its workers at the beginning of their shift. Amazon provides masks to its employees and delivery service partners. Walmart is requiring all employees to wear masks.

Testing: As we noted here, workplace-based testing by businesses is key. Amazon is exploring building what it calls scaleable testing capacity that could be used to regularly test all of its workers.  So far no other company has come out and directly talked about developing their own testing capacity, but it’s clear that others would follow if workplace-based testing became possible.

Pay Policy: Labor markets function even during a pandemic. Leading companies have boosted pay for essential workers offering bonuses and temporary hourly wage hikes. Target raised wages by $2 per hour. Walmart boosted pay in its fulfillment centers by $2 per hour, and added a cash bonus for hourly associates. Amazon increased pay for hourly employees by $2 per hour in the U.S., C$2 per hour in Canada, and €2 per hour in many EU countries, and doubled the regular hourly base pay for every overtime hour worked.

These pay changes were all billed as temporary. But unlike seasonal pay hikes, the pandemic is not going away any time soon.  Moreover, there’s a word that economists use, hysteresis,  which means effects that persist after the initial causes giving rise to the effects are removed.

These companies are now the leaders, setting the trends for safety measures and pay policies. As the U.S. economy reopens,  other businesses will be following their path.

 

 

 

 

 

 

Protecting core systems: After today’s huge announcement, what Treasury and the Fed need to do with the rest of the $500 billion

Posted on by The Progressive Policy Institute

As of Thursday, April 9, Treasury and the Federal Reserve are finally starting to set set up the facilities need to use the $500 billion in funds for “severely distressed sectors” contained in the $2.2 trillion CARES relief act. The money has to be allocated by December 31, 2020.

In this initial round, the Fed is stepping up to lend $600 billion to small and medium-sized businesses; $850 billion to bond issuers to fund corporations and household borrowing for items like automobiles; and $500 billion to support state and municipal liquidity. This lending is backed up by $195 billion in Treasury funds from the CARES act.

What should Treasury and the Fed do with the rest of the $500 billion? Some will go directly to the airlines and industries essential to national security, like airplane manufacturing.

But Treasury must think strategically as it decides how to dole out the money over the rest of the year.

Read the rest of the essay here.

The Moment of Truth for Walmart, Amazon and the Rest of the Food Supply Chain

Posted on by The Progressive Policy Institute

In our previous blog post, we wrote about the importance of keeping the food/essentials supply chains open. With hundreds of millions of Americans stuck at home, having a dependable source of food is essential to avoid panic and to stay the course on social distancing. That’s not optional.

We equally stressed the importance of the health and safety of the workers in the food supply chain.  That’s also not optional.  And it’s not just Walmart, or Amazon, or Kroger–it’s every company in the food supply chain that faces the same problem of workers in distribution centers or stores getting infected and potentially spreading it to their coworkers and customers.

Walmart and Amazon are understandably bearing the brunt of criticism, because of their size and their sophistication.  Both companies are putting into place similar measures. Amazon is ramping up to do temperature checks of every employee at their entire U.S. and European operations network and Whole Foods Market stores by next week, and distributing millions of masks.  Walmart is doing roughly the same thing, with the roll-out of fever checks taking somewhat longer.

But this is the moment of truth for Walmart, Amazon, and the rest of the food supply chain. As more is learned about the virus, the standard of care will evolve. These companies must move pro-actively as that happens, including reorganizing tasks to increase distance between workers and tightening screening of potentially ill workers.

Moreover, workers need to be compensated for their risk. Amazon says that  “…we expect to go well beyond our initial $350 million investment in additional pay, and we will do so happily.”

The food supply chains must remain open. Workers must be protected and compensated. It’s not a choice.

 

 

 

 

 

 

 

What’s Next: Breathtaking Deflation, Stunning Inflation or Both?

Posted on by The Progressive Policy Institute

Get ready for the biggest economic and financial roller coaster of all time.  Policymakers in the United States and around the world are opening up the monetary spigots full bore and limbering up spending packages on an unimaginable scale. This comes after more than a decade of low interest rates. In the United States,  Congress has passed a $2.2 trillion pandemic package.

Let’s assume for the moment that progress is made on the health front against COVID-19, since the alternative is too horrifying to think about.  If we look out ahead, are Americans moving into an era of amazing deflation, stunning inflation, or both?

In the short run,  the sheer disruption of the sudden lockdown advocated by the health experts is going to send both demand and prices plunging. Goldman Sachs is forecasting a 24% plunge in GDP in the second quarter.  Domestic demand for non-food, non-health goods will collapse,  export demand will fall, factories will close. It will be a moment of supreme deflation, combined with an overwhelming–and deeply saddening–surge in virus-related deaths.

But then, like a tsunami wave, trillions of dollars of Federal Reserve funding and Treasury payments to individuals and businesses will finally come roaring onto shore. Demand should soar for all sorts of goods and services that the global economy is too disrupted to provide in quantity.  The most likely outcome: A new era of rising prices like we have not seen since the 1970s.

That surge of inflation, if it happens,  will present policymakers with a very tough choice–tighten up monetary and fiscal policy and potentially send the economy back into recession, or accept the inflation surge. The choice won’t be a choice–higher inflation will seem infinitely preferable to another downturn.

Instead, if we’re lucky, we’ll see a slow 3-5 year withdrawal of fiscal and monetary stimulus, as government loans are paid back, budget deficits are reduced, interest rates are raised, and excess funds are withdrawn from the financial system. Eventually the global economy comes back to normal–whatever normal will be.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emergency Economics: Fighting a Recession in 2020 and Beyond

Posted on by The Progressive Policy Institute

INTRODUCTION:

The outbreak of COVID-19, caused by the novel coronavirus, has created a global market downturn and put the United States on track for its first recession since the 2008 financial crisis. Quarantines, social distancing, and other proactive measures that are necessary to contain the pandemic are already limiting commerce and disrupting global supply chains, essentially ensuring that the U.S. economy will contract for at least some period of time in 2020.1 Policymakers must adopt a combination of thoughtful public health and macroeconomic policy measures that will limit the damage caused by both this and future recessions.

Congress has already taken two strong first steps. On March 6th, President Trump signed legislation that provided $8.3 billion in emergency funding for public health agencies and coronavirus vaccine research.2 Now the U.S. Senate is debating the Families First Coronavirus Response Act: a far more expansive bill carefully crafted by House Democrats to further bolster public health agencies and provide economic support to the people and businesses most likely to be harmed by the disease.3 This bill temporarily increases federal Medicaid and food-security spending, makes coronavirus testing available to patients free of charge, expands unemployment insurance benefits, mandates employees afflicted with the virus be given 14 days of paid sick leave, and creates a refundable tax credit to provide them with up to 12 weeks of additional paid medical leave, among many other things.4

Although these measures were a great start, much more will be needed. For example, the sick-leave mandate – which is essential for discouraging potentially infected employees from spreading the disease to their coworkers – covered just one fifth of workers after concessions were made to win Republican support.5 Many otherwise financially healthy businesses face the threat of going bankrupt as the crisis chokes off their cash flows, further increasing unemployment and perpetuating a vicious cycle of weakening demand.6 Millions of Americans may be unable to make their rent or mortgage payments, causing both homelessness and instability in the financial sector.

The Federal Reserve’s target interest rate has been reduced to zero percent, meaning it has already used its most potent tool for fighting a serious recession.7 But fortunately, low interest rates also make it cheaper than ever for Congress to borrow money to provide needed economic stimulus. Importantly, the current crisis is somewhat different than previous recessions in that most consumer spending will be constrained by limits on opportunities for commerce rather than a lack of money in their bank accounts. It is therefore more important than ever that stimulus money be targeted towards those who are most in need and most likely to spend. At the same time, a stimulus package must be aggressive enough to prevent an economic contagion that spirals into another financial crisis, or worse, a second great depression.

The best way to accomplish this goal is through the expansion of “automatic stabilizers” – policies that cause spending to rise or taxes to fall automatically when the economy contracts. These policies are more responsive to real economic needs because they are unconstrained by the political processes that often slow the passage of discretionary stimulus. Moreover, as the economy recovers, well-designed automatic stabilizers will actually reduce federal budget deficits and help pay back the debt that was used to finance stimulus.8 This proven structure prevents stimulus from being prematurely shut off (as it was following the 2008 financial crisis) and removes fiscal concerns as a political impediment to essential borrowing.9

This report provides a framework for new automatic stabilizers and other measures that will both combat the coronavirus recession and better prepare the United States for others that come after it. The Progressive Policy Institute recommends that policymakers prioritize giving relief to people who either lose their job or are already low-income, since both groups have a higher propensity to spend any money they receive than those who are economically secure. People and businesses should be given increased financial flexibility to inject liquidity into the market and prevent unnecessary bankruptcies during the crisis. The federal government should provide relief to cash-strapped state governments so that they are not forced to cut back their own spending and counteract federal stimulus. Finally, policymakers at all levels of government should cut taxes that discourage consumption, particularly those applied to industries hardest hit by the crisis.

READ THE FULL REPORT: