The Post-Covid Economy

Pre-Covid GDP for the first quarter of 2020. Q2 loss will be five to seven times greater than the Q1 loss.

Post-Covid Fed funds rates. For all practical purposes, Fed interest rates are now zero.

Covid-19 confirmed infection rates per million for selected countries. Y-axis shows the new-case rate. X-axis shows cumulative cases over time. Note that all nations shown have dropped their new-case rate to a tenth or less of their peak — except the United States.

by Thomas Neuburger

"The Fed can print money, but it can’t print jobs. It can buy bonds, but it can’t cure a virus."
—Nomi Prins

"The stock market is a graph of rich people's feelings."
—Source unknown, last quoted here

The current Covid crisis is three crises in one.

First, it's a medical crisis, one in which tens of thousands of Americans are newly infected each day and 125,000 have already died. Both of those numbers continue to rise at a time when most civilized nations have brought infection rates down to a tenth or less of their peak. At some point, the rest of the world will have to quarantine the U.S. — seriously.

Second, it's a financial crisis, one in which unemployment, if measured by Great Depression standards, has reached Great Depression levels, and in which GDP will drop farther and faster than it did at anytime in the 1930s.

Nomi Prins puts the employment picture this way. The current official unemployment rate of 14.8% "excludes workers the Bureau of Labor Statistics considers “marginally attached” to the workforce, meaning those not looking for a job because the prospects are so dim, or those who were only laboring part-time. If you factor them in, the unemployment rate already stands at a Great Depression-level 22.8%. Some industries, of course, felt more pain than others. Employment in the leisure and hospitality sector, for instance, fell in April by 7.7 million, or 47%." [emphasis added]

At its peak, U.S. unemployment during the Great Depression reached just shy of 25%.

GDP fell 4.8% in the first quarter of 2020 (see chart above), almost all of it pre-Covid-19. In late April, Trump economic advisors put second-quarter GDP at an additional –20% to –30%. As of June 26, a consensus of estimates puts Q2 GDP much higher, between –38.1% and –26.7%.

According to Prins, GDP dropped 27.8% between 1930 and 1932. The most optimistic recent Q2 estimate would put the drop for the first half of 2020 well beyond the Great Depression collapse. If reported Q2 GDP is just the average of these estimates, first half GDP for 2020 will be a stunning –40%.

This is going to hurt the real economy, meaning people's lives, in both imaginable and unimaginable ways, regardless of when the virus is brought under control. And if the virus is not brought under control soon, that damage will be even greater. As Prins puts it, "The Fed can electronically print money, but it can’t print jobs. It can buy bonds, but it can’t cure a virus. It can continue to try to stimulate the market, but it can’t banish fear."

Regardless of where the stock market is headed, the real economy is going down. And if indeed the "stock market is a graph of rich people's feelings" as some anonymous wag put it, even today's buoyant market could crash for good if the wealthy finally figure out that their earnings are tied to everyone else's after all.

The economic damage will touch everything. Consider all the vulnerabilities the jobless face: mortgages, rent, student debt, consumer debt, medical debt, medical expenses ... food. Most people are barely managing their debt payments and monthly expenses on a month-to-month basis now. Government unemployment checks will end soon, and if there is a renewal of support, it will be a small one (because, the deficit).

The same with debt deferments. The first rule of modern capitalism is, lenders (our job-creators) must be paid no matter what, and borrowers (potential deadbeats) must always be forced do the honorable thing. It's almost immoral — so we think — to allow them to do otherwise.

We never bailed out the mortgage borrowers in 2008; only the banks. Does anyone think that, ultimately, we'll do the same again. Again, when the real economy goes down, the people will suffer greatly, as will a great many industries. 

Finally, it's a political crisis, perhaps the one we've been expecting since George W. Bush left office, Bush the butcher of Iraq, servant of the nation's rich and powerful. America, sick of rule by its wealthiest elites and their endless, Ratheon-enriching wars, elected in 2008 what it thought was a peace-loving FDR president. It gave him FDR's Congress and an FDR mandate to change the nation, finally, to something most people could live in.

"Yes we can heal this nation. Yes we can repair this world. Nothing can stand in the way of the power of millions of voices calling for change" was the song of a triumphant Barack Obama in 2008, sung atop the rubble of a crushing financial crisis by a people hoping to rise.

They sang it in vain. "Yes we can" became "No I won't" in the blink of an eye. Promises to enhance Social Security by scrapping the cap on Social Security taxes became endless "grand bargains" to cut benefits designed to appease Republicans (and Obama's Wall Street donors) at the expense of all but the professional and investment classes. Obamacare "healed" the medical care crisis by backstopping medical insurers first, and offered relief to just a fraction, though a large one, of people who desperately needed it. In an unintended irony, Barack Obama presided over the greatest loss of African-American wealth in modern history. His economic policies were a "disaster for middle class wealth," and he made almost all of George Bush's tax cuts permanent.

"At every turn," wrote Matt Bruenig and Ryan Cooper, the Obama administration "was obsessed with protecting the financial system" and left homeowners "to drown."

Many of those who hoped for change in 2008 despaired of it in 2016, and enough Obama voters turned to Trump to give him an Electoral College win over Hillary Clinton, famous for her Wall Street speeches and hatred of progressive policies like single-payer health care.

Will this be the year, if Covid turns the economy to crap, when broken Americans grow angry enough to break things? The nation is angry now, a simmering low boil, and has been since 2016 when it was denied, on the left, a champion of the people, whoever you imagine that champion to have been — and on the right it was offered such a flawed vehicle for "change" that even our grandparents, good Republicans all, may be literally sickened enough to abandon him now.

Someone will win the next presidential election, but frankly, neither candidate deserves to, and neither candidate can give the nation the medicine it actually needs — a world in which the voices "of millions of people calling for change" will actually be heard. Of each of these looming crises — medical, economic, political — the economic could be a world-historical disaster, but the political may be greatest threat of all.
  

Progressives Team Up With Conservatives To Scuttle Pelosi's Orwellian Domestic Spying Bill

Progressives in Congress worked with the GOP Tuesday to torpedo an authoritarian domestic spying bill-- already passed by the Senate-- that Pelosi, Hoyer and Schiff were trying to push through the House. By late that night, Pelosi and her team read the tea leaves and pulled their own bill that was meant to reauthorize key parts of FISA. Trump, for his reasons-- remember he had signed the FISA legislation into law last year-- had threatened to veto the bill hours before Pelosi cancelled the vote on it.

As Ryan Grim pointed out, "earlier this month, the Republican-led Senate failed to pass a measure that would limit the FBI’s ability to access web-browsing history and other online activity without a warrant by a single vote... Civil libertarians, led by Rep. Zoe Lofgren (D-CA) pushed House Speaker Nancy Pelosi to allow an up-or-down vote on that amendment, then send it back to the Senate, where it could pass with all senators voting. Pelosi instead told Lofgren to negotiate with House Intelligence Committee Chair Adam Schiff (D-CA) the New York Times reported, and Schiff watered down the legislation. The result drew criticism from the left and right-- and Trump’s attention to the fight. Had Pelosi agreed to a simple up-or-down vote on the Senate amendment, it likely would have passed easily, and reauthorization of the broad surveillance authorities, along with some real reforms, would be on their way to becoming law."

The politics of surveillance, even in normal times, scramble the typical partisan tendencies, with Senate Majority Leader Mitch McConnell (R-KY), Pelosi, and Schiff often aligning on questions about the breadth and depth of state power to surveil and track Americans. Opposing those congressional leaders is the civil liberties community, which includes both progressives and conservatives with libertarian leanings, but which rarely can muster a majority in Congress for its defense of the Bill of Rights.

The civil liberties argument has gained new traction in recent months, with Trump’s outrage over the U.S. Foreign Intelligence Surveillance, or FISA, court’s handling of surveillance of his campaign, particularly the deeply flawed application for a warrant to surveil former adviser Carter Page. Although it was initially designed to review intelligence surveillance applications for suspected agents of a foreign power, after 9/11 the secretive FISA court signed off on expansive interpretations of surveillance law. Now, as Trump feels victimized by it, he and his allies have found religion on the question.

Rep. Louie Gohmert (R-TX), a famously eccentric conservative in the House, remarked at a Rules Committee hearing Wednesday morning on the oddity of House Democrats fighting to give Trump surveillance powers he wasn’t asking for, despite his clear determination to use law enforcement for his own political ends.

“It sure seems strange to me. For Democrats to vote for this reauthorization, even with these amendments, would have to be sort of saying, we have so much trust in Donald Trump and the people he’s appointed that they would never lie to a FISA court. They would never just go after their enemies. We feel like he can be trusted and so can all the people he’s appointed,” he said. “We know he’s cleaned out some folks at the Justice Department, FBI, I mean, think about it.”

The unlikely coalition of Trump and the civil libertarians was enough to stall the legal reauthorization of the FBI’s “call detail records” program, an amended version of the Patriot Act that allowed federal law enforcement to collect phone records. The authority lapsed in March after McConnell was unable to force through an unamended reauthorization.

Earlier this month, the Senate reauthorized those programs with additional restrictions, but an amendment that would limit the government’s ability to collect internet browsing history without a warrant fell one vote short of the 60 votes it needed to pass.

Pelosi then instructed Schiff to come up with a compromise version with Lofgren, rather than allow an up-or-down vote on the Senate language. The result of those negotiations was an amendment, introduced by Lofgren and Rep. Warren Davidson (R-OH) that reintroduced the restriction on collecting browsing history, but applies it only to U.S. persons.

However, Lofgren’s and Davidson’s amendment leaves up to interpretation what federal agents should do when they don’t know ahead of time whether U.S. persons’ information would be swept up in information requests-- giving the secretive FISA court room to allow bulk collection and task the FBI with purging U.S. person information afterward. The agreement broke down when Schiff and Lofgren offered different interpretations of their measure.

“If the government wants to use a dragnet and order a service provider to produce a list of everyone who has visited a particular website, watched a particular YouTube video, or made a particular search query, it cannot seek that order unless it can guarantee that the business records returned will contain no U.S. person IP addresses, or other U.S. person identifiers,” Lofgren said at a Rules Committee hearing Wednesday morning. That interpretation was enough to win the backing of Sen. Ron Wyden (D-OR).

In a statement, Schiff said that the amendment prohibited orders that “to seek to obtain” U.S. persons’ browsing information, leaving open the possibility that the FBI could seek to collect visitor logs from a website that contained Americans, as long as that was not their primary purpose.

Statements like that, noted Charlie Savage in The Times, can be used by judges to determine legislative intent and confounded what had appeared to be a settled issue.

That led to pushback from both the left and right, and the renewed attention not only risked reforms that had been won in the Senate and failed to win support for the amendment Schiff advocated for, but it also drew a veto threat from Trump. Wyden, who co-sponsored the failed amendment in the Senate, withdrew his support, saying in a statement that it “flatly contradicted the intent” of his amendment in the Senate, and urged the House to consider his version.

...David Segal, executive director of Demand Progress, which lobbied against the legislation, said that Pelosi and Schiff’s apparent own goal came from too close of an alliance with the national security establishment, which, he argued, “has led them to line up against reforms that could have passed, and in support of a bill that harms Americans, might not pass, and would likely be vetoed.”

...The opposition of a vast majority of Republicans gifted the CPC a fresh opportunity to flex its muscles in the House, after a disappointing effort to influence coronavirus relief packages. Trump’s turn against surveillance authorities has produced enough Republican opposition that a concerted effort by progressives could block passage. Rep. Mark Pocan, D-Wisc., a CPC co-chair, told The Intercept that the caucus was urging its 92 members to vote no. “We have grave concerns that this legislation does not protect people in the United States from warrantless surveillance, especially their online activity including web browsing and internet searches,” said Pocan and fellow co-chair Pramila Jayapal, D-Wash., in a statement later on Wednesday afternoon. “Despite some positive reforms, the legislation is far too narrow in scope and would still leave the public vulnerable to invasive online spying and data collection.”

...The opposition of a vast majority of Republicans gifted the Congressional Progressive Caucus a fresh opportunity to flex its muscles in the House, after a disappointing effort to influence coronavirus relief packages. Trump’s turn against surveillance authorities has produced enough Republican opposition that a concerted effort by progressives could block passage.

Rep. Mark Pocan (D-WI) a CPC co-chair, told The Intercept that the caucus was urging its 92 members to vote no.

“We have grave concerns that this legislation does not protect people in the United States from warrantless surveillance, especially their online activity including web browsing and internet searches,” said Pocan and fellow co-chair Pramila Jayapal (D-WA) in a statement later on Wednesday afternoon. “Despite some positive reforms, the legislation is far too narrow in scope and would still leave the public vulnerable to invasive online spying and data collection.”

For now, the Patriot Act provisions remain dead-- as do the reforms included in the underlying bill (some of which extend beyond the Patriot Act). All because Pelosi and Schiff insist on letting the FBI access browser history without a warrant, not what people who don't watch carefully would ever expect from either Pelosi or Schiff.

Ryan Cooper asked a salient question that Democrats should be asking themselves: If Trump is a budding autocrat-- and we all know he is-- shouldn't Democrats limit his surveillance powers?. "Why in God's name," he asked, "did Democrats even consider giving President Donald Trump-- the man they recently impeached for abuse of power-- more unaccountable surveillance powers? Over his own objection, no less?"

Schiff himself was the leader of the impeachment prosecution of Trump just a few months ago. In a long speech before the Senate, Schiff argued that the Founding Fathers had put impeachment into the Constitution specifically to deal with someone like Trump: "a man who would subvert the interest of the nation to pursue his own interests. For a man who would seek to perpetuate himself in office by inviting foreign interference and cheating an election." Even on the extremely narrow grounds chosen by House Democrats (which left out his most egregious looting of public coffers) Trump undoubtedly deserved to be removed from office.

But Schiff doesn't seem to actually believe his case against Trump. There is no possible justification for granting a corrupt, election-cheating president-- one who appointed a dishonest stooge as the nation's chief law enforcement officer-- the power to root through anyone's browser history without a warrant. Indeed, all the enormous powers of the surveillance state (which accomplish little or nothing of value) are exceptionally dangerous in the hands of Trump, and Democrats should be working frantically to scale them back. So far it appears we have gotten lucky in that Trump doesn't appear to grasp what these powers are for or how he might exploit them fully, but that situation is not guaranteed to hold.

Indeed, Trump's own objections remove the only possible political justification for passing this bill-- that Republicans would call Democrats soft on terrorism. They could shelve the bill, point to Trump, and shrug. Not their fault Trump didn't want these powers extended.

But in reality, Democrats like Schiff have completely swallowed the worldview of the national security establishment. Dragnet surveillance, like semi-randomly assassinating people up to and including American citizens, are some of the Important Tools that Keep Us Safe. The danger of a corrupt imbecile in the White House abusing those powers does not fit into this worldview, so it is ignored. If there is a choice between bowing before American imperial power and recognizing the danger of that power, they will choose the former, even when a game show demagogue is in the White House.

UPDATE From San Francisco: 

I just heard from Shahid Buttar, the progressive attorney and community organizer who is challenging Pelosi in November (having-- like her-- won the jungle primary in March). "It's entirely unacceptable—- and equally unsurprising—- that Nancy Pelosi has yet again used her formidable influence on Capitol Hill to enable authoritarian surveillance powers," he told us. "The reason I felt forced to run to replace Pelosi was her longstanding opposition to surveillance reforms on which I've worked for over a decade. What's new this year is the presence of a right-wing aspiring tyrant in the White House, and a bipartisan block of policymakers willing to do the right thing and challenge the institutional establishment that has rammed these powers through Congress on nearly a dozen occasions over the past decade without ever allowing a transparent debate. It is shameful that Pelosi supported the Republican position on FISA reauthorization. Pelosi's support for GOP positions also represents a profound threat to our democracy. Under the administration of a criminal president with no respect for the rule of law, we need resistance for real in Congress, not partisan posturing paving the road to fascism."