Between Sunday and Thursday of last week, 4,815 people applied for unemployment benefits in Ohio. Since Sunday of this week, 139,468 have.
Data from other states tells a similarly apocalyptic story. Extrapolating from the available data, economists at Goldman Sachs estimate that more than 2.25 million Americans will have lost their jobs by week’s end, the highest level ever recorded. After adjusting its growth projections to account for this carnage, the bank now predicts that the U.S. economy will contract by 6 percent this quarter — and by 24 percent next quarter — as unemployment more than doubles. Goldman does offer the consolation of 10- to 12-percent catch-up growth during the second half of this year. To enjoy such a “V-shaped recovery,” however, the U.S. will not only need to make (as yet, far from guaranteed) public health progress against COVID-19 but also keep its business sector solvent enough to rapidly emerge from hibernation once the pandemic is under control.
And if Senate Republicans get their way, a hefty percentage of America’s small businesses are about to die in their sleep.
On Friday, Mitch McConnell unveiled the economic rescue package he’d negotiated with the White House. The bill’s most incendiary provision is its revision of the Trump administration’s initial proposal for cash relief: Instead of sending $1,000 checks to all U.S. adults, as Treasury Secretary Steve Mnuchin had proposed, Senate Republicans would give less money to the poorest Americans, and none to those who earned over $99,000 in 2018. The insanity of this proposal was apparent even to some within McConnell’s caucus. Conventionally, conservatives justify providing less aid to the indigent than to the working poor on the grounds that the government should incentivize labor-force participation. But in the present context, millions of cash-strapped Americans are being denied the opportunity to work as a direct result of government policy. Under these conditions, there is no rationale for giving less aid to the poor than to the middle-class other than sheer contempt for the weak. Meanwhile, even if denying aid to those who made six figures were more valuable than expediting the dispersal of aid through a simpler approach (which it isn’t), there would remain an obvious problem: Just because someone made $100,000 in 2018 does not mean they are financially comfortable today; in fact, many such individuals have surely lost their jobs this week.
But if this cruel stance on cash assistance is the bill’s most execrable provision, it isn’t necessarily the most irrational one. After all, the GOP has never evinced much concern for whether the neediest Americans can afford to eat multiple times a day. Republicans are, however, very much invested in extending Donald Trump’s presidency for another four years, and sustaining America’s aberrantly right-wing version of capitalism in perpetuity. And the party’s penny-pinching approach to aiding small businesses jeopardizes both those objectives.
Here’s is the GOP’s plan for helping small businesses survive the coming months:
The small-business section, drafted by Sen. Marco Rubio (R-Fla.), offers loans to small businesses with under 500 employees. The $300 billion for the loans would be made available through lenders certified by the Small Business Administration, such as banks and credit unions, with the maximum loan capped at $10 million. The portion of the loan used by the small businesses to cover their payrolls could be forgiven if firms retain their employees through the end of June 30, 2020. Loans given to firms with tipped employees, such as bars and restaurants, could be forgiven if they are used to provide additional wages to their employees.
While better than nothing, this is woefully insufficient to keep small businesses solvent. But don’t take it from me — take it from all of these Republican economists. Former Bush administration CEA chair Glenn Hubbard and the American Enterprise Institute’s Michael Strain have a plan to supply small firms with enough privately issued loans to guarantee all of America’s small businesses 80 percent of their expected revenue for three months; the government would then pay off those loans so long as the firms fired no workers in the interim. They estimate the cost of this proposal at $1.2 trillion, making their relief measure four times as large as Rubio’s.
These conservative wonks understand that spending trillions of dollars to keep America’s businesses on life support is the small-government solution to the impending crisis. If firms are allowed to fail en masse — and their workers left to scatter in the wind — more-expensive and longer-term government income support will be required than if Uncle Sam spends what it takes to keep existing enterprises in the black.
The reason for this is simple: Once social-distancing measures are lifted, restaurants that retain their existing location, management, and staff will be able to instantly meet resurgent demand for dining out, while also supplying their workers with the market income necessary to pay their bills, and fuel resurgent demand for other goods and services. By contrast, if restaurants are allowed to fail en masse, it will take a long time after normalization for restaurateurs to build entirely new businesses, recovery will be painfully slow, and the number of Americans dependent on social insurance to get by will remain high for much longer. And the same basic logic applies across myriad industries.
From a crassly partisan perspective, meanwhile, the president’s party should be doing everything in its power to ensure a rapid rebound from the coronavirus crash. The fate of Trump’s campaign likely rests on whether strong growth returns in the third quarter of this year. Or at least, this is what GOP operatives are saying. And academic political science supports their view. It is true that, to this point, Trump has not suffered any decline in approval from the coronavirus crisis despite his literally indefensible handling of the pandemic (the president himself refuses to defend his own public statements about the virus’s fictional containment from earlier this year, preferring to simply fabricate an alternative recent history). But given the president’s personal unpopularity, it remains difficult to believe that his current ratings would survive a 20 percent contraction and 9 percent unemployment rate. Few incumbent parties in any democracy have ever won reelection while presiding over an election-year economic decline half as severe as the one we’re now entering. Trump and his party need a rapid turnaround by late summer. And the less they are willing to spend now to keep businesses solvent, workers employed, and households financially stable, the more improbable that turnaround is going to be.
Nevertheless, Republican lawmakers’ kneejerk ideological reflexes appear more powerful than the chorus of conservative wonks begging for more-aggressive measures. If McConnell and Co. allow their myopic phobia of massive countercyclical spending to delay and constrain the provision of aid, they will dig the Trump presidency’s grave. And when one considers the potential political ramifications of sudden mass unemployment and business failures — amid extraordinary inequality and a resurgent left — Republicans may well bury America’s low-road model of capitalism with their commander-in-chief.