The GOP Isn’t Cynical Enough to Save Us From a Depression

How Kudlow can they go? Photo: Shutterstock/Shutterstock

More than 30 million Americans have lost their jobs since mid-March. The U.S. unemployment rate is now officially 14.7 percent, the highest it’s been at any time since the Great Depression (and that official rate is almost certainly lower than the actual one). Small businesses all across the country are on the verge of collapse. Absent an expansion in the government’s grant program for such firms, a cascade of bankruptcies will eliminate them — severing functional matches between workers, employers, and commercial spaces in the process — and thus delaying the onset of economic recovery. Meanwhile, states and cities are being forced to deepen the downturn by laying off public workers as exploding public-health costs — and cratering sales and income tax revenues — lay waste to their budgets. Already, just weeks into the labor-market collapse, nearly 23 percent of U.S. households say they cannot afford enough food, according to a new survey from the Brookings Institution. During the Great Recession, that figure never exceeded 16 percent.

If the Republican Party wanted to maximize Donald Trump’s odds of winning election this November, it would be doing everything in its power to pass a fourth coronavirus stimulus package as quickly as possible. Historically, swing voters have consistently turned against incumbent presidents (and their parties down-ballot) when economic growth slows in an election year. And there’s reason to think that Trump may be more vulnerable to worsening economic conditions than most presidents: Throughout his time in office, voters have given Trump’s handling of the economy higher marks than the man himself. Although the president’s approval rating has yet to dip beneath its long-run average, it has declined along with the economy’s performance in recent weeks. Today, both public surveys and (reportedly) the Trump campaign’s own internal polling suggest that Joe Biden is on pace to make Donald Trump a one-term president.

But for Republicans, some things are more important than winning elections — and, apparently, denying government assistance to desperate workers and their underfed children is one of them.

Shortly after the Labor Department unveiled the worst jobs report in multiple generations Friday, Larry Kudlow told reporters that the White House will oppose the passage of any further stimulus legislation this month. Trump’s chief economic adviser argued that it was unclear whether further aid was necessary, as Congress had just made “another big infusion” of relief funds late last month and states were now beginning to reopen their economies.

Trump appeared to echo this message late Friday afternoon, saying of negotiations over the next stimulus package, “We’re in no rush, we’re in no rush.”

There do appear to be some divisions among Republicans, both in the White House and Senate. Although Trump downplayed the need for stimulus Friday, he had described a payroll tax cut and infrastructure package as economic necessities earlier in the week. Recent reports have suggested that the White House favors sending out an additional round of relief checks. On Capitol Hill, meanwhile, a few Republican lawmakers from hard-hit regions have called for substantial fiscal aid to states and more generous wage subsidies for companies.

But the dominant view in Mitch McConnell’s caucus seems to be one of callous complacency. Asked whether he would support another round of cash payments to working-class households, Louisiana Republican John Kennedy told The Hill, “Well, people in hell want ice water too. I mean, everybody has an idea and a bill, usually to spend more money. It’s like a Labor Day mattress sale around here.”

Wisconsin senator Ron Johnson and South Carolina’s Lindsey Graham have also expressed opposition to further cash aid. And McConnell’s top deputies, John Barrasso and John Cornyn, have echoed Kudlow’s line that it’s premature to discuss new relief measures.

It’s possible — perhaps even probable — that this is a negotiating posture. If McConnell can frame the conservative position as “let the economy burn,” then suddenly relief of any kind, no matter how limited or regressively targeted, becomes a concession to Democrats. Nevertheless, this would not be a politically optimal pose to strike. If Republicans want to maximize the U.S. economy’s performance in the second half of this year, they need to keep businesses solvent and consumers financially secure now. Recessions are self-reinforcing. As Roosevelt Institute economist J.W. Mason writes, “once economic units have run through their reserves of liquidity, and/or start changing their beliefs about future income, the fall in spending will continue under its own power, regardless of what started it.”

In the Trump era, many liberals have commented on the GOP’s opportunistic embrace of deficits and expansionary monetary policy. When the unemployment rate was nearly 10 percent — and a Democrat was in the White House — Republicans cried out for balanced budgets and interest rate hikes. Once Donald Trump took the reins of an economy closing in on full employment, the GOP paired a $1.5 trillion tax cut with large increases in federal spending and calls for the Federal Reserve to expand the money supply.

But there are limits to Republicans’ ideological opportunism. The party may prioritize delivering returns to their investors in the billionaire class and military-industrial complex over balancing the federal budget. But the conservative movement’s commitment to increasing the dependence of labor on capital, crushing public-sector unions, and discrediting state-level experiments with social democracy is real and deep. And a significant portion of the party’s lawmakers seem to genuinely believe that recessions are self-correcting phenomena that government intervention will only prolong.

For these reasons, Republicans appear hell-bent on allowing the $600 federal increase in unemployment benefits to expire in July and denying states and municipalities the level of aid necessary for averting steep reductions in public employment, education, and other basic services. From the perspective of a Randian libertarian, COVID-19 looks like a cure for municipal workers’ pensions and blue state pre-kindergarten programs. So why not let the virus accomplish what the “red state model” failed to? After all, more free handouts aren’t actually necessary for ensuring that Trump won’t be campaigning in a depressed economy this fall — coercing workers back to their (epidemiologically hazardous) jobs forthwith will make America grow again. Besides, the S&P 500 is up 30 percent since late March — so how bad can things be?

This reasoning is economically delusional. In practice, state governments did not shut down their economies, their residents did. As Raj Chetty and his team of economists demonstrate in a new paper, in states across the country, economic activity declined before lockdown orders took effect — and has not picked up much in those places where they’ve been lifted. International data lends credence to these findings: Sweden’s economy has suffered at least as badly as its neighbors’, even though it made the aberrant decision to allow its nonessential businesses to remain in operation.

Whether the GOP’s stance is politically insane is more ambiguous. If America were a functioning, majoritarian democracy, then the party’s position would surely be untenable. Democrats currently lead Republicans in the congressional generic ballot by eight points. Virtually every poll suggests Biden is on course to win the popular vote by a comfortable margin. But then, if America were a majoritarian democracy, Republicans would not be in power to begin with. The GOP can afford to prioritize its ideological mission over its electoral best interests because America’s electoral institutions structurally overrepresent its predominately white, nonurban coalition. By holding up further stimulus, Republicans are taking a massive political risk and significantly reducing Trump’s odds of reelection. But it remains conceivable that the president will be able to squeak by on the strength of his Electoral College advantage, even as his party actively deepens a historic recession so as to economically disempower the majority of Americans who must work for a living.

A more cynical GOP would prioritize Trump’s reelection over denying “ice water” to “people in hell.” Unfortunately for America, actual Republicans put plutocracy before party.

The GOP Isn’t Cynical Enough to Save Us From a Depression