Coronavirus challenges bring democratic socialism to America
People you know are going to die from COVID-19. Thousands of Texas businesses will shutter, and tens of thousands of Texans will lose their jobs due to the new coronavirus.
Today, the challenge is preventing the 2020 recession from becoming another Great Depression.
Texas’ major cites are shutting down, and the list of damaged businesses is legion: fast-food, slow-food, movie theaters, taxis, bars, art galleries, live entertainment, sports, hospitality, home maintenance, janitors, personal fitness, child care.
Of the state’s 12.8 million workers, more than 4.2 million work in one of these industries, according to Texas Workforce data. A third of the workforce is at risk of losing their jobs, and an NPRPBS Newshour-Marist poll reports that 18 percent of Americans have already been laid off or had their hours cut. Companies are announcing thousands of additional layoffs every day, and governments are ordering more businesses closed.
The low-income workers whose job requires them to meet you face to face and provide a low-cost service will suffer the most. They work in low-margin industries, where business owners struggle to make a profit, let
alone build up a cash reserve to pay people during a pandemic.
About 44 percent of Americans workers are considered low-wage, taking home a median income of $17,950 a year, according to an analysis by the Brookings Institution, a center-left Washington think tank. About 40 percent of these people have children, many of whom no longer go to school and require child care.
The 2020 recession will do more economic damage in a shorter period than the Great Recession of 2008 or the Sept. 11 attacks, economists from across the political spectrum agree.
Social distancing is knocking down consumer spending, the drop in oil price is wiping out capital investment, and when combined with expanded travel bans, the result is “a minus-1 percent reading in the first quarter and a large contraction of 6 percent for GDP growth in the second,” said Beth Ann Bovino, chief U.S. economist at S&P Global.
Political leaders must mitigate the damage, which means COVID-19 will introduce democratic socialism to the United States. We will not call it that, of course. But both Republicans and Democrats have announced plans that look a lot like Western European-style intervention.
President Donald Trump plans to send most Americans a check next month, in addition to unemployment benefits. He wants to spend tens of billions of taxpayer dollars to deliver free health care to coronavirus victims, guarantee paid sick leave for patients and subsidize private corporations to keep them from bankruptcy.
Bravo, Mr. Trump, more, please.
Pandemics present unique challenges since governments need people to isolate themselves to slow the spread of disease. The government needs to minimize disease before restarting the economy.
Sick people are more likely to stay home if they are not going to lose their pay. Since a quarter of American workers do not get any sick leave, according to the Department of Labor, the government needs to intervene and require it.
The emergency bill
Trump supports would provide two weeks of paid sick leave and up to 10 weeks of family medical leave, at two-thirds pay. Without financial aid, a quarantine would likely doom a low-income worker to homelessness.
British economist John Maynard Keynes taught us 90 years ago that when faced with a potential depression, the government must spend money like gangbusters.
The government must bail out employers, both large and small, to make sure they have a place to work when the pandemic fades. Estimates put Trump’s plan at $1.5 trillion, which is the right number. But we need to make sure the money is spent to keep people in their jobs, not to enrich shareholders with stock buybacks.
Gov. Greg Abbott did his part by waiving the oneweek waiting period and work-search requirements for unemployment insurance. Smart moves, since no one is hiring and Texas unemployment claims are up 40 percent.
Admittedly, we’re talking about a lot of taxpayer money, but the alternative is a depression. Anyone who thinks I’m exaggerating should remember that three months ago, no one imagined a viral pandemic shutting down the country.
Will these steps sink the government into deeper debt? Yep. Would it have been nice if the Federal Reserve had raised rates earlier and faster, so that they had more room to cut? Yep. Should we all have health insurance and paid sick leave? Hell yes!
Should the airlines have spent so much money buying back stock? No. Should the Trump administration have blown the budget by giving out tax cuts? No, of course not. We did not prepare for this rainy day because we are greedy.
I wish we’d been wiser, but this crisis requires concerted, collective action. Welcome to democratic socialism.