Tomlinson: GOP puts Wall Street over Main Street in virus response.
Treasury Secretary Steven Mnuchin promises the government will spend whatever it takes to keep the financial system afloat, while Sen. John Cornyn tells America’s unemployed they are on their own.
Stock prices are rallying, while more than 38 million Americans are out of work. As Republican leaders refuse to consider any economic stimulus until the end of June, they are proving the GOP is dedicated to helping the rich to get richer while allowing the poor to get poorer.
For those who need reminding, Wall Street is not the economy. Share prices represent investors’ optimism for the future success of companies. The economy is on Main Street, where you and I live, buying and selling goods in the moment.
Mnuchin and Federal Reserve Chairman Jerome Powell moved quickly to save Wall Street from the coronavirus. When investors became pessimistic about the future, the Fed ponied up $5.8
trillion; Congress promised $3.6 trillion, and the White House spent $380 billion, according to the Committee for a Responsible Federal Budget.
Mnuchin and Powell went on television promising to spend whatever it takes to make sure Wall Street does not falter. In other words, the federal government took charge of the financial sector, and unlike in a truly free market, guaranteed there will be few if any losers.
So much for Adam Smith’s invisible hand. President Donald Trump’s administration has eliminated risk, driving the S&P 500 Index briefly over 3,000 on Tuesday. Investors have nothing to fear. Or so they think.
Back in the real world, Texas’ unemployment rate is a record 13 percent and could reach 20 percent by the end of the month. Two million Texans have applied for unemployment insurance, and economists estimate 40 percent are unlikely to regain their old jobs.
The United States is facing the worst recession since the Great Depression, and Texas is hit doubly hard. The state’s economy is heavily dependent on hospitality and energy, two sectors unlikely to recover until doctors develop a vaccine or a cure for COVID-19.
In a rare show of unity in crisis, Republicans and Democrats cooperated and approved extraordinary unemployment benefits to help those who lost their livelihoods due to the pandemic. The enhanced unemployment insurance program covers the selfemployed and adds $600 a week to the regular payment.
These benefits, though, expire July 31, which will leave millions of people in desperate straits. Texas’ senior senator, Republican Majority Whip John Cornyn, is unmoved. He’s seemingly convinced working-class Texans are loafers who will not work unless faced with starvation.
Cornyn and Senate Majority Leader Mitch McConnell are rejecting Democratic proposals to extend this vital program that enables Americans to pay their rent, buy their groceries and care for their children until the economy recovers.
Cornyn accused millions of Americans of using their unemployment insurance to avoid work, thereby short-circuiting the Payroll Protection Program, which was intended to keep them in their jobs.
“We’ve heard from worried hotels, restaurants, and barbershops in Texas unable to rehire their workers and now at risk of losing their PPP loans they need to survive,” Cornyn said in a statement.
Sorry, but most Americans are not going to hotels and restaurants, nor do they plan to anytime soon. The businesses cannot operate at full capacity safely.
GOP leaders have held a poor opinion of the working class for decades. They believe we’d rather live in poverty on unemployment benefits than provide for our families and build a prosperous future.
Politicians like Cornyn would rather punish millions of sincere Americans than allow one malingerer to collect a government check.
The sad truth is that American companies are not going to rehire 38 million Americans over the next two months. They are unlikely to rehire that many over the next two years. In a typical economic recovery, the unemployment rates goes down no more than 1.5 percent a year.
Even the White House acknowledges the national unemployment rate will remain above 10 percent through the end of 2020.
The Fed understands this, which is why Powell urged Congress to quickly pass an economic stimulus bill that will employ Americans to build things. We need smarter roads, sturdy bridges, better electricity grids and improved health care.
Trump and Congress did the right thing by flooding financial markets with cash to protect investors, stabilize retirement accounts, and keep banks open. Wall Street, though, will not save Main Street.
If governments do not spur the economy and generate jobs, unpaid mortgages, failing businesses and desperate citizens will drag down the entire economy, and no amount of Fed financing will save Wall Street.
Now is not the time to pause. The economic crisis is really only beginning.