Matt Stoller has a disturbing thread on the new political order that is being born before our eyes. Perhaps this situation will be temporary and we will revert back to some semblance of a free economy when the present crisis blows over. But there is no particular reason to believe that the government, having gathered unprecedented powers unto itself, will easily let them go:
1. A thread on our new #PlannedEconomy.
One conceptual problem during this #coronavirus is understanding what is happening politically. Consider that Democrats are angry at Trump for not taking over private corporations. They demand he seize power and the means of production!
2. Hundreds of billions for families, $349B for small businesses, $150B for hospitals, and $4.5T in credit for banks and big business. That’s an inconceivable amount of money. It is in fact a takeover of our commerce by the government.
3. In other words what Congress passed was not just a series of bailouts. We just turned ourselves into a planned economy. Now Donald Trump will choose which businesses live and die.
4. Labor Secretary Eugene Scalia will design the rules for unemployment, Fed Chair Jay Powell and Treasury chief Steve Mnuchin will hand out trillions, and SBA Administrator Jovita Carranza will decide if loans go to churches or businesses or private equity, and on what terms.
5. We have been here before. Every war is to some extent a planned economy. World War II was highly planned, and so was Korea. The Defense Production Act comes out of the Korean War era. But we are not used to what planning means. So here are a few pointers.
6. In a planned economy, political choices are everything. The private financial system is no longer in control. If a corporation that’s making masks needs a loan, its creditworthiness shouldn’t matter—the government should make sure it gets that money.
7. Similarly, the various private equity funds licking their chops at the prospect of buying distressed assets – well the answer should be hell no. Money spent to buy private jets for financiers is money not spent on ventilators. We can see this in Philly.
8. Keeping an eye on corruption is essential. There is nothing more demoralizing than lobbying for private favors in a time which demands shared sacrifice. Price gouging, profiteering, etc. We must have no tolerance.
9. We must make things here again. Our borders and global supply chains are shut. The 30-year period of globalization, in which we consolidated and offshored production to lower costs, is over. Don’t fall for the endless bullshit from free traders. See:
10. Resilience is in, monopolies are out. This 2012 merger that killed a cheap fleet of ventilators is going to restructure antitrust thinking. Diversity and competition work, concentration creates fragility.
10. To restart our economy we must strengthen our public health infrastructure and social safety net to give workers the means to not infect others. Business requires social density. When we restart our economy, sick people need to know they will be fine if they don’t go to work.
11. That means a robust public health infrastructure and a social safety net, even if it’s only temporary.
12. Most importantly, we are now choosing what kind of world we will live in after this pandemic. Will it be, as @jimcramer fears, a world with just three retailers, Amazon, Costco, and Walmart?
13. Pay cuts and layoffs are rife across newspapers. Will an advertising depression combined with the monopolization of ad revenue in the hands of Facebook and Google end the free press? Or will we choose to restructure big tech and enable journalism?
14. These are the choices that Donald Trump and his cabinet will make. That is what Nancy Pelosi, Mitch McConnell, Chuck Schumer, and every other member of Congress decided. We are in a planned economy, and Trump is the planner.
15. I realize this will be taken unpleasantly by many out there. Donald Trump is not the leader I would have chosen. But he is a politician, and he does respond to public sentiment. We do have power. We can expose what is working and what is not.
16. Nothing is inevitable. We can choose to order post-pandemic America so it is more resilient and democratic. Or we can consolidate power in unimaginable ways. It is up to a small group in Washington, DC, and up to us citizens who pay attention.
The Federal Reserve unleashed a new series of moves Thursday to try to make loans available to states, localities and companies that have been hard hit by the coronavirus.
In doing so, the Fed will pump an additional $2.3 trillion into the U.S. economy. The central bank, in part, is drawing on money made available in Congress’ new economic relief package to buy municipal bonds as well as debt that did not previously qualify for federal backing.
The extraordinary rescue package comes on top of efforts the Fed has already made to bolster the economy, including cutting its benchmark interest rate to near zero and supplying more than $1 trillion to purchase Treasury and mortgage-backed securities to help keep credit flowing.