the Senate coronavirus stimulus package: wsws crunches the numbers

Patrick Martin also notes the many caveats and unknowns afoot in potential waivers to the General Rules as to which corporate loans end as gifts, and more.  His explanation of each state having its own static metrics of unemployment compensation was new to me.  And yes, RT.com is reporting that there were 3.2 million new applications for compensation filed this week, obviously not just for employees ‘furloughed due to coronavirus’ as earlier reported as covered in the Stim package.

‘US Senate passes massive economic “rescue” bill’, Patrick Martin, 26 March 2020 (I’ll paste almost all of it in)

“Senate Democratic and Republican leaders reached agreement with the Trump administration early Wednesday on an economic “rescue” package of unprecedented dimensions—an estimated $2 trillion. The bill was passed late Wednesday night by a 96–0 margin, despite the effort of a handful of Republican senators to block it for providing too much money for those thrown out of work by the coronavirus crisis.

Vermont Senator and presidential candidate Bernie Sanders voted for the bill, despite its unprecedented transfer of taxpayer funds to corporations and limited benefits for workers.

The major change from the first version proposed by McConnell and the Republicans last week involved an expansion of unemployment benefits for the rapidly escalating number of workers being laid off as lockdown orders are issued in state after state to try to head off the spread of the coronavirus pandemic.

The number of workers filing new applications for unemployment compensation was expected to jump to more than three million this week, a more than tenfold increase over the previous week but only the beginning of what is expected to be a virtual shutdown of large parts of the US economy over the coming weeks.

Faced with the prospect of levels of unemployment that could exceed those of the Great Depression of the 1930s—and massive social unrest that would result—both Republicans and Democrats agreed on two stopgap measures to stave off an explosion of social struggle by the working class.

The first is immediate and direct federal payments to most Americans, amounting to $1,200 per adult and $500 per child. The payments are to be distributed by the Internal Revenue Service to anyone who filed an income tax return in 2018 or 2019, as well as some of those who were too poor to file, although the exact details of eligibility depend on the final language of the bill, not yet publicly available.

The second measure is a substantial temporary federal supplement to unemployment compensation benefits, which are administered by the states. The federal government will add up to $600 a week to the benefits set by the states, which themselves range on average from under $200 in Mississippi to a high of $515 in Massachusetts. The federal supplement is to last for four months, ending in early August for workers filing claims this week.

The total cost of these two measures is $550 billion—$300 billion for the direct payments and $250 billion for the increase in unemployment benefits. The still leaves the biggest share of the $2 trillion package for corporate and business interests.

Those provisions include $500 billion for corporate bailouts, with about $75 billion earmarked for specific industries, including $50 billion for passenger airlines, $8 billion for cargo airlines, and $17 billion for Boeing (although the company is not named).

Democrats objected to the $500 billion being under the sole control of Treasury Secretary Mnuchin, with even the names of the companies receiving aid to be kept secret for at least six months. They accepted a “compromise” under which auditing is to be carried out by an “independent” inspector-general—the same method employed during the 2008–2009 bailout of Wall Street—and oversight by a five-member panel appointed by congressional leaders.

While corporate borrowers are to be prohibited from stock buybacks and the payment of dividends for a year after the loans are repaid, and will have minor limitations on executive compensation, Mnuchin will have the power to waive those restrictions “upon a determination that such a waiver is necessary to protect the interests of the Federal Government.

Corporate borrowers will have to commit to maintaining until September 30 the employment levels in place on March 24, but only “to the extent practicable,” another gigantic loophole. They will be barred from cutting employment by more than 10 percent.

More importantly, the $500 billion does not really represent an adequate measure of the scale of the bailout. Besides the $75 billion for transportation, the remaining $425 billion will be used to underwrite lending by the Federal Reserve to companies approved by Mnuchin on a much larger scale, estimated by various analysts as ranging from $2 trillion to $4 trillion.

Another $367 billion is set aside to aid “small business,” although these firms can employ up to 500 workers, a ceiling that will allow many hedge funds and private equity firms to qualify. Trump’s personal holding company, the Trump Organization, would likely have qualified but for a special provision inserted in the bill to make companies owned by the president, vice president or members of Congress ineligible.

Another $50 billion is allocated for an “employee retention tax credit” for businesses that keep workers on the payroll rather than laying them off. The details of this, including which companies will benefit, remain to be clarified.

Nearly $500 billion is to be distributed for the front-line costs of fighting the coronavirus epidemic and other social needs. That sum includes $207 billion for state, local and tribal governments, school districts and public transit agencies; $130 billion for hospitals and public health facilities; $45 billion for the Disaster Relief Fund of the Federal Emergency Management Agency; and $41 billion to pay for additional personal protection equipment for health care workers and to replenish the national emergency stockpile of such materials.

There are lesser amounts for bailouts of farmers hit by Trump’s trade war with China and for other social services, including food stamps, child nutrition, allowing students to defer loan payments for six months with interest waived, and waiving Pell grant restrictions for students forced to leave school because of coronavirus-related closures. There is even $100 million for the National Endowment for the Arts and the Kennedy Center for the Performing Arts, a provision that set off howls from the ultra-right media, although it represents 0.005 percent of the massive bill.

In sum, the spending breaks down into three major components: about $1 trillion for corporate and business interests (although with the Fed’s lending, this could climb to $2.5 trillion); about $500 billion to keep the US population from starving over the next four months; and about $500 billion more directly linked to the effort to contain the pandemic.

The money to support state governments—hit by huge drops in tax revenues just at the point when they must spend more to fight the coronavirus—is not distributed according to need, but according to a political formula that reflects the intrinsic inequities of the Senate, where every state has two votes, regardless of population.

The bill distributes $60 billion in the form of $1.2 billion for each of the 50 states, with the remaining $90 billion distributed based on population, so that New York receives less than Texas, even though it has 30 times as many coronavirus cases.

This slap in the face to the people of New York did not faze Senate Minority Leader Schumer, one of two senators from New York state. In remarks just before the final series of votes, Schumer praised the bill, claiming it would save “millions of small businesses and tens of millions of jobs.” His real concern—like that of all the other senators—was that the corporate bailout and the temporary relief checks to millions of workers would help safeguard the wealth and power of the US financial aristocracy.” [snip]

At a remarkable press conference Wednesday afternoon, the four Republicans—Ben Sasse of Nebraska, Tim Scott and Lindsey Graham of South Carolina, and Rick Scott of Florida—inveighed against the unemployment compensation payment of $600 a week. They issued a statement declaring that the payment was a “strong incentive for employees to be laid off instead of going to work.

Ben Sasse, of a more philosophical bent, declared that the unemployment compensation provision threatened to “disrupt the employer-employee relationship”—Karl Marx called it wage slavery—and was therefore un-American.

But the most revealing comments came from Rick Scott of Florida, a former corporate CEO in the health care industry, who claimed that small businesses could not survive if workers were unwilling to work for low wages because they could make more on unemployment pay. One reporter apologized for asking him, “Do you understand how bad the optics are to have probably the wealthiest person in the Senate potentially holding up this bill for a couple hundred bucks for some of the poorest people in this country?

The four threatened to use procedural obstacles to slow passage of the bill, thus giving Vermont Senator Bernie Sanders the opportunity for a bit of “left” demagogy. He threatened that if they objected to the unemployment compensation section of the bill, he would raise objections to the corporate bailout. In the end, the four settled for a recorded vote on an amendment by Sasse, which was defeated, and Sanders joined in the bipartisan vote to approve the bill.”

From fileunempoymment.org:

Unemployment Benefits Comparison by State

Unemployment insurance programs are governed by State governments and are funded by state, federal and private companies that pay employment tax. Ultimately, the onus is on the state government to balance the checkbook, so the state has to decide the benefits maximum amount, duration, and eligibility to receive the benefits. For this reason, you notice that unemployment benefits largely vary by state.

Some states like Illinois could pay as high as $1,495  depending on the eligibility criteria. But only a handful of states such as Pennsylvania, Rhode Island, Connecticut, New Jersey provide such generous benefits. Majority of the states provide average benefits in the range of $300 to $500.

Benefits Amount and Duration by State

This table provides a complete list of unemployment benefits and duration for all 50 states. It provides the maximum dollar amount per week and also the maximum number of weeks benefits provided by each state.”

For instance the lowest: Alabama: $265; Florida: $275; Louisiana: $247; Mississippi: $235; Tennessee: $275.  Do we note a trend here?

States that provide unemployment compensation for a shorter duration

  1. Florida – 12 Weeks
  2. North Carolina – 12 Weeks
  3. Missouri – 13 Weeks
  4. Georgia – 14 Weeks
  5. Kansas – 16 Weeks

(cross-posted at caucus99percent.com)

5 responses to “the Senate coronavirus stimulus package: wsws crunches the numbers

  1. Another summary of the stimulus package from Politico…

  2. the house passed the bill, but ooof! this is a barn-burner!

    March 27, 2020, Stimulus Bill Allows Federal Reserve to Conduct Meetings in Secret; Gives Fed $454 Billion Slush Fund for Wall Street Bailouts’, by Pam Martens – Russ Martens, counterpunch

    “The bill provides specific sums that can be made as loans or loan guarantees to passenger airlines ($25 billion), cargo airlines ($4 billion), and loans and loan guarantees to businesses necessary to national security ($17 billion). But when it comes to the money going to the Federal Reserve and then out the door to Wall Street, the legislation says only this:

    “Not more than the sum of $454,000,000,000…shall be available to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system….”

    Why does the Federal Reserve need $454 billion from the U.S. taxpayer to bail out Wall Street when it has the power to create money out of thin air and has already dumped more than $9 trillion cumulatively in revolving loans to prop up Wall Street’s trading houses since September 17, 2019 – long before there was any diagnosis of coronavirus anywhere in the world.

    The Fed needs that money to create more Special Purpose Vehicles (SPVs) — the same device used by Enron to hide its toxic debt off its balance sheet before it went belly up. With the taxpayers’ money taking a 10 percent stake in the various Wall Street bailout programs offered by the Fed, structured as SPVs, the Fed can keep these dark pools off its balance sheet while levering them up 10-fold.

    White House Economic Adviser Larry Kudlow acknowledged plans by the Fed to leverage the money at a White House press briefing this week, stating that the money the Treasury is handing over to the Fed would result in “$4 trillion in Federal Reserve lending power.”

    The Fed has already created one of these SPVs. On March 17, the Fed said it was creating a Commercial Paper Funding Facility (CPFF) that would work like this:

    “The Treasury will provide $10 billion of credit protection to the Federal Reserve in connection with the CPFF from the Treasury’s Exchange Stabilization Fund (ESF). The Federal Reserve will then provide financing to the SPV under the CPFF. Its loans will be secured by all of the assets of the SPV.”

    Adding to the suspicions that the Fed doesn’t want to have to battle Freedom of Information Act (FOIA) requests (sunshine law requests) again in court, as it did and lost during the last financial crisis to keep its outrageous $29 trillion bailout program to Wall Street a secret from the public, the Senate-approved stimulus bill repeals the sunshine law for the Fed’s meetings until the President says the coronavirus threat is over or the end of this year. That could make any FOIA lawsuits to unleash details of what’s going on next to impossible since it has been codified in a federal law. The bill states the following:

    SEC. 4009. TEMPORARY GOVERNMENT IN THE SUNSHINE ACT RELIEF. (a) IN GENERAL.—Except as provided in subsection 8 (b), notwithstanding any other provision of law, if the Chairman of the Board of Governors of the Federal Reserve System determines, in writing, that unusual and exigent circumstances exist, the Board may conduct meetings without regard to the requirements of section 552b of title 5, United States Code, during the period beginning on the date of enactment of this Act and ending on the earlier of— (1) the date on which the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 20 U.S.C. 1601 et seq.) terminates; or (2) December 31, 2020.

    This could mean that the American taxpayer may never learn why it went into debt to the tune of $454 billion if no records are being maintained.

    Wall Street’s mega banks and their primary regulator, the Federal Reserve, are no longer just a threat to the safety and soundness of the U.S. banking system — together they are an unparalleled and unprecedented threat to the idea of democracy as we understand it.

    We find it difficult to believe that Senators Bernie Sanders, Elizabeth Warren, Sherrod Brown and Jeff Merkley would vote in favor of this legislation – given their in-depth knowledge of what the Fed did during the last financial crisis. The public deserves an honest explanation from.”

    imyself, i’m not a bit surprised that they voted for it.

  3. I couldn’t look at this earlier, sorry, wendye. Well done on crunching the numbers. All I can say is thank goodness for spring. We are being put through the wringer, had one of those sitting in my grandmother’s house, a giant one, when I was little. The frame was light green in color. I never saw it in use, do wonder whatever happened to it. As I said, I was little and it seemed enormous.

    Best thing will be when this doesn’t work for the ‘economy’. Best and worst at the same time. Calling FDR…calling FDR…

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