President Trump’s push for emergency coronavirus relief is laying bare a glaring double standard: He decries socialism even as he’s practicing it.
On the one hand, the Trump administration wants $500 billion for loans and loan guarantees that Treasury Secretary Steven Mnuchin could tap for industry bailouts with few limits or oversight. That proposal helped galvanize Senate Democratic opposition to a $1.8 trillion package aimed at keeping businesses and workers afloat, throwing it into limbo and sending stock futures reeling.
But as his administration reaches for unchecked authority to engineer a massive intervention in the marketplace, Trump is rejecting bipartisan pressure to conscript U.S. businesses to help churn out medical gear in dangerously short supply. His reasoning: Doing so would constitute a Venezuela-style violation of free market principles.
The strategy points back to the president’s political interests. Trump and his team had been hoping to frame the 2020 presidential election as a contest between capitalism and socialism. They aimed to brand the Democratic Party and its eventual nominee as captive to radical ideas that would short-circuit the American wealth-creation machine.
But the coronavirus has already put an emphatic end to the historically long economic expansion Trump inherited. And the president has yet to adapt his playbook to a disaster that now threatens to usher in an economic collapse on a scale not seen since the Great Depression.
Governors, health-care industry leaders and front-line medical workers are urging the president to tap the Defense Production Act, a Cold War-era law that enables him to force American manufacturers to make ventilators, masks, gowns and other basics for patients and caregivers.
The president, after offering contradictory accounts, confirmed at his Sunday evening news conference that he has decided against it. “We're a country not based on nationalizing our business. Call a person over in Venezuela,” Trump said. “Ask them how did nationalization of their businesses work out? Not too well.”
Instead, he said, he is relying on companies to step up voluntarily to meet the needs of health-care providers — a method that so far has yielded a patchwork and inadequate response.
The move is “based on a bet that he can cajole the nation’s biggest manufacturers and tech firms to come together in a market-driven, if chaotic, consortium,” the New York Times’s David Sanger, Ana Swanson and Maggie Haberman report. “But it is far from clear that the effort to enlist companies like General Motors, Apple and Hanes, just a few of the firms that have promised to free up existing supplies of masks or repurpose 3-D printers to produce ventilator parts, constitutes an effective strategy.”
Ford, General Motors and Tesla are being given the go ahead to make ventilators and other metal products, FAST! @fema Go for it auto execs, lets see how good you are? @RepMarkMeadows @GOPLeader @senatemajldr— Donald J. Trump (@realDonaldTrump) March 22, 2020
The U.S. Chamber of Commerce and leading corporate executives have lobbied the administration against using the Defense Production Act, the Times reports.
Given the history-bending stakes, it’s reasonable to expect the presidential election now will turn on voters’ assessments of Trump’s handling of the crisis. It is too early render those judgments. But the damage is already piling up — the stock market, for one, has erased all of the gains it recorded during Trump’s presidency, with no bottom in sight yet. Economists expect more than a million workers will lose their jobs by the end of the month as economic activity grinds to a halt; St. Louis Fed President James Bullard warns the jobless rate could hit 30 percent in the second quarter.
Against that backdrop, Trump’s two-handed approach to the private sector at best looks more confused than principled. And at worst, trying to maximize his Treasury Secretary’s flexibility in bailing out vulnerable industries while declining to press other businesses into the nation’s cause is opening him up to charges of corporatism.
“They’re throwing caution to the wind for average workers and people on Main Street and going balls to the wall for people on Wall Street," Sen. Joe Manchin III (D-W.Va.) told my Post colleagues.
From Sen. Ron Wyden (D-Ore.), the ranking member on the Senate Finance Committee:
I just voted no on the partisan #COVID19 bill. Here's why: while nurses are being forced to make their own masks and gowns, McConnell and Trump are busy creating a taxpayer-funded slush fund for their buddies. I will stay here as long it takes to get this done the right way.— Ron Wyden (@RonWyden) March 22, 2020
From the New York Times columnist Binyamin Appelbaum:
A big reason the Senate can't pass a bailout bill is that Republicans are refusing to require big companies that get bailouts to refrain from firing workers or imposing pay cuts.— Binyamin Appelbaum (@BCAppelbaum) March 22, 2020
Also, Republicans are opposing the expansion of unemployment benefits for workers who do get fired.
The bill the Senate did not move forward on Sunday “does not include many restrictions on the companies that receive these funds,” my Post colleagues note. “For example, companies are required to maintain the same employment levels that they had as of March 13 ‘to the extent practicable,’ but it does not define what practicable means.”
It does, however, “appear to prohibit stock buybacks at firms that receive the emergency loans and gives the Treasury Department the opportunity to take equity stakes in the firms so that taxpayers could benefit if a firm regains its financial footing.”
It isn’t the first time Trump has sought a heavy-handed approach to private enterprise, in spite of his free-market rhetoric.
In the trade fights that defined the middle of his term, for example, the president chose winners and losers in the private sector as he levied tariffs and carved out exemptions, in some cases for specific companies. And he has touted his administration's bailout of farmers caught in the crossfire, a program that cost more than double what the Obama administration provided to domestic automakers after the financial crisis.
But the coronavirus relief package presents a new twist: Trump’s own businesses could benefit, a point Democrats have been quick to note.
The president declined to pledge he would reject the help. “I ran and everybody knew I was a rich person. I built a great company. And people knew that. But I agreed to do things I didn't have to. I still don't have to,” he said at his news conference. “And instead of being thanked for, again, not agreeing to do it but just for not doing it, I get excoriated all the time. So I've learned, let's just see what happens.”
- Futures point to another ugly opening. S&P 500 futures are off by more than 2.5 percent in the wake of the Senate's failure to advance a relief package. That marks an improvement over Sunday night, when they hit their “limit down” levels by falling 5 percent. Stocks tumbled globally.
- Bankers and investors predict market carnage will get worse: “They note that by historical standards, stocks’ declines look modest compared with some prior downturns, given the early indications of how much damage virus-related shutdowns are likely to do to global growth,” the Wall Street Journal's Anna Hirtenstein and Akane Otani report.
- Top economists see similarities to Great Depression: “Former White House chief economists Glenn Hubbard and Kevin Hassett and former Federal Reserve Vice Chairman Alan Blinder have drawn comparisons to the Great Depression, though they’ve stopped well short of forecasting another one,” Bloomberg News's Rich Miller and Reade Pickert report, though experts caution that a depression requires prolonged, perhaps multiple years, of downturn.
- Growth projected to fall off a cliff in the second quarter. More from Bloomberg: “JPMorgan Chase & Co. expects gross domestic product to shrink at an annualized rate of 14% in the April-June period while Bank of America Corp. and Oxford Economics both see a 12% drop. Goldman Sachs Group Inc. sees a 24% plunge.” Morgan Stanley predicts a 30 percent decline.
In the United States:
- Trump activates National Guard to help in California, New York, and Washington: “Through the Federal Emergency Management Agency, ‘the federal government will be funding 100 percent of the cost of deploying National Guard units to carry out approved missions to stop the virus while those governors remain in command,’ Trump said Sunday at the White House briefing,” per the Post's Samantha Pell.
- Ohio and Louisiana become the latest states to issue stay-at-home orders. They take effect tonight, the Post's Kim Bellware reports.
- Governors and mayors slam federal response: “The growing gulf between the White House and officials on the front lines of the pandemic underscored concerns in cities, states and Congress that Trump does not have a coherent or ready plan to mobilize private and public entities to confront a crisis that could soon push the nation’s health-care system to the brink of collapse,” my colleagues Robert Costa and Aaron Gregg report.
- The virus is boosting almost anything that can be done with minimal human contact: “The result, economists say, is likely to be dramatic losses in local retail and dining options, with millions of jobs disappearing as the biggest and wealthiest companies — especially those that do much of their business online — extend their gains,” my colleagues Craig Timberg, Drew Harwell, Laura Reiley and Abha Bhattarai report. Some experts argue the crisis will change people's habits and the economy in more permanent ways.
- The IRS may need months to get relief to Americans: “In order to put recession-fighting checks into the hands of millions of Americans, [Trump] will rely on a tax agency that has fewer workers, a smaller budget, and the same 1960s-era computer systems it had the last time it was asked to do so,” Reuters's Andy Sullivan reports.
- Airlines say they need a bailout or workers will have be furloughed: “ 'Time is running out,' wrote the CEOs of Southwest, Delta, Alaska, American, United, JetBlue, Hawaiian, UPS Airlines and FedEx, and their lobbying group, Airlines for America, to congressional leaders,” CNBC's Leslie Josephs reports. “U.S. airlines employ close to 750,000 people and large carriers are now shrinking their international networks to the smallest in decades …”
- Wells Fargo asks Fed to lift cap on growth: “The bank approached the Fed about a temporary or permanent lifting of the $1.95 trillion asset cap, which has curbed its growth and profitability since it was imposed in 2018,” Reuters's Rishika Chatterjee reports. The cap was initially imposed during Wells Fargo's account scandal.
- Marriott to furlough thousands of workers: The decision hits "about two-thirds of its 4,000 corporate employees at the company’s Bethesda, Md., headquarters,” the WSJ's Craig Karmin and Esther Fung report. Hilton and Hyatt are making similar moves.
- CEOs face a pivotal moment: “Many CEOs, cut off from their staff for the first time, are ramping up their communication with employees to address the confusion, anxiety and isolation setting in among the rank-and-file,” the WSJ's Chip Cutter and Jennifer Maloney report on how executives are leading their companies through some of the toughest times in recent memory.
- European countries race to avoid becoming the next Italy: “As coronavirus cases surge in the biggest infectious disease crisis to hit European hospitals in a century, officials and health-care workers are scrambling to keep national health systems above water,” my colleagues Loveday Morris, William Booth and Luisa Beck report.
- IOC may postpone Olympics after all: Canada became the first country to announce a boycott of the Summer Olympics amping up the pressure on the International Olympic Committee to figure out the future of the Tokyo games, my colleagues Rick Maese and Des Bieler report.
— Occidental nears settlement with Icahn: “Occidental OXY Petroleum Corp. is nearing a truce with Carl Icahn that would conclude one of the highest-profile corporate clashes of the past year and usher the activist investor into the embattled oil producer’s board room as it seeks to recover from a series of setbacks,” the WSJ's Cara Lombardo and Rebecca Elliott report.
“Andrew Langham and Nicholas Graziano, two lieutenants of the billionaire investor, would receive seats on Occidental’s board under the terms currently being discussed, people familiar with the matter said. Mr. Icahn and the company would also mutually agree on a third, independent director, who is likely to be Herbalife Nutrition Ltd. board member Margarita Paláu-Hernández, some of the people said.”
The curve of new cases in the U.S. shows an alarming trend, via Eurasia Group's Ian Bremmer:
US case trajectory now looks steepest... pic.twitter.com/MUwrtvDtkb— ian bremmer (@ianbremmer) March 23, 2020
Hourly work is collapsing, via economist Adam Tooze:
- Nike and Carnival are among the notable companies reporting their earnings, per Kiplinger
- The Labor Department releases its weekly jobless-claims report
- Lululemon Athletica, GameStop, KB Home and Movado Group are among the notable companies reporting their earnings
- U.S. consumer spending data for February is released
- The University of Michigan’s releases its consumer sentiment survey for March