This is one of those moments when it’s worth asking: What is an economy for?
It doesn’t exist for the benefit of stock market participants, nor does it exist to fatten the coffers of corporations. Since at least the 1980s, the US has equated economic health with a rising market and ever-increasing corporate profits. They are necessary ingredients for a healthy economy, but they are ultimately just a means to an end. The end is the welfare of the citizens. Economies exist to allow workers and their families to become more prosperous. That’s what too many Americans had forgotten. Until now.
The coronavirus is making a hash of the US economy, just as it is in the rest of the world. Virtually every event that requires an audience has been canceled: theater, sports, conferences, even political rallies. The cruise-ship industry is in shambles. The International Air Transport Association estimates that the airline industry will lose $63 billion to $113 billion in worldwide revenue. Hundreds of universities have sent students home, a crushing blow to the surrounding stores and restaurants that depend on student traffic for their existence. Bars and restaurants have been ordered closed in many big cities. There are an almost unlimited number of other examples of economic activity either slowing drastically or coming to a halt.
But the coronavirus also seems to have awakened society to what truly matters. Yes, many headlines trumpet the market’s scary crash, but I don’t hear people obsessing about it the way they did after the dot-com bubble burst or Lehman Brothers collapsed in 2008. For once, “shareholder value” is a secondary concern. And much to my surprise, corporations have not responded to the downturn the way they normally do during hard times: with rounds of layoffs. They seem to understand that the most important thing they can do to help the country get through the crisis is to keep putting money into the pockets of their employees — even if they don’t have much to do.
Thus, hard-hit airline companies, while instituting hiring freezes — and asking for a bailout — have continued to pay employees. Microsoft and other big tech companies have vowed to keep paying vendors that employ the workers who clean their offices and supply their cafeterias. The Walt Disney Co. is keeping its theme park employees on the payroll. On Friday, USA Today reported that US companies have cut 893 jobs because of the coronavirus. That is a remarkably small number.
Chief executive officers “are thinking about making sure they come out of this with a good reputation,” Lloyd Blankfein, the former CEO of Goldman Sachs Group Inc., told the Wall Street Journal. “You want to be perceived as someone who does the right thing.”
Blankfein went on to say that companies whose survival is threatened by the virus might ultimately have no choice but to resort to layoffs. But for most big companies in the US, that’s not an issue. They’ve booked tremendous profits over the past decade; who cares if they use some of it — or their credit lines, as the Boeing Co. recently did — to keep people employed?
(Here’s a thought: how about if the Securities and Exchange Commission cancels the April quarterly earnings season? The numbers will be so aberrational as to be completely meaningless.)
That’s the good news. The bad news is that there are an enormous number of low-wage, part-time workers in the country. Daniel Alpert, the founding partner of Westwood Capital LLC and a columnist with Business Insider, calculates that they number more than 31.5 million, making up 30% of the workforce.
“It stands to reason that many workers in these positions will be laid off for as long as potential customers quarantine, or will be unable to work if they themselves get sick,” Alpert wrote recently. Even if they are not laid off, their hours will undoubtedly be reduced, making their hand-to-mouth existence even more precarious.
Alpert concludes that “the low quality of most of the jobs created in the US since the post-recession years screams out for far greater government involvement and proactivity.”
Which raises the second piece of bad news: Even as many big corporations have stepped up, the institution with the greatest resources, the federal government has not. President Donald Trump has talked about seeking bailouts for the cruise-ship industry, the airlines and the hotel industry, among others. But when congressional Democrats wrote a bill aimed at helping citizens, Trump denounced it, saying that it was full of “goodies that they haven’t been able to get for 25 years.”
Although House Speaker Nancy Pelosi was able to get the White House to sign on to a compromise bill, it includes an incredible demand made by the Republicans. Only companies with 500 or fewer employees — that is, companies without much political influence — would be required to give their workers paid sick leave. All the big US companies, which collectively employ 54% of workers but do have political clout, would be exempt. This is terrible public policy. But it is typical of the administration’s callous attitude toward its citizens.
There was one recent moment that crystalized this attitude: the Katie Porter moment last Wednesday. You may have seen it on Twitter.
Porter, a freshman Democrat from Orange County, Calif., is a former law professor who has quickly gained a reputation as a fierce questioner of administration witnesses. During a congressional hearing, she first grilled Robert Kadlec, an assistant secretary at the Department of Health and Human Services, about how much a coronavirus test was likely to cost. She knew the answer better than he did: a minimum of $1,331.
Then she turned her attention to Robert Redfield, the director of the Centers for Disease Control and Prevention, asking him whether he knew what was in “42 CFR 71.30”— “the code of federal regulations that applies to the CDC,” she explained. After Redfield stumbled around a bit, she told him that it gave the agency the authority to make coronavirus testing free for all Americans. She asked him if he would commit to doing so.
Unbelievably, he hedged. She asked again. He hedged again. She showed him a letter she and other representatives had sent asking this question, which he had never responded to. And still he hedged!
“Our intent is to make sure that every American gets the care and treatment they need at this time for this major epidemic,” he said — still avoiding the question of how it would be paid for. Finally, he said yes, though it was clear he felt he’d been badgered into it. In truth, we won’t really know the answer until widespread testing becomes available. I’m not hopeful.
As I’ve mentioned before, the great failing of the government’s response to the financial crisis is that it put the needs of companies over the needs of people. So far, at least, the tragedy of this economic crisis is that while companies seem to have learned that lesson, the Trump administration hasn’t. That’s unlikely to change anytime soon.
Bloomberg
