The emergency coronavirus legislation that the Senate agreed to on Tuesday can only be described as an outrage. It is not an economic rescue package, but a sentence of unprecedented economic inequality and corporate control over our politics that will resonate for a generation.
It represents a transfer of wealth and power to the super rich from the rest of us, with the support of both political parties ― a damning statement about the condition of American democracy.
Final text of the bill has not been released, but according to a legislative draft, the new law would establish a $4.5 trillion corporate bailout fund overseen by Treasury Secretary Steve Mnuchin, with few substantive constraints. Some outlets are reporting this as a $500 billion fund, but $425 billion of that can be leveraged 10 times over by the Federal Reserve, resulting in a multi-trillion-dollar program.
The bill permits bailed out companies to lay off up to 10% of their workforce over the next six months, with no restrictions thereafter. Mnuchin would have authority to waive any upside for the public in its new investments, and the bill’s restrictions on stock buybacks at bailed-out firms are too temporary to be significant. Bailed out companies could even pay dividends to their shareholders.
Bailout money will flow to the shareholders of large corporations, otherwise known as rich people. The oversight terms that Democrats secured are purely cosmetic, replicating the toothless provisions of the 2008 bank bailout that enabled watchdogs to report abuse but not actually prevent or rectify it.
“If you give vast amounts of public money to a single person with no real accountability, you won’t like what happens next,” Damon Silvers, the deputy chair of the oversight panel for the bank bailout, wrote on Tuesday.
In exchange for this takeover, Democrats got four months of more generous unemployment benefits for the millions who will be laid off and a one-time check of $1,200 per adult, eliminating a Republican restriction that would have limited poor people to just $600 and phasing out payments for six-figure incomes. These are not bad provisions, but they pale in comparison to the handout offered to the rich.
“$1,200 isn’t enough,” the Economic Security Project, a liberal think tank, tweeted on Wednesday. By agreeing to the deal, Senate Democrats in effect accept a horrendous future in exchange for a somewhat less burdensome present.
“It is a panicked and reckless legislative response,” Sarah Miller, executive director of the American Economic Liberties Project, an anti-monopoly advocacy group, said in a statement on Wednesday. It’s one that “will repeat most of the mistakes made in the 2008-2010 bailouts” and “fundamentally transform the American economy,” she added.
There is, in fact, an economic emergency right now — just not for the super rich or massive conglomerates. On Monday, the Federal Reserve announced essentially unlimited support for the banking sector and, for the first time, used its authority to directly finance corporate debt. Large corporations can get money, as Boeing CEO David Calhoun made clear on Tuesday when he said his company would “just look at all the other options, and we’ve got plenty of them,” if Congress were to demand an equity stake in the companies it assists. Bailouts will eventually be necessary, but Congress has plenty of time to craft serious programs designed to save industry, not merely people who own stock in industry.
Unnecessary Corporate Welfare
Working people, by contrast, do not have time to wait. The coronavirus layoffs have already begun, and when official numbers begin rolling in on Thursday, they will be shocking. Democrats and Republicans have essentially decided to hold a pittance of relief for the people hit hardest hostage to the most reckless and, at the moment, unnecessary corporate welfare program ever conceived.
Senate Majority Leader Mitch McConnell (R-Ky.) boasted that the package is “a wartime level of investment into our nation.” But nothing about the legislation resembles the way a nation prepares for an ambitious military operation. The legislation provides nothing of substance to address the coronavirus pandemic itself. New York Gov. Andrew Cuomo (D) has already said the package will do next to nothing to assuage the disaster unfolding in his state. It mobilizes no new resources, organizes no production, improves no medical supply delivery and trains no new nurses. Instead, it moves an enormous amount of money around and puts the Trump administration in charge of its movement.
The dissonance between the actions of Senate Democrats today and those from just a few short months ago is mortifying. In December, House Democrats voted to impeach President Donald Trump for withholding congressionally mandated aid to a national ally, arguing persuasively that Trump’s actions were designed to undermine his political rival for the presidency, Joe Biden. Democrats literally tried to remove Trump from office for abusing the public purse for personal political gain. On Wednesday, Senate Minority Leader Chuck Schumer (D-N.Y.) and every Senate Democrat were preparing to authorize more than $4 trillion for Trump’s top lieutenants to pass around.
For too long, Democrats have ignored the suffering and dysfunction caused by structural problems with the American economy, trusting that social welfare payments will be sufficient to counter the power disparity between the rich and the rest of us. They are wrong to accept such a bargain now.
We live in an era in which the wealthy and the well-connected dominate almost every aspect of our society. The rich not only live different lives than the rest of us ― they live significantly longer lives, a trend that is likely to be exacerbated as the medical system cracks under the pressure of the incoming coronavirus caseloads and as working people lose access to basic care.
A Warning From 2008
The financial crisis of 2008 and the bank bailouts it inspired did long-term damage to the American social fabric. The financial sector essentially became a criminal syndicate, as fraud settlements became a simple cost of doing business for bailed-out banks like Wells Fargo. The government’s unheard-of largesse for wealthy bankers made an infuriating contrast with the unemployment lines and foreclosure signs that became commonplace across the country, and our politics were transformed as a result.
The campaigns of both Donald Trump and Sen. Bernie Sanders (I-Vt.) largely grew out of the anger and resentment that the bank bailouts and the outrageous inequality of both the crash and the recovery inspired.
We are about to replay this nightmare with a more frightening cast of demons. The small business relief the Senate has agreed to authorize on Wednesday will be too little to stem the tide of failures, and will arrive too late to help too many firms that will go under, while the biggest companies in America feast on the fruits of the bailout.
“We will be lucky if most small businesses see any assistance in less than two months,” law professors Adam Levitin and Satyam Khanna wrote in a New York Times op-ed on Tuesday. “That is time they — and their employees — do not have.” As with the bank bailouts, big companies will grow larger and more profitable and demand further control over the way what we still call a democracy is organized.
But these horrors will only be realized if the House of Representatives approves this monstrosity. The House voted down the first bank bailout bill in 2008. It could do so again, and demand instead a simple relief bill for people who really need it ― working families ― and emergency measures to actually fight the coronavirus pandemic.
Democrats control the House. They can pass any bill they like and dare Senate Republicans and the president to oppose a serious bill for a serious problem.
Or they can rubber-stamp the Senate bill and help Donald Trump foreclose on the next generation of American democracy.
Zach Carter is the author of “The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes,” available now for pre-order from Random House.