Work lists

Delusions.  

New Orleans’ tourism-dependent economy will remain shut down until at least June, business leaders said Thursday, with no one able to say with certainty when it will fully reopen.

“Based on the fact that the governor has extended the stay in place order until April 30 and we are nowhere near our peak [in infections] in New Orleans, it will be well into May and probably June before the stay-in-place order is released and we start to go back out,” said Stephen Perry, president and CEO of New Orleans & Co., which promotes tourism. “For tourists, we’re not anticipating anything until August or September. Our industry is just watching carefully and making sure we watch every health protocol.”

Ha ha, what?  Do they mean June of next year?  Because really even that seems optimistic. But when you are Stephen Perry and your business is basically marketing, you are trained to believe that real wealth is created entirely through perception management.  In a way it's hard to blame Perry for thinking that. It's certainly made him rich, anyway.  But it's also a chronically blinkered way of understanding what's going on out there. And it's why New Orleans's tourism ownership class should be the last people anyone turns to for policy advice right now. (Too late, I know.)

What will it take to "restart the economy?" The longer we go without providing the millions of suddenly jobless Americans a means of support during the shut down, the harder it will be.  There is a plan to do this but Congress left it sitting on the shelf before they adjourned for (at least) the rest of April. In the meantime we'll just keep handing all the money we print over to large corporations and  investment banks with little or no accountability as to what they do with it.

Neither Fed nor Treasury officials would comment on the record. But the Fed quietly began to signal its discomfort with onerous conditions on Monday when it unveiled the terms of two new corporate credit programs that are likely to play a significant role in the bailout. One had no restrictions on how borrowers can use the money, while the other had extremely mild limits on stock buybacks and dividends, and only for firms that defer their loan payments.

Those two programs represent an extraordinary escalation in fighting the crisis, empowering the Fed for the first time to buy investment-grade corporate bonds and financial instruments backed by corporate bonds, with the potential to expand to even riskier corporate debt once the Treasury injects some bailout funds as a backstop.

But while the programs don’t look like the “Trump slush fund” some Democrats feared, they don’t look like the worker-first initiatives some Democrats promised. Unlike the CARE Act’s separate $360 billion small business bailout, they impose no requirements that the beneficiaries use the money to retain their employees. And unlike the 2008 bank bailout, they impose no limits on executive pay.

It's important to understand that this favoritism toward Wall Street is a deliberate policy choice. We could be doing things very differently.  The same "money printing" process the Fed employs now to float trillions of dollars out to banks could be used to put cash in the hands of ordinary Americans who very badly need it right now.  Economist Stephanie Kelton briefly explained this in a column for the Intercept last week.

Think back to 2019, when the political conversation centered around the Democratic presidential primaries and whether we could afford the kinds of ambitious spending proposals being pushed by Sanders or Warren. Neither of them admitted it at the time, but Congress could have canceled student loan debt, lowered Medicare’s eligibility age to zero, or paid to make public colleges and universities tuition-free simply by writing a bill that sent one set of instructions to the Fed. Spending or not spending money is always a political choice. 

That’s not to say that Congress can authorize multitrillion-dollar spending bills left and right without ever building in offsets to subtract dollars out of the economy. There are limits.

But the limits aren’t financial. Uncle Sam can’t run out of dollars. The U.S. government is the issuer of our currency — the U.S. dollar — which means that, unlike Greece, it can never find itself in a situation in which it has bills coming due that it can’t afford to pay. Remember, Greece gave up its sovereign currency — the drachma — and started borrowing in what is effectively a foreign currency — the euro — when it joined the Economic and Monetary Union in 2001. That’s why it (and other) countries in the eurozone experienced a debt crisis and countries like Japan, the U.K. and the U.S. did not. 

So what are the limits for a currency-issuing government like the United States? The answer is inflation. The government can’t run out of money, but it can run out of things to buy (including labor). We are constrained by our real resources — i.e. our technical know-how and the available supply of workers, factories, machines, raw materials, and so on. As long as the economy isn’t already operating at full capacity, then it is reasonable for Congress to send just one set of instructions to the Fed.

This is the point that gives lie to every conservative and neoliberal trope about "how you pay for it." What we're really bounded by is how much the economy can produce and for whom. What Kelton is saying there is we can keep printing money until we produce enough stuff to match it. The money gun is real. It's just that the choices we make about where to target it are meant to prop up the status quo rather than benefit most Americans.

Instead the biggest cash infusion into the economy will support destructive activities.  Here's how that could end up affecting the New Orleans economy in June whenever it is ready to go back to business. 

In Louisiana, four dozen hotels — ranging from some of the largest, well-known brand names in New Orleans, like the Hyatt Regency, to budget roadside inns in Lake Charles — are financed by a total of $1.1 billion of the kind of loans that can make them the potential prey for so-called vulture investors, who specialize in targeting businesses during troubled times.

The loans, called commercial mortgage-backed securities, or CMBS, differ from traditional bank mortgages in that they are pooled together, converted into bonds and sold to investors, such as hedge funds or pension managers.

That means that instead of dealing with a traditional bank when there are payment problems, hotel owners with these loans must answer to "special servicers" who represent only the interest of the bond investors.

What this means is several New Orleans hotels could find themselves vulnerable to private equity firms who specialize in carving up companies with financial vulnerability, selling off their assets, and putting their employees out of work. It's similar to what happened to Bayou Steel last year. The result is more workers are left to fend for themselves.

No worries, though. Here comes Bill Cassidy to help. In this Wall Street Journal op-ed Cassidy (along with Christopher Mores) plans to get everyone back to work sooner than later by putting them on a list.

To restart the economy, the government needs to set up coronavirus-immunity registries. At the same time, widespread testing is necessary to document immunity in those who haven’t fallen sick. A recent report from China found that 100% of patients tested two weeks after symptoms cleared had antibodies for the coronavirus. Recovering from a known coronavirus infection or having a positive antibody test is likely to indicate immunity lasting for at least some time. Those who so demonstrate that they are immune can be allowed to return to work. The whole community is freer when herd immunity is established.

Dr. Cassidy is well aware that the science on "herd immunity" to COVID 19 still has a long way to go. One "recent study from China" doesn't get you there. "Immunity lasting for at least some time" is vague, also. At this point we still don't know how long any acquired immunity lasts.  But the "allowed to return to work" is the real kicker. What he means is "compelled."

And that is what all of these policy choices taken together add up to. 10 million newly unemployed Americans' lives are meant to be kept as precarious as possible so that there will be plenty of compliant labor available when we get "back to business." We run the big money printer for Wall Street firms. We attach labyrinthine thickets of red tape to small business loans. And we give working people $1200 maybe 5 months from now.  But, hey, at least we'll have a list of who is "allowed" to work. That's real progress.