Zach Carter, senior reporter at The Huffington Post, joins us to explain why the coronavirus bill is an outrageous bipartisan giveaway to corporate power, and whether or not it can be renegotiated in the weeks and months to come.
Listen to our conversation in the audio player. A full transcription of the interview is also listed below.
Keaton Weiss: Hello everyone, welcome one and all, this is the Due Dissidence podcast, and I have the great pleasure of being joined on the phone by Zach Carter. Zach is a senior reporter for the Huffington Post whose piece came out yesterday, it was front page on the Huffington Post for a number of hours. It’s called Democrats are Handing Donald Trump the Keys to the Country. Zach, thank you so much for making the time on what I’m sure is a very busy and chaotic day for you.
**Zach Carter:**Thanks so much for having me, Keaton.
***KW:*Thank you. One of the things I loved about this article is that it puts this kind of information in such a way that people can actually get something from it. People can actually understand what they’re reading. That’s what I said when I emailed you; I said this is informative, it’s also accessible, which really comes in handy for people like me, and most of us laymen who have a hard time following these sorts of topics. But I really loved this piece and I’m so excited to get to talk to you about it.
My first question, before we dive into the specific informative points of the article, is who actually held the cards here in this coronavirus bill negotiation? Because one of the things I took from the article, and I’ll sort of jump quickly to a couple of phrases from the last section of it here. It reads, “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.” As opposed to all this corporate bailout stuff.
What I took from that is that a political party whose main priority was actually the material well-being of ordinary people, you would think would have the upper hand here. Because this is a situation and a crisis in which things actually have to get done. You can’t just fake your way through a crisis like this, you actually have to give people material relief. And so I think one of the things that may be helpful to understand before we dive into the specifics is who really had the upper hand going into this process. Would it be fair to say that the Democrats had a lot more leverage than they used?
**ZC:**Well I think in this particular case, ideology aside, whatever you think the Democratic Party does, or ought to stand for, the fact remains that Donald Trump needed a bill to pass. He needed to get a lot of money out the door. There’s no way you can fight a crisis like this without spending trillions of dollars. I have a biography of John Maynard Keynes coming out in a couple of months, that’s one of the lessons of his life story.
And I think when you have control over one of the chambers of Congress, that gives you the power to set, maybe not all of the agenda, but a great deal of it. And one of the hallmarks of the Democratic Party’s strategy since they took back the House in the 2018 elections has been to seek common ground with the President and with the Republican Senate wherever possible, so as to project a sense of cooperation to the public, on the assumption that this is a politically advantageous message to send.
I think in a crisis, you can argue that putting forward a united front has some value. But ultimately Donald Trump needed a bill, and Nancy Pelosi has power, more power in this situation than Chuck Schumer, but Chuck Schumer also has the filibuster. And individual senators, Bernie Sanders and Elizabeth Warren have the power to affect the progress of the bill, to stall things, to put holds on legislation, to make a case to the public that the approach to the emergency that is the coronavirus crisis should look a certain way. And ultimately, I think in this particular case, they didn’t take advantage of that opportunity.
The Republican Party has been plagued by a lot of scandals lately. It’s not just the raw power dynamics on Capitol Hill that matter, there’s also the sort of legitimacy of the party. The Richard Burr revelations that he appears to have dumped an enormous amount of stock while reassuring the public that the coronavirus stuff was not that big a deal, and the United States was prepared for it. That didn’t look very good. I think the President’s various shifting narrative about the coronavirus, whether it’s a big hoax dreamed up by the Democrats, or what have you. I mean the fact that this is even happening is partly biological, but it’s also political. Other countries that prepared for this are doing much better. Taiwan, Singapore, even South Korea, which had a pretty bad outbreak in the beginning, has really gotten it under control. The United States is making the wrong decisions at every turn. And there’s no sense in which I think the Democratic Party has tried to, or done a good job at least, making that case. Making it clear to the public that this is a political failure as well as a once-in-a-century biological disaster.
I think in general, yes, the Democratic Party could have had a different bill if they had wanted one. They could still. I mean the bill has not passed the House yet. They’re going to vote on it I think tomorrow. So things are shifting quickly in this environment. But I think ultimately Nancy Pelosi and Chuck Schumer are happy with this bill. So I’d be surprised if that happened, but I’ve been surprised before.
***KW:*Right. You mentioned Elizabeth Warren, and I wanted to bring up a few tweets that she put out in response to this bill, because she did vote for it. But before we get into that I would just like to ask you about one section here, because this is a situation where, like I said, once again, this stuff gets so complicated. And this part of it would have slipped entirely by me had I not read your article, and I’m still not 100% clear on it, so I’m wondering if you could shed some more light on this.
Right towards the beginning, it says that “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.”
Can you explain that a little bit further? Because I read a bunch of things that said basically that he should be overseeing $500 billion of this to basically do what he wanted without the public knowing. But it sounds like what you’re saying is that that is a very misleading figure.
**ZC:**It’s a much larger figure. And look, I don’t blame every reporter who reported it at the numbers that are included in the bill, because this is an unusual type of accounting trick, let’s call it. I don’t mean “accounting trick” as a nefarious thing, but this is an unusual provision. Larry Kudlow, one of President Trump’s economic advisors, thinks it’s the most important provision of the bill.
Essentially, the Federal Reserve can do a lot of things that the Treasury can’t, including creating money. Actually the Treasury can create money, but only with the authorization of Congress. The Fed can issue loans, it has existing congressional authorization to do a lot of things that the Treasury can’t so. And so essentially, the Fed is just going to run 10 times as much money as Treasury is going to get from this program. So this money doesn’t just go straight out the door to companies. It capitalizes a much larger fund at the Fed, 10 times the size of initial outlay.
So I think the final legislation, it’s not $425 billion, it’s $454 billion. And so, multiply that times 10, and that’s your final arrangement. And look, I think it’s ultimately going to cost trillions of dollars to address this crisis. The government is going to have to spend like crazy. The fact that there’s a lot of money going out the door is not necessarily bad, the fact that it’s coming from the Fed is not necessarily bad. But the fact that Congress really didn’t put any strings attached to it is, I think, it’s using the model of the 2008 bank bailouts for this coronavirus crisis. And as we saw in 2008 that is a recipe for a lot of abuse, not just within the programs themselves, but it’s also a recipe for a corporate sector that is more aggressive and less accountable once the crisis is over. And also bigger and more concentrated. The biggest banks got bigger in the 2008 crisis, they got bigger after the 2008 crisis. And they got worse. Wells Fargo is sort of the poster child for big bank abuse these days because of the fake accounts scandal and everything else that seems to be going wrong over there. But they’re not the only bank. More respectable banks, quote-unquote, like Goldman Sachs and JPMorgan, just had dozens and dozens of settlements with federal agencies and institutions after the financial crisis, because they learned from this experience that they can get away with just about anything, and they can use these settlements as a sort of cost of doing business.
I’m really worried that with the terms of this bailout being so vague, the restraints on the use of the money being so loose, I mean in the drafts of the legislation I saw, there was not even a limitation on companies just converting the money they get from Treasury and the Fed into dividends and paying their shareholders directly, straight cash payments.
KW: Right, and that’s separate from a stock buyback. They can just pay that out in a dividend as soon as they get it. Is that right?
**ZC:**Right, exactly. There is a provision that says they have to retain 90% of their workforce if they receive this money, but you know, that’s 10% of the workforce being laid off. 10% unemployment is pretty bad.
KW: Yeah, and that’s only for the first 6 months, right? After that, can’t they let anyone go who they want?
ZC: Correct. The argument that you’re starting to see emerge from people who support this bill is that it’s just one bite at the apple; that there will be further legislation down the line. While I hope that’s true, because I think a lot more money is going to be required to treat this crisis than what the government has put forward so far, certainly a different strategy for what to do it, I mean we had global supply chains breaking down, we can’t get access to basic medical supplies at hospitals. The way that this bill was passed does not give lawmakers who want a more responsible package more leverage to get one the next time around. It shows they can be rolled, and be pushed into legislation that I think is ultimately very irresponsible. And I include Warren and Sanders in that camp. Both of them supported this bill and neither of them had to.
***KW:*I just want to talk about the stock buybacks for a quick second here. Because you do write in here that the restrictions on those buybacks are too temporary to be significant. And this was such an obscene thing that happened in the wake of 2008. You linked to a separate article that you had written that the big banks had bought back $157.4 billion of their own stock, JPMorgan alone $25.7 billion. For people who don’t know anything about what a stock buyback is, it’s basically when you buy your own stock off the market and use that to inflate the value of your company, which enriches your shareholders. What restrictions on these buybacks do you know are in this bill, and how temporary are they?
**ZC:**You can’t do buybacks for the life of the loan. Most of this aid is going to be structured as interest free loans from Treasury to these institutions. And so as long as that loan remains un-repaid, you can’t do stock buybacks. But this is not a particularly inspiring constraint. I mean, you could get your bailout, pay it back in a year, and then buy back $20 billion worth of stock the next, if you want. We need a longterm restriction on the ability to convert your company into cash for its shareholders if the bailout is going to mean anything. You want this money to go towards real corporate investment; either better wages for workers, or upgrades on equipment, or more research and development. You want the corporation to serve a public function, and you want the bailout money to go to something productive. You don’t want it just turned into cash that goes out the door to rich people. To be clear, stock holders are, for the most part, wealthy people. Only about 20%, I think 22%, according to this research from New York University economists, own more than $25,000 worth of stock. That was before the stock market crashed. So I think that number is substantially lower. That includes money through 401k’s and pension accounts, and all of the sort of indirect ways that people can own stock. So fundamentally, stockholders, we’re talking about wealthy people. And it’s kind of a strange thing in the way that the Democratic Party and the Republican leadership approached this bill.
It includes this one-time $1,200 payment to most households. But the payment is means tested. So it gets smaller if you make $75,000 a year, and it disappears entirely for you if you make $100,000 a year. And we can argue about whether that’s good or bad policy. In a crisis like this, I don’t think it’s a really big deal if people who make $100,000 are spending a little bit more money. That doesn’t seem like a huge problem to me. But they went way out of their way to make sure that this money was “targeted.” They did not seem to think that that applied to the money they were turning over to the corporate sector. Most of that money is going to turn into money for rich people. They put no substantive restrictions on how that money can end up in the hands of the very wealthy.
I think part of that is because smart people who were looking through the bill wanted it to look that way, and part of it is because people in the Democratic Party especially don’t understand how this works, and think that they have to support corporations in a crisis. And there’s good reason to support corporations in a crisis, but not corporate shareholders. There’s a distinction between the institution and the public purpose that it serves, and the people who receive income flows from that public purpose.
***KW:*There also seems to be just this general aversion to universality as a concept. This is one of the things that Bernie Sanders sort of ran up against in a lot of these debates where people are saying “why should we send millionaires’ kids to public college for free? Why shouldn’t we means test it?” There’s probably a million reasons for why that is, but there does seem to be this preoccupation with technocracy, and adding nuance to these things where there need not be, and I think part of that comes from a certain fear that if we start implementing these universal programs, or universal payouts, that that will lead to a restructuring of the economic system that the Democrats are not entirely comfortable with.
**ZC:**I mean, I can’t argue about what’s deep down in the ideological hearts of every member of Congress. Democrats are different, there are left wing Democrats and there are very conservative Democrats. But the power of ideology on Capitol Hill is very real. Democrats have just done things this way for a very long time. They think that it’s the responsible way to govern, and they believe that deeply. When Nancy Pelosi talks about pay-go rules and not increasing the budget deficit with most legislation, she takes that very seriously. She thinks it’s really important not to increase the deficit.
That’s not really where most liberal economists are right now. Even pretty run-of-the-mill Rubinites, people like Jason Furman who’s done a lot of work with Larry Summers very recently, don’t think that focusing on the deficit is that big a deal. And in fact in the early talks of this bill, the big disputes on the House side were not between Nancy Pelosi and the left, but Nancy Pelosi and Jason Furman, who said that her focusing on making sure that paid sick leave was targeted for particular people and wasn’t going to be a big benefit that blew up the deficit, was wrongheaded. I think it’s just a deeply ingrained habit that people who have been governing a long time become steeped in. And it’s very hard to get them to change after a certain point in time.
***KW:*I do want to talk a little bit about these Tweets that Warren put out, because it points to something you mentioned earlier. Late last night she put out a small thread here. I won’t read the whole thing, but she said, “We face a public health crisis that threatens to bring another Great Depression. Families, hospitals and small businesses need immediate aid. This is not the bill I wanted, but its immediate investments are vital. They are also insufficient. We will need to do more, and soon.” Then, a couple of tweets later, “I won’t block vital aid, but tomorrow we get back up and continue the fight. And I make you this promise: I will spend every waking moment watching the Trump White House and do everything I can to hold it accountable for how it spends this $450 billion taxpayer fund.”
And that raises the question of, and I guess these two things are somewhat related. Because if a one-time check of $1,200 per adult is insufficient, then there’s probably going to need to be more payments. And will those further payments provide opportunities to renegotiate some of what is in this bill? Or, will further payments be able to pass without this kind of battle? How does that play out? How likely is it that they get a chance in the not too distant future to rehash some of this stuff?
**ZC:**Well it’s always really hard to predict the future, especially when things are as volatile as they are right now with the coronavirus crisis. I honestly don’t know what the Democratic Party or what Donald Trump is going to support once we start seeing thousands of deaths a day from this. It’s just really hard to know. I mean, both parties are doing things that I would not have expected a month ago, for instance.
But I have a lot of respect for Elizabeth Warren. I’ve covered her for about 12 years. I think she’s probably the most prominent critic in the Democratic Party of the 2008-2009 bailouts. I think she’s certainly the most respected expert on financial policy on the progressive left, at least in Washington. But I think she’s just wrong about this. I think she’s right about the lay of the land, but I think the idea that voting for this even though she knows it’s not a good bill because she wants these small payments to go out to people, I mean she’s correct that there’s a slightly more generous unemployment benefit that’s going out. It’s like $600 more per month on average. That’s not bad, that’s a decent thing. And these checks are not terrible. There’s a little bit of money for hospitals. But the idea that she’s got more leverage next time around I just don’t think is right.
And the same thing is true for Bernie Sanders, who I also have a lot of respect for. I think he’s run two very good presidential campaigns. I think the two of them are both very clear moral communicators. But in this case, I don’t think they were terribly good legislative strategists.
***KW:*What did Bernie get into this bill? I’ve been seeing some things online over the course of the past few hours saying he basically got the minimum payment up to $1,200 from $600 to some of the poorer families. Do you have any more up to date info on that? I was a little unclear on that.
**ZC:**My understanding, subject to change with additional reporting, is that Sanders is responsible for expanding the scope of the unemployment benefit. There are a whole bunch of workers who don’t qualify for unemployment insurance if they get laid off. If you’re a tipped worker, for instance, you make like $2 an hour as a waiter, but you actually make 15 bucks because you get all these tips, you don’t qualify for unemployment insurance. That’s changed. So there’s a broader scope of people who will be getting benefits as a result of being laid off, and that is a good thing. That is a real change for the better that’s in the bill. But ultimately, $4.5 trillion for large corporations, I think he could have gotten a higher price tag.
Because if you were going to accept that as the basis for the negotiations, there’s no real reason why we have to tag any of these social welfare, social support payments, to a giant corporate bailout. I mean, corporations are going to need support, but Congress has time for them. The Federal Reserve already has these enormous facilities that are open providing direct support for corporations, which is why people like the CEO of Boeing were saying you know, “if we don’t like the terms, we’ll walk away and we’ll just get money somewhere else.” They won’t be able to get money somewhere else forever, but Congress has time.
***KW:*Right, they’re not in an emergency situation the way that ordinary people are.
***KW:*Because I was watching a clip where Lindsay Graham was talking to Sean Hannity about how Bernie basically threatened to hold up the bill because Bernie wants people to make more money on unemployment than at their job, and that was something that the GOP was having a hard time with, and I was seeing a lot of stuff come out about that.
**ZC:**To be clear, Bernie probably does want people to make more money unemployment than they make at their job, because that puts more pressure on employers to pay more. I don’t think that’s an unreasonable characterization of his position.
***KW:*Oh sure. He was saying that if you make $11-12 an hour, that he still wants you to get what, $600 a week? That’s more than $11-12 per hour. So that’s totally right.
My last question for you is one that I’d be really interested to get your take on. Because one of the real, good insights of this article is that, right in the last section here which is called “A Warning From 2008” is “The financial crisis of 2008 and the bank bailouts it inspired did long-term damage to the American social fabric.” And then I will skip down to the next paragraph, “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.”
I think that’s totally true. And it may be more noticeable on the Bernie Sanders side, because he more directly, obviously, and more honestly, confronts a lot of those issues. But even on the Trump side, when you really look at the core of what the Trump base, their core grievance, or certainly a fair amount of them, was that there’s a different set of rules for people with money and power. And so I think you’re totally right that this has really disrupted the social fabric in a real way.
My question is now that Donald Trump is the president, where does that go next? Where does that energy go if a similar type of situation happens right now?
**ZC:**Yeah, well I think a similar situation is happening. I have a really hard time predicting it. I think researching, I spent 4 years working on this Keynes book, most of his life is dedicated to moments of crisis like this, whether it’s WWI, the post-WWI inflation, WWII, the Great Depression, what we find in all of these periods is that things happen that people don’t expect. And that that tends to, Keynes believes, inspire people to become more sympathetic to authoritarian ideology. And so if you want to keep people away from authoritarian thinking, you need to find ways to make sure they’re taken care of, and feel like society, and the rules of the game for society, apply to everyone. That they’re part of a society. That there’s not just a system of power that’s being applied to them unfairly. A lot of the look-back on 2016 is focused on the absolute income levels of people and the fact that a lot of Trump supporters make pretty decent amounts of money, and that’s all true. They’re Republicans. Republicans tend to be wealthier.
The thing that I think that kind of analysis misses is that people have a certain feeling of participation in society. And if you take that away, even if you don’t totally pound them into the dust, and make them starve to death, or put them on the verge of starvation, they still feel like they got a real deal. And it makes them very angry, understandably so. I mean, this is the United States, in particular, we’re supposed to be a democracy. And when people are denied that, it’s not a fun feeling. And obviously, there are groups in the United States who are denied that for long periods of time. I don’t think they’re very happy about that. And so I think it’s a very volatile situation.
I don’t know if people blame the President or not. Right now, it looks like his approval ratings are at an all-time high. That could change. It could go higher. It could go lower. I think the Democratic Party right now, is not making a case for their own governance. They’re not drawing contrasts with the President in ways that are resonating with people. For whatever reason, people sort of look at this as a crisis where it’s some sort of foreign invasion, or 9/11, where something bad has happened to the United States and Trump is leading us out of it, rather than something that is just a complete political calamity caused by the Trump administration’s incompetence, largely. Also a lot of underlying fragilities in the economy. If we didn’t have supply chains that made it impossible to manufacture medical supplies in the United States, this emergency would look a lot different.
All of that said, honestly I don’t know. I just don’t know, but I’m not optimistic.
***KW:*Yeah, I think a lot of it comes back to something we said about 15 minutes ago, which is that they’re just not comfortable thinking outside the box in a way that would just simplify everything. There’s not a lot of simplicity in their messaging here. What we need to do now is get money to ordinary people. And the reluctance to just sort of distill that and deliver that, I think makes it difficult for them to draw contrast with Donald Trump. I mean, the right wing was putting out that the Democrats were holding up checks. Their messaging was that we’re ready to send you checks, and the Democrats don’t want to.
**ZC:**And part of it was true!
**ZC:**That wasn’t entirely false. I just think there’s a certain way of legislating that these people grew up doing in the 80’s and 90’s. You can look at what Pelosi has proposed for the next round of legislation already. She has floated better paid sick leave, improved worker safety regulations so that people who are on the job are not exposed to terrible risks from the coronavirus, that sort of thing. That stuff’s not bad, right? But it’s just sort of taking what’s on the books and beefing it up a little bit. There’s no thought that the United States needs to take some role in how medical supplies are produced and distributed and delivered, that the government has a role to play there. It’s all just very, I hesitate to use the word “technocratic,” because I feel you can use that word to apply to almost anything, and there was technocratic stuff that does matter.
***KW:*Sure, but I think the way we think of “technocratic” is that we’re basically sort of tweaking the dials within certain parameters to get certain results that are a little bit better or a little bit worse. I think, in that sense, you can use the word, as opposed to like, having a new New Deal. Right? I mean, these crises provide opportunities to rethink the way we do a lot of things, and I think there’a reluctance to go that route.
**ZC:**I think that’s absolutely right. You need some sort of TVAS response for medical supplies. The medical infrastructure in New York is already breaking. I mean, they have mobile morgues set up.
***KW:*Yeah, it’s unbelievable. It’s horrible.
**ZC:**Yes, it’s horrible. And that’s coming to every city, potentially. Maybe not, maybe we’ll contain this. It would be nice. But I think you have to prepare for the possibility that that’s coming to every city eventually, and that if you don’t prepare for that, it’s enormously reckless. And so far, we’re not.
Moving money around doesn’t solve that problem. Even though getting checks out the door to people is important, you can’t solve that problem just by moving money around. You have to do organization, you have to get involved in production, you have to manage. It’s hard.
***KW:*Right. And if you don’t get that infrastructure in place, they talked about how South Korea was basically able to get their situation under control, not by forced quarantines, but by doing a very robust testing operation where they tested over 5,000 people per million.
And the other way to get it under control is the way China did it, which is basically, you have to stay home. That’s a more authoritarian route. But you have to do one or the other.
**ZC:**Look, the South Korean example should be a very comforting example. It just shows that you can definitely address this problem, even after it comes to you, without resorting to authoritarian measures. You just have to have a competent administration, and I don’t mean like the Trump administration, I mean literally, competent administrative capacities to get tests out the door, and get people tested. And that is clearly just not happening right now. And I’m not optimistic that it will.
***KW:*Well we will stay tuned I suppose. I hate to end on such a somber note. Why don’t you talk a little bit about the book that you’re writing. It’s available for pre-order now?
**ZC:**Sure. The book is finished. It comes out May 19. It’s a biography of John Maynard Keynes. It looks into him as a political thinker. I think most people, including myself, come into contact with him through an Econ-101 class, where they learn that he’s the guy who suggests large budget deficits in a recession to help the economy recover. And that’s all true, but it’s a very narrow aspect of his thought. I think he’s a much broader and much more interesting philosophical thinker who has a vision of a good life that, certainly by the end of his career, is much more radical than I think the economics profession portrays him.
Just to give you an example, probably the most important political achievement of his life was helping pass the Beveridge plan in the UK, which is of course where the British National Health Service comes from. He was really the financial architect of socializing British medicine. That was every bit as important to his economic and social project as deficit spending, and I don’t think that’s something that is broadly appreciated.
***KW:*Like you just said, that is available for pre-order now. The name of the book is The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. Zach Carter, thank you so much for making the time.