Cromwell

Unusually, our small restaurant owner has the sympathy of members of both parties. Can he count on effective help from either one?

The GOP will offer him the usual cocktail of tax cuts and deregulation. The root of his problem, however, is public confidence in the health care system; the GOP formula isn’t responsive to that. The elimination of health and safety regulations is the last thing he wants right now. He doesn’t need faster depreciation (he already has all of the equipment he needs), capital gains are irrelevant to him, and income tax cuts don’t help when you’re not making any money. A payroll tax cut would reduce his expenses somewhat, but it won’t cause him to rehire employees he doesn’t need, and blowing a hole in the finances of the safety net is not sustainable for any length of time. The GOP approach, in short, won’t keep him in business indefinitely.

What about the Democrats? They have no issue with direct subsidies to worthy businesses, which is what he really needs. Unfortunately, his restaurant is not a public utility, and it isn’t too big to fail. There are tens of thousands of restaurants just like his, many of which would go out of business even under normal circumstances; can the government really distinguish between his successful operation and countless others that look, on paper, just like it? Probably not, so it is unlikely it will try.

There is no good answer to this problem. If he can’t adjust on his own, he’s probably going to go under. That’s the harsh reality of the situation. The good news, to the extent that there is any, is that there will be plenty of people to pick up the pieces when public confidence improves. When will that happen? When we have a vaccine, or a much more rigorous regime of testing and isolation than is contemplated today.

Imagine that you are the owner of a moderately successful restaurant. You poured all of your life savings into it. It’s really hard work, with a small profit margin, but it was your dream, and it means the world to you. It’s not just a job; your customers and your workers are practically your family.

Then the virus came, and you had to shut down. You applied for and received a loan from the feds to pay your rent and keep your workers on the payroll during the lockdown. It is becoming increasingly likely, however, that nothing like normal operations will be possible for months, and maybe even years, to come. The current government money is going to dry up, and you can’t survive with your previous operational model on 25 or even 50 percent capacity.

What do you do? Can you effectively keep the business in a sort of comatose state indefinitely until the vaccine arrives? Alternatively, can you change your business model so that you can actually make money at a lower capacity? What would that mean for your workers? Finally, is it realistic to expect the government to help you out in the long run?

The answers to the first four questions will, to a large extent, dictate the direction of the economy, and the outcome of the election. I will address the last one in my next post.

In the nineties, Donald Trump was in desperate financial trouble. He survived by persuading bankers that his problems were really theirs, and by offloading his casino liabilities on to foolish, unsuspecting investors. It wasn’t very edifying, but it worked, and it convinced him that he was invincible. His triumph, against the odds and the polls, over Clinton in 2016 clinched the deal.

His belief in his ultimate victory, as I’ve noted before, is the best guarantee that the election will go forward; if he thought he would lose, he would try and cancel it. But is he destined to pull off another magic act, as he undoubtedly thinks? Is 2020 just the second coming of 2016?

Not necessarily. The key to being a successful con man is to rip people off one time and move on. He can’t do that in 2020. He can blame Obama, and the Chinese, and politically correct liberals, and the socialists, and the illegal immigrants, and the Europeans, and the Iranians, and the Ukrainians, and the deep state, and the MSM, and left-wing judges, and everyone else except himself, Putin, and his trusty base, but the record is what it is, and for the first time, he will have to run on it, not away from it.

Without much discussion or even thought, we seem to have arrived at a middle course: fewer restrictions than the Chinese; less testing than the Koreans; more distancing than the Swedes. The result has been a new equilibrium, with a high number of deaths, but not so high as to swamp our medical resources, and an economy that is running at about 75 percent, due to continued social distancing.

The Phase One regulations are consistent with the new equilibrium, but they won’t last; the momentum to open up appears to be irresistible regardless of the facts on the ground, and Trump will insist in any event. So what happens next? What level of deaths and economic activity do we have when distancing is no longer mandated, but is only self-imposed?

We don’t have anything like the testing regime that we logically need for future phases, so there are two possibilities, neither of which is very appealing. If animal spirits return and we all decide to be Trump’s “warriors,” the death toll will spike again. If large segments of the population remain cautious and refuse to congregate in large groups even in the absence of distancing regulations, the economy will continue to limp along at roughly its current rate. My bet is on the second scenario, but neither is good news for the Trump re-election campaign.

The typical reactionary indignantly denies that he is a bigot. He will tell you that he can’t stand anyone who refuses to work and lounges in the hammock of dependency at his expense. As it happens, most of these lazy slackers picking his pocket and demanding cuts in line are minorities, but he doesn’t have any respect for the white ones, either.

The allegation about minorities and welfare isn’t true, of course, and a lot of this is just eyewash. Not all of it, however. The collapse of the economy has been so sudden and massive that even the GOP has been forced to abandon its sympathy for these Victorian attitudes and support across-the-board safety net legislation. Will that continue?

No. The pendulum is already starting to swing. The GOP is beginning to draw lines between the deserving and undeserving poor. It may prevent any new rounds of stimulus, and it will probably be a battleground in the election.

Given that the current unemployment rate can hardly be blamed on workers, the Democrats should look forward to that debate.

On the one hand, if he repudiates Phase I, he will create more uncertainty, hurt the economy, and drive his beloved stock market down. On the other hand, if he doesn’t, he will undercut his argument that China is responsible for all of our misfortunes, economic and otherwise. What to do?

Leave everyone hanging, of course. It’s his favorite tactic. It makes him the perpetual center of attention and leaves all of his options open. What it doesn’t do is solve any problems, except for him.

I’ve got those dirty, lowdown, socialism blues.

You have to be aware of it; it’s all over the news.

I thought I had it all wrapped up; I’ve really paid my dues.

Now it seems in retrospect that I was bound to lose.

_____________

I would have been the country’s hope; a second FDR.

But my lefty past, it seems, was just a bridge too far.

I know I won’t be president; my age will be a bar.

Now our hope is AOC; she’s our rising star.

_________________

I’ve got the blues.

The nomination blues.

Now that I am history

The dirtbag left must choose.

If they don’t go out and vote

Then Trump will likely win.

We have to get them to the polls

‘Cause that would be a sin.

For the Democrats, the pandemic is all about pictures of exhausted but heroic doctors, nurses, and first responders; mass graves in NYC; and long lines of unemployed workers waiting for free food. Strong stuff, that.

What do the Republicans have in response? Protesters with assault rifles? Trump bloviating at press conferences? Happy spring breakers at the beach?

Images can drive narratives, which decide elections. I would much rather be working on commercials for Biden than Trump.

On the DOJ head William Barr.

In Trump’s firmament he’s a big star.

Now Flynn will go free.

It sure seems to me

That Hungary is now where we are.

To be fair, if left to his own devices, Mike Pompeo would probably be a reasonably decent Secretary of State. His positions on Russia, NATO, and liberal democratic values, just to name three, are within the mainstream of traditional Republican thought. But Pompeo works for Donald Trump, so none of that matters. How does he reconcile his opinions with those of his capricious boss?

It works like this:

1. Provide public support for traditional American positions except where it is already known that Trump does not agree with them.
2. If, as he frequently does, Trump makes an impulsive decision and makes statements that are inconsistent with yours or with the apparent truth, lie and say there is no inconsistency.
3. If you are pressed on the inconsistency, change the subject by blowing up and attacking the press.

As a survival tactic, this appears to work fairly well. As a basis for diplomacy, it is a disaster. No one outside of Trump’s bubble believes a word you say. As a result, America no longer has any real allies–just skeptical business partners pursuing their own interests.

You can argue that Barack Obama’s most difficult, and best, decision was to bail out GM. He managed to avoid a crippling loss of jobs and confidence without ultimately losing any of the public’s money. Do the airlines present the same issue, and will they get the same treatment?

Unlike GM, the airlines were not failing at the time of the pandemic. Their existing business model will not, however, survive a lengthy period of distancing and less than full planes, which is very likely to occur. In my view, like the banks in 2008, they are effectively a public utility that needs to be protected; the loss of them would be felt all over the country. And so, I have every expectation that the current bailout will be continued as long as necessary, probably with the government taking a temporary equity stake, as it did with GM, and selling it when things improve.

It’s a mistake to pay too much attention to the specific programs advocated by presidential candidates, because the country you campaign to lead is rarely the country you get. George W. Bush didn’t run as the scourge of Saddam and Islamic extremists; Obama didn’t run as the man who would save us from the Great Recession; and Trump obviously didn’t anticipate a pandemic.

The assumption during most of the campaign was that the next president would inherit a country with full employment. Realistically, while the public health crisis will have waned somewhat in January, 2021, the economy will be struggling, and unemployment will be very high. Trump’s nonsensical response to this will be to cut taxes for the wealthy. What will Biden’s plan look like?

I think he will support a fairly conventional stimulus based on two kinds of programs: a massive green infrastructure plan; and a temporary public health initiative that will look in some respects like M4A, but without the cost controls. This will replace the current regime of, essentially, using the government to keep the economy on life support; by January, unlike today, it will be obvious which businesses have a future without perpetual public assistance, and which will not. There will be widespread public support for both initiatives, and they would have a decent chance of getting through the Senate by way of the reconciliation process.

A picture of Trump at the Lincoln Memorial reminded me of a fake future news post from 2016 in which I envisioned Paul Ryan trying to find money for a grandiose Trump Monument. The question for today is, what would be a fit monument for the man on golf cart?

Given that his legacy will be division and bigotry, and his most memorable policy initiative is the wall, I would suggest a white marble wall with figures of white people on one side and people of color on the other. That says it all.

We know that Trump is going to try and paint Biden as being soft on China. How should Biden respond? I would suggest something like this:

1. Historically, members of both parties hoped and believed that integrating China into the web of global commerce would result, not just in increased prosperity, but in a friendlier and more democratic country. That clearly didn’t happen. China is becoming more aggressive and authoritarian by the day.
2. That said, our relationship with China is complicated, and we need to use carrots as well as sticks. We need to be able to cooperate with the Chinese on a variety of issues, including the virus and climate change.
3. Trump’s response to the Chinese challenge has been blustery, but singularly inept. He sucks up to Xi, ignores human rights issues, imposes tariffs for no clear purpose, and does his best to alienate the allies we need to change Chinese behavior. As a result, we have made no real progress on North Korea, the Chinese are continuing to militarize rocks in the South China Sea, and Taiwan and Hong Kong are under increased pressure. In addition, American consumers are paying more than they need to for Chinese manufactured goods, which benefits exactly no one in either country.
4. We need a new approach. We need to work with our allies to change the rules of world trade in our favor, instead of annoying them by calling them worse than the Chinese. We need to maintain a strong military presence in the South China Sea in order to keep our allies’ trade routes open. We need an open and transparent investigation of the origins of the virus to make sure it doesn’t happen again. We should not, however, make ridiculous demands for compensation that are never going to be satisfied, and we need to respond to the economic challenge by fixing things that we can control instead of insisting that the Chinese simply give up their attempts to modernize, because that isn’t going to happen.
5. Most of all, we need to stop using China as a scapegoat for our problems. China didn’t force us to respond so poorly to the virus. China didn’t demand that we shred our safety net, or treat climate change as a hoax, or pass a huge tax cut that primarily helps wealthy people, or put the regulatory screws to our workers. We did that to ourselves by electing a man who is clearly unfit for his office. If you elect me, that will stop.

Based on ideology and the fate of the Warsaw Pact countries, we knew what awaited us if we lost the Cold War: totalitarian rule by a Communist Party answerable to Moscow; the loss of all political and legal rights; and the destruction of all private businesses of any size. Does China aspire to something similar?

No. Given its history and belief in Chinese exceptionalism, China’s model for world domination is the relationship between the Middle Kingdom and vassal states, not the Soviet Union and its satellites. The Chinese do not care what kind of legal, political, and economic system we have as long as it doesn’t criticize China or prevent it from doing business as it sees fit. As a result, there would be some constraints on free speech, and the possibility of camps for political opponents, but nothing worse than that.

Do you find that comforting? I’m guessing not.