The Democrats' baffling economic concessions

The economic downturn is giving Democrats a lot of leverage. They're blowing it.

President Trump.
(Image credit: Illustrated | Getty Images, iStock)

America is headed straight for a full-blown economic depression. Data from the first quarter of 2020 came in this week, and showed a decline in inflation-adjusted GDP of 4.8 percent at an annual rate — and since that figure stops at the end of March, when lockdowns were only starting to take effect, the figure for the next quarter will be undoubtedly much worse. Millions have been laid off in the private sector, and state and local governments are also beginning mass layoffs.

This spells severe political trouble for President Trump. About the firmest rule in American political history is that the party in charge during terrible economic times gets thrown out. The years 2008, 1932, 1874, and many others all saw gigantic swings away from the party holding the White House because voters blamed them for the economy going to pot.

This should give House Democrats enormous leverage over Trump and the Republicans. Yet so far, not only are they refusing to use this leverage to save the American people, they apparently do not even believe they have it. In every coronavirus rescue package, Democrats have caved to most Republican demands, and behaved as if rescuing the economy is a concession to themselves rather than to Trump. It is baffling and egregious political malpractice.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

There is no reason to believe analysts who say the economy will make a quick comeback in the next few months in line with orthodox economic models that predict rapid "v-shaped" recoveries after recessions. Millions of people have already been financially ruined, and do not have any disposable income to spend on ordinary consumption even if the virus were to disappear tomorrow. State budgets are already deeply in the red, and since most of them have (idiotically) forbidden themselves from running budget deficits, they are already beginning to slash their spending and lay off thousands of their employees. Unless they get federal aid, much worse is sure to come — yet Senate Majority Leader Mitch McConnell (R-Ky.) has argued that states should instead declare bankruptcy. It is unclear how that would work — you can't just liquidate, say, Arkansas and sell it to its creditors — but presumably it would make the austerity permanent and further hinder recovery.

Models also predicted a rapid recovery from the Great Recession, but instead recovery was grindingly slow — growth kinked down by about 40 percent, and unemployment remained high for years. The economy was just barely coming above stall speed before the virus hit. There is every reason to think we will be stuck in the same sandpit as in 2010 without massive stimulus to restore spending and growth.

Now, Congress has passed several economic aid packages, most importantly a big boost to unemployment insurance and a bailout for small businesses. Yet state unemployment systems are so janky (sometimes deliberately so to keep taxes on business down) that perhaps half of people eligible for benefits have not received them, per a recent survey from the Economic Policy Institute. And the small business grant program has already run out of money twice; the recent allocation of $350 billion ran out in minutes.

Moreover, we have no idea when social distancing measures will actually be relaxed in practice. America is setting up precisely none of the "test, track, and isolate" systems that civilized countries are constructing to prevent future resurgence of the virus. There is a strong chance the pandemic will continue to simmer in this country for the rest of the year, if not longer. In that case, huge swathes of the population will still refuse to go about their normal business for fear of killing themselves or their families, no matter what state governments urge them to do, and the economy will not jump back to life. (Indeed, it seems that conservative state governments are "reopening" mainly so they can kick people off unemployment, which will only worsen the economic damage still further.)

It would be irresponsible for Democrats to simply let the economy collapse into ruin and hope that wins the 2020 election for them, as Republicans almost certainly would do if the tables were turned. And Democrats don't appear to want to do this, given how they have pushed for unemployment and small business grants. What Trump desperately needs if he wants to have a decent chance of re-election is lots more rescue and stimulus. States, local governments, and transit agencies should be bailed out, especially because the pandemic is very obviously not their fault. The Republican argument that states have spent beyond their means when their economies are being strangled by a viral pandemic (and while Wall Street gets blasted by the Federal Reserve money cannon) is utterly preposterous. Ordinary citizens and businesses of all kinds should get lots more help, subject to conditions that keep money flowing to workers instead of wealthy owners.

By rights, Democrats should be able to exploit this situation to make stimulus and benefits even better (ideally automatic), and demand further concessions like universal vote-by-mail, and then loudly take credit in an effort to outweigh the benefit to Trump.

But incredibly, Democratic leaders are behaving as though rescuing state and local governments would be a concession to Democrats. Speaker of the House Nancy Pelosi (D-Calif.) said as much in an interview with Bloomberg, and told critics who argued she should have demanded aid for states be included in the last package to "calm down." For all the major rescue bills, she has refused to pass an agressive proposal out of the House, instead negotiating from the Senate Republican position and getting little of what she supposedly wanted.

In other words, it is the classic Democrat Cringe — they're going to categorically rule out any hardball tactics, sit on their hands, and do as little as possible — at the worst imaginable time. It may well carry Joe Biden to the White House almost by accident, but the collateral economic damage will be cataclysmic.

Want more essential commentary and analysis like this delivered straight to your inbox? Sign up for The Week's "Today's best articles" newsletter here.

To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us
Ryan Cooper

Ryan Cooper is a national correspondent at TheWeek.com. His work has appeared in the Washington Monthly, The New Republic, and the Washington Post.