'This Is Not About Stimulus. This Is a Rescue Package" *

Back in the halcyon days of December, when the threat Donald Trump posed to the republic was merely obvious [3] rather than fully realized [4], we took some time to look at the administration that would replace his. In particular, what did Joe Biden's picks for economic advisers signal [5] about his positioning on workers, wages, and monopoly power? The verdict from progressive economist Eileen Appelbaum, co-director of the Center for Economic and Policy Research, was that the signs were largely positive—except for a couple of private-equity guys who'd made the cut and presented some potential issues. Moreover, Appelbaum said, it was still unclear where Biden would come down in terms of antitrust policy, a pressing concern in an America now plagued by corporate consolidation.

In the time since, Donald Trump incited an insurrection to stop the transfer of power to Joe Biden. He failed, was impeached, and his trial was held in the Senate, where his spineless allies ensured he was not convicted [6]. But Biden was also inaugurated, and Democrats took narrow control of both houses of Congress, and they have now turned their attention to a COVID relief bill to address the multitude of crises—vaccine distribution, unemployment, small-business closures—that the country faces. (Well, after their vacation this week, anyway.) We circled back with Appelbaum to get her thoughts on Joe Biden's proposed $1.9 trillion bill, how things are developing in Congress, and on some of the new president's more recent Executive Branch appointments as well. Our interview has been lightly condensed and edited for clarity.

Are you satisfied with the overall size of the bill?

Yes. I think it's going to be very, very effective. I'm surprisingly pleased with how things are going. They've included the $1,400 to all of the people who are eligible. They've included the income limits that were the same as they were in the earlier act. I mean, if Trump could give out the money to people making a $75,000, or $150,000 if you're a couple, how is it possible that the Democrats wouldn't be able to do it? It's not as if the folks in the middle class are doing so well. As you know, we have this K-shaped recovery where people like me haven't really suffered financially at all, but I'm thinking about my niece who works for $11 an hour. I'm really happy to see if they are going to be reducing healthcare premiums for people who are on the exchange. They're going to subsidize COBRA for people who lose their jobs, try to keep insurance that way.

The child benefits...I mean, this would be huge. This was something that we've been wanting to see for a long time. They have it in Canada, where families get a monthly benefit. And in Canada, that means that when you have a baby, the benefits start flowing. And it continues until the kid ages out of it. And it's to make sure that all children have what they need. In this country, I can understand that we don't want to give the benefit to people with an income of $400,000 a year; they can afford to raise their children. But to send this money to lower income people, to relieve the pressure and to lift so many millions of children out of poverty, to get rid of the great food insecurity that they face. We have an economist [at CEPR] who’s analyzed income shocks in low-income households. Month to month, their hours get cut and their income goes down, strictly hourly. The company doesn't need them. They send them home that day. Even if they have a job, there are these income shocks. And of course, they work in high-turnover industries. Having a monthly child benefit that lets you put food on the table and makes a difference in that kid's life is just—you can imagine how important it is.

It seems like it would introduce a kind of floor in terms of standard of living for American children, which is what some people like about universal basic income (UBI).

That is correct. UBI is problematic because if you make it universal, which is what it's supposed to be, then the benefit has to be so low that nobody really gets anything out of it. We would much rather see a set of social programs, like the child credit, and other policies that effectively do put a floor under a family's income.

And really, I think one of the reasons this is resonating at this moment is that so many middle-class people, people who have a middle-class income that are affected by COVID are suddenly downwardly mobile. There’s a big church near where we live in Philadelphia that does a food distribution on Saturday mornings. You can't drive down that street on a Saturday morning [now]. You have never seen so many cars, and these are not wrecked cars. These are middle class. These are people who not that long ago could buy a fairly expensive car, and now they can't put food on the table. So I think the fact that so many people with middle-class incomes are now downwardly mobile, it really makes the idea that there should be some support that comes to you, that does provide a floor. And especially if it's a family with children.

But there are other ways to provide that. The food stamps program is another program that could potentially provide that. It could be expanded. And the child credits that we have—if you have a lot of income, you get the full benefit of the child credit, but [since] it's accredited against your tax liability, low-income people can't really get it. And so one of the things in this $1.9 trillion is to guarantee even low income people a certain amount of money to offset childcare expenses.

And why would the benefits of UBI be low by comparison?

The budget implications mean it’s not big enough to really help people. Maybe the idea that everybody's going to get $1,000 a month from the government, I don't think that's going to work. We have a hard time giving out the $2,000 once, and people are concerned about the expense. If we did [UBI], it would be a relatively small amount of money, which if you have income would be great, because you can always use a thousand dollars. If you're trying to live on it, it's not going to work. I mean, even this child benefit, the new child benefits, if you have a child under the age of six, it’s $3,600 a year. UBI, nobody’s talking about it being that big, and you need something like that for it to make a meaningful difference in a child's life.

For the checks, you said you’re happy the House bill is keeping the same income levels. Are you worried about changes in the Senate?

Yes, I'm concerned about the amendments, and that we may not get everything we want. The other thing is that these all fit in a reconciliation bill. I'm glad to see that the path to a $15-an-hour minimum wage has remained, but I know from work we’ve done on paid family and medical leave that the Senate parliamentarian has a big say over what goes into reconciliation and what doesn't. And they do not have to explain themselves, and they are inconsistent from one Senate parliamentarian to another. In order to be included in reconciliation, it has to be involved with spending large enough to be significant. Based on the past, the parliamentarian would not approve anything that was a mandate on employers, and wouldn't approve anything where the cost to the budget was incidental. So all of the things that we're talking about fall into that category, but the $15-an-hour minimum wage is an employer mandate. And I'm hoping it stays, but I wonder what the Senate parliamentarian is going to say about it.
 

In terms of Biden's appointees, when we last spoke, it seemed like you were pretty happy in terms of workers and wages with Biden's appointees. Is that still true?

Yes. And I'm happier and happier. Even the ones I worried about have figured out that they have to come down on the right side of these issues. On the National Economic Council, even those folks who I worried about a little bit are saying all the right things. So, that makes me happy. And then he has so many other great appointments: [Gary] Gensler at the SEC, Rohit Chopra at the Consumer Financial Protection Bureau. That's fabulous. I wanted there to be two Rohit Chopras, because we need him as the commissioner at the FTC as well, but there's only one of him. The person they appointed as the commissioner of the FTC, [Rebecca Kelly Slaughter], she's also very good. She's more concerned about competition. Other people would have only worried about privacy issues.

On competition and monopoly, have we seen enough of the appointments there to make any calls? Is there anything else to be concerned about?

Well, I think it will be looking at competition. The last thing the Trump FTC actually did is to begin to investigate the competitive, or the price-raising effect, of these healthcare companies that start out little and they grow by what are called add-ons. You see it a lot in private equity.But what really needs to happen is that the FTC or the Department of Justice, depending on the industry, has to do a look back and see how many add-ons they already did. And if they get this add on, what does that do to competition and does that give them more power? So Rohit Chopra and the FTC have demanded all of the records from [these healthcare providers] and from the insurance companies, so that they can see whether as they kept on adding on, adding on, adding on, did this give them excessive market power in their negotiations with insurance companies, and are they driving up healthcare costs as a result?

You mentioned the influence of private equity there. How do see Biden's more recent appointments on that?

So far so good. What do you think about seeing Larry Summers sidelined this way? Back when it was Obama and it was the financial crisis and Christy Romer wanted $1.8 trillion, he said, "We can't even go to a trillion." He made a political decision at that time that Obama would be laughed out of whatever, or would seem ridiculous to ask for [even] $1.2 trillion. And of course we needed $1.8 trillion. We had that long, slow recovery for people at the bottom. It took a very long time before we got anywhere near full employment, which we did eventually get to, and before we could get the bottom rows, which they did when we got closer to full employment.

Summers is the worst, and now again, he's saying $1.9 trillion is too big. “The economy is going to overheat.” I mean, let's wait and see. I don't think there's too much danger. The 2% inflation rate is supposed to be an average. It's not supposed to be a ceiling, and we've been under it so long that if it goes up a little bit beyond that, that's really not a problem. Real overheating happens when we can have cost-push inflation, when workers can say, "Well, prices are rising, my wages have to go up too." There are workers on their backs in this economy. They've been knocked out, the unions are so weak in the private sector that the idea that we're going to have cost-push inflation—it's laughable.

With the CARES Act, we probably were not vigilant enough [7] in terms of how it was spent. Do you see any potential pitfalls with this bill?

The bills don't exactly exist yet, but I hope that we do a better job. And I also think we did it in the December bill—did a better job on who gets the money that goes to businesses. We need it going to small- and medium-sized businesses. We don't need it going to hotels that are franchised. We made an exemption in the original CARES act for chains—including chains owned by private equity—of restaurants and hotels, so the individual restaurants and hotels could apply for that money that the Small Business Administration was giving out. And that was a mistake in many, many ways, because it used money that could have gone elsewhere.

But I'll tell you what the biggest mistake is, and that is that the SBA [Small Business Administration] is used to giving out money to companies that have no more than 500 employees. It knows how to deal with small companies. Even the IRS does not know how to deal with a restaurant chain or a hotel chain owned by private equity. The IRS will tell you they lack the resources to do an audit of a Blackstone empire. It's just so complicated. There are so many shell companies, companies located in the Cayman Islands. The idea of doing an audit of one of those companies, the IRS would need to have increased resources to be able to do it, they're so complex.

So how anybody thinks that the Small Business Administration would be able to do this—the SBA was told it was supposed to be able to make loans to private equity-owned individual hotels that are a part of a chain, individual restaurants that are part of a chain. I'm not saying that those restaurants and hotels didn't lose business, they did, but the private equity owners have deep pockets. Let them actually do what they say they do and save their companies. I think it was a crime that the money went to many individual hotels and restaurants owned by private equity, or owned by real estate investment trusts, that could have survived in a different way. And it did not go to women-owned, Black-owned, actually real small businesses, businesses that keep communities together that make a place worth living, that gives it some charm.

So the risk is that this money, like some of the CARES Act, flows upwards to these private equity firms that own these chain businesses, and that we don't have the resources to investigate how that happens.

Or how it's actually used, exactly. That they actually keep the workers. If you talked to Unite Here, Local 11—one of my favorite unions, because there are really smart people there—but anyway, they will tell you about the hotels that took the CARES Act money on the basis that they were going to keep their employees and didn't keep the employees. So if you don't keep the employees, then it's no longer a grant. It's now a loan that you have to repay. It's a very low-interest-rate loan, and they were happy to take those. They took the money on the grounds that, yes, we are going to keep the employees, but then in the end they didn't keep the employees. They paid their rent, which was okay. They paid their utilities, which was okay. But then they also paid off debt. That was just money that came to them at a low interest rate. They didn't care if it's not going to be a grant at the end. You're a little company and you get that money, it needs to be a grant at the end, because how the heck are you paying it back? If you're a private equity-owned hotel, you get that money, you use it however you want and you pay it back.

It's sort of a disaster capitalism element, it seems like.

Yeah, that's exactly right. So I think that lesson has been learned, is what I'm saying. There is a paycheck protection piece of this, and I haven't really had a chance to look at how that money is going to be given out, but that would be something to watch.

I think it's going to be well designed, and it’s not a stimulus. The idea that we want people to run out and spend it, that is not what it's all about. My niece makes $11 an hour, single mom, and has a child. When she thought got that first round, she got $1200 for herself and $600 for her child, she had no savings at that point. How can you make $11 an hour and ever have any savings? So all of a sudden she has $1,800. She put it in her savings account knowing that, right at that moment, she was still working. But knowing that she could be laid off at any time, which in fact she was, and then she got the extra $600 while she was laid off. And then when she was unemployed, she was able to handle her car inspection, paying her car insurance. So the fact that some people are saving, it's not just people who have higher incomes. It's people with low incomes who see how precarious the economy is and are trying to prepare for that rainy day.

So this is not about stimulus. This is a rescue package. This is to get people through the pandemic until enough of us are vaccinated, that we don't have the fear that we're all living with at the moment. Biden will be back with his public investment deals, also investment in care infrastructure, investment in our bridges, our roads, our airports, our train stations. That will be stimulus. This is a rescue plan, and it looks so promising in terms of rescuing the people who have been left behind in this economy.
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* This article originally appeared in "Esquire" - https://www.esquire.com/news-politics/a35472557/joe-biden-covid-relief-bill-democrats/

Jack Holmes is the Politics Editor at Esquire, where he writes daily and edits the Politics Blog with Charles P Pierce.

Eileen Appelbaum, Senior economist at the Center for Economic and Policy Research(Washington)and coauthor of Unfinished Business: Paid Family Leave in California and the Future of U.S. Work-Family Policy.(appelbaum@cepr.net [8])