100,000 Deaths

100,000 Deaths

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Plus: The EU's $825 billion coronavirus rescue plan
Wednesday, May 27, 2020

100,000 Coronavirus Deaths

The most important number of the day is clearly 100,000 — the sad milestone in the Covid-19 death toll that the U.S. reached on Wednesday. As The New York Times reports, that is far higher than in any other nation and tops the number of U.S. military combat deaths in every conflict since the Korean War. And we all know that the total is much more than just a number, that each of the 100,000 lives lost represents an incalculable loss.

European Union Proposes $825 Billion Crisis Fund

Facing the worst economic crisis since the Depression, the European Union is proposing to take unprecedented steps to combat the downturn: borrowing hundreds of billions of dollars to distribute to member states.

That sounds familiar to American ears, since it’s what the U.S. government does every day, and at a record pace since the coronavirus pandemic hit. But for the EU, such a move would be revolutionary, moving the union closer to the kind of federal state that Germany, the union’s most powerful member, has long opposed.

The proposal from the European Commission, the executive committee of the EU, calls for borrowing 750 billion euros (about $825 billion) in total, with about 500 billion euros being used for grants to the 27 member states and the rest for loans that must be paid back. New taxes are proposed to bring in revenues, including a digital tax on tech firms such as Google and Facebook, and a tariff on carbon energy imports.

A ‘Hamiltonian’ moment: Some European policymakers are referring to the proposed borrowing and spending program as “Hamiltonian” after the American founder (and Broadway musical inspirer) who pushed the U.S. to become a full fiscal union.

Wolfgang Ischinger, former German ambassador to the U.S., told The Washington Post that his country’s change of heart is driven by fears that the EU is at risk of coming apart amid the crisis. “This is not simply a gift which we give away because we like our neighbors so much,” Ischinger said. “It’s about assuring the survival of the European project to which Germany has now been attached to for the last 70 years. Our political future. And we’re not going to let that fall apart.”

But there are still doubts: Germany may be losing its fear that fiscally weak states in southern Europe will act as a drain on hard-won savings, but a handful of other northern countries still have their doubts. According to CNBC, four nations — Austria, the Netherlands, Sweden and Denmark — would prefer to use loans for all assistance, while requiring reforms from states in return for help.

And Mark Copelovitch, a political scientist at the University of Wisconsin, is skeptical about the “Hamiltonian” narrative. The “initiative may yet prove to be a major step forward in turning the European Union into a federal union like the United States,” he wrote Wednesday in The Washington Post. “Yet the plan is less a ‘Hamiltonian moment’ than another demonstration that E.U. leaders cannot reach agreement on the euro zone’s fundamental structural issues or how to address the enduring debt problems of Italy, Greece and other highly indebted euro-zone countries.”

What’s next: Lots of negotiations. EU leaders will meet on June 18 to discuss the proposals, and any agreements would have to be approved by the European Parliament. In the meantime, the European Central Bank will continue to buy bonds from EU nations to help fund unemployment payments and loans to struggling businesses.

Quote of the Day

“We have major infrastructure projects in New York that are ready to go, that are desperately needed, that were desperately needed 30 years ago. Build them now. Supercharge the reopening, grow the economy.”

– Democratic New York Gov. Andrew Cuomo, who says he discussed the need for infrastructure projects in a meeting with President Trump at the White House on Wednesday morning.

Cuomo also criticized congressional Republicans who oppose “bailouts” for New York and other states facing pandemic-related budget shortfalls. He explained again that New York sends more money to the federal government than it receives, while red states like Florida and Kentucky receive more than they contribute. “So my point to our friends in the Congress – stop abusing New York, stop abusing New Jersey, stop abusing Massachusetts and Illinois and Michigan and Pennsylvania,” Cuomo said. “Stop abusing the states who bore the brunt of the COVID virus through no fault of their own.”

Poll of the Day

This won’t come as a surprise, but a majority of Americans oppose their state government cutting spending on areas including K-12 public education, police and safety, Medicaid and social services, according to the latest Kaiser Family Foundation health tracking poll. But a majority of adults (57%) do support having their state cut spending on transportation as a step toward closing budget shortfalls.
  • The tracking poll also finds that, among those who live in the 14 states that have not yet expanded Medicaid under the Affordable Care Act, two-thirds (66%) say they want their state to expand the program to cover more low-income uninsured.
     
  • And 26% of Americans say they or a member of their household have skipped meals or relied on government or charity food programs since February. And nearly half (48%) of Americans say someone in their household has delayed medical care due to the pandemic, but more than two-thirds of those postponing treatment expect to get the care in the next three months.

Hunger Relief Program Falling Short

Congress created an emergency food aid program in March that allows families to transfer the value of meals they would have received at school to electronic cards that can be used at grocery stores. But the Pandemic-EBT program is falling far short of its goals, The New York Times’ Jason DeParle reports, reaching only about 15% of the roughly 30 million children who are eligible to receive assistance.

Poor design and clunky infrastructure are playing a big role in the problem. Lists of names of eligible students must be collected from school districts and then transferred to state computer systems that are often not up to the task. Credits — calculated at $5.70 per child for each lost school day — are then placed on electronic cards and mailed out. The cumbersome process has produced considerable delays; although the program was approved in mid-March, only 12 states had started sending out aid money by May 15.

There’s little doubt that the need is massive, DeParle says. “In a survey of mothers with young children by the Brookings Institution, nearly a fifth said their children were not getting enough to eat — a rate three times higher than the worst of the Great Recession,” he writes. “The Census Bureau reported last week that 31 percent of households with children lacked the amount or quality of food they desired because they ‘couldn’t afford to buy more.’”

Amtrak Says It Needs $1.5 Billion to Prevent Service Cuts in 2021

In a letter to Vice President Mike Pence and House Speaker Nancy Pelosi, Amtrak President and CEO Bill Flynn said that the passenger railroad service will need an additional $1.475 billion in funding for fiscal year 2021 in order to avoid service cuts.

Flynn said that, as of February, Amtrak had been on track to break even for the first time ever, but as the pandemic led people to cut back on travel, many routes are now struggling to reach 10% of normal ridership. “While we work towards a full recovery one day, our current projections tell us that we expect to see ridership drop by approximately 50%, down to just over 16 million riders in FY 2021,” Flynn wrote.

Amtrak had already requested $2.04 billion for its Northeast Corridor and national network for fiscal year 2021. The new request is for funding on top of that. Amtrak received $1 billion in emergency funding as part of the $2 trillion coronavirus relief package Congress approved in March. Flynn said that the railroad is planning to reduce operating costs by $500 million in fiscal 2021, including $150 million in savings from reduced train frequency and capacity and $350 million from workforce restructuring.

A Dire 'Superforecast' for When Coronavirus Vaccine Will Be Ready

Good Judgment Inc., a company that runs a global network of what it calls “Superforecasters,” says there’s a less than 10% chance than a vaccine for Covid-19 will be widely available before next April — and just a 63% chance that an FDA-approved vaccine will be available to inoculate 25 million people in the United States before April 2022, according to Bloomberg Businessweek’s Peter Coy.

Column of the Day: 3 Ways to Boost the Economy

“Rarely has the argument for government spending to support the economy been more compelling,” Narayana Kocherlakota, an economics professor at the University of Rochester and former president of the Federal Reserve Bank of Minneapolis, writes at Bloomberg.

With long-term interest rates so low, the question is how to use the government’s spending power to best effect, Kocherlakota writes. That means programs that can be implemented quickly, appealing to competing economic philosophies “without getting bogged down in ideological debate.”

Kocherlakota proposes three ideas. The prospect that any of these might genuinely avoid becoming the subject of ideological and political battles may be slim at best, but here’s what he suggests:

1. Eliminate sales taxes: “Every three months, as long as the unemployment rate exceeded 5%, the government would grant states that reduce sales taxes to zero an amount equal to their quarterly sales tax revenue in 2019. This would cost about $350 billion a year.” The temporary tax breaks should encourage spending and could help businesses charge higher prices and thus pay more, luring workers back.

2. Eliminate employee payroll taxes until the unemployment rate drops to 5%. This would give workers more money to spend, and create added incentives to work. It would cost about $500 billion a year.

3. Try a temporary uniform basic income. “Every adult, regardless of income, would receive $2000 every three months until the unemployment rate declined to 5%.” This would cost about $2 trillion a year.

Read the full column a Bloomberg.

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