Excerpt from NYTimes, March 2020. The $700 billion bank bailout elicited a voter backlash, which means any aid this time is likely to have large strings attached. Those could include limits on executive compensation, prohibitions on stock buybacks and, most prominent, measures to force bailed out companies to keep workers on their payrolls.
Senator Elizabeth Warren, Democrat of Massachusetts, released an eight-point list of conditions this week for companies seeking aid, including
- a permanent ban on buybacks
- institution of a minimum wage of $15 an hour for employees
- at least a three-year ban on dividend payments and executive bonuses.
“During this crisis, we cannot do a no-strings bailout for corporations like we did in 2008,” Ms. Warren said in an interview. “It’s got to be clear that the money will be used in ways that will help workers and strengthen the whole economy.”
Ms. Warren compared the conditions on assistance with a mortgage lender that insists that the borrowed money actually be spent on buying a house. “It’s good lending practice,” she said. “If we’re going to lend money to these guys, we ought to know how the money is going to be used, and that’s what the strings are for.”
Matt Bruenig, Peoplespolicyproject.org March 17, 2020 | CREATE!
In response to the spread of COVID-19, the economy appears to be in recession. Lawmakers are scrambling to respond to the recession with many ideas floating around about how best to do so. Below, I outline a few responses that I think would be wise.
Welfare Expansion
In a normal recession, the proper goal of a policy response is pretty simple: increase output and employment by directly or indirectly increasing aggregate demand. Many proposed responses to this recession have fallen into this typical model. But, strictly speaking, this model does not really make sense for our current situation. Insofar as we are attempting to limit the spread of a virus, we should not be trying to increase employment and output. The only work that should be done is work that can be done in isolation or work that is absolutely necessary. All other work and its associated output should cease.
This is an unfortunate feature of the current recession, but it also simplifies the policy debate considerably. Since we are not interested in job creation, we do not need to have the usual disagreements about how best to do that. Since we do not want very many people working, we do not need to debate about whether the low employment level is because employers aren’t hiring or because the unemployed aren’t seeking work.
Instead, the only question we need to answer for individuals is how to keep them financially solvent during the disruption. In a well-constructed society with a good welfare state, the system would already be set up to handle these kinds of disruptions. The shocks people are going to face in the coming months — mainly unemployment and leave for sickness and caregiving — are shocks that already hit people all the time in our society. We should already have good benefits for those shocks. But we don’t. So we’ll have to build them on the fly probably on a temporary basis.
The first thing we should do is expand unemployment benefits.
- Benefit duration for ordinary unemployment benefits should be increased to one year and the benefit amount should be increased to 100 percent of prior earnings up to $8,333 per month. In addition to the changes to ordinary unemployment benefits,
- A new basic unemployment benefit should be established that is equal to at least the one-person poverty line, which is $1,063 in the 48 contiguous states. Any unemployed, non-elderly adult who is not eligible for ordinary unemployment benefits would be eligible for the basic unemployment benefit.
The second thing we should do is create a sickness allowance for those who need to take leave from a job because they are inflicted by the virus.
- The allowance duration would be one month and the benefit amount would be 100 percent of prior earnings up to $8,333 per month. Employers can pay the allowance themselves and be reimbursed by the government. If they do not, then the employee can get the benefit directly from the government.
The third thing we should so is create a family leave benefit for those that need to take leave to care for family members due to various disruptions such as school closures. The benefit duration would be three months long but would otherwise be structured like the sickness allowance.
These benefits would directly address the kinds of disruptions people will face that will cause them to become financially insolvent. Insofar as this may not be enough and people might fall through the cracks in other ways, it would also be wise to send cash out indiscriminately, such as through a $1,000 per month universal cash benefit.
Bailouts For Equity
Many companies will require bailouts to stay afloat due to massive contractions in revenue, e.g. airlines and hotels. These companies should be bailed out with cash from the government but only in exchange for new stock issued by the companies. This is what we did with General Motors. It is what any other investor would require of these companies. Structuring the bailout as cash for equity ensures that, once the recession has passed and the companies bounce back, the public gets the benefit of their investment. It would also establish substantial public ownership that we should hold on to permanently.
Social Wealth Fund For Stocks
The stock market is collapsing as the prices of the shares of all companies are declining dramatically. Investors are selling off their stock at increasingly lower prices and putting their money into cash and treasury bonds. This has driven the interest rates on treasury bonds to their lowest levels ever seen.
The federal government should respond to this situation by selling trillions of dollars of new treasury bonds and then plowing the cash from those sales into stock purchases. Similarly, the federal reserve should expand its balance sheet by creating new money and buying corporate stock with it. The stock purchased through these two mechanisms should then be placed into a social wealth fund. By buying these stocks at rock-bottom prices with money borrowed (or created) at rock-bottom interest rates, the federal government will help stabilize financial markets while also ensuring that the public reaps the windfall when the stock market climbs back up after the recession is over.
** Howard comments: Whatever, we need to understand that the Fed is not our government, the Fed is the big banks, JP Morgan Chase, CITI Bank, Goldman Sachs, mostly. It is THEIR government, they choose who we get to vote for, what our public policy is, choose what gets funded or not, which industrial corporation will dominate, what the media tells us etc. etc.. We the people are supposed to be the sovereigns of this nation, not the big banks. It is time for the nation to reclaim its Constitutional authority over the money and demand that their electronic voting machines be trashed, banks banned from creating money and debt-free government money, created as an asset, be issued for the common good beginning with a Citizen’s Dividend. The greed driven financial industry has driven the world into a multi-dimensional global emergency and its FIRST response is to find ways to profit off of the crises. There is an historical allegory. When the big banks refused to help the nation defend itself in the Civil War, demanding up to 36% interest, government issued Greenbacks came to the rescue. Greenbacks can do it again and today offer the safest alternative to getting the nation and the world out of debt and through the multiple crises the banks have created. The longer we ignore this the deeper into the night we go.
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Ugo Gentilini of the Brookings Institute argues that in fighting COVID-19, there might well be a role for a one-off universal basic income, but careful deliberation is needed to establish whether this is the best policy response.
When crises hit, cash transfers are a part of the package of policies that governments deploy to ameliorate their economic effects. Whether it’s about refugees, economic downturns, or natural disasters, countries have used cash extensively. Empirical evidence shows that cash transfers are generally spent judiciously, they can save lives and, if they are designed well, can help people get permanently out of poverty.
But there is more to it. More recently, it has become clear that cash injections can spark wider knock-on benefits. In Africa, the provision of $1 in such programs generated between $1.27 and $2.60 in local economies. In the United States, a dollar’s worth of SNAP, a quasi-cash scheme, leads to $1.79 in economic gains. And even amid the EU’s recession a decade ago, every cash euro generated 85 euro cents in economic activity.
The question is: Could cash transfers help offset some of the economic damage being wrought by COVID-19? It’s not a hypothetical question. In responding to the novel coronavirus, countries like Indonesia, Malaysia, and China are anticipating, expanding, and increasing payments of their flagship cash programs. And so is the U.K. Because of the universal nature of the virus, some countries are considering universal transfers. These include the provision of cash to everyone with no strings attached, namely universal basic income (UBI)—the subject of our new book.
ONE TOOL, MANY OBJECTIVES
Traditionally, UBI is framed around three different goals: (1) countering possible job losses from automation, including at-risk occupations like truck drivers; (2) strengthening social contracts and trust in government by redistributing oil revenues a la Alaska; and (3) acting as a deliberate poverty-reduction instrument.
Each of these objectives has different implications for how UBI has to be communicated to the public, how it is perceived and supported societally, and how it is designed. For example, the amount of cash provided as a token for social contracts may hardly be adequate to make a dent in poverty. Trade-offs and expectations need to be managed.
The COVID-19 epidemic is now presenting policymakers an opportunity to consider a new approach to UBI—a one-off cash transfer to stimulate consumer demand. This could be implemented as monetary levers at the disposal of central banks, or as part of fiscal packages rolled out by ministries of finance.
There are precedents: Kuwait had such one-off transfers in 2011, while Australia did a similar injection in 2009. Policymakers have taken note and are now considering one-off cash transfers as a serious policy option.
In fact, Hong Kong has already announced that it will reach its 7 million adult residents with a one-off payment, and the European Union is pondering doing so as it “turns every stone.”
5 LESSONS
Previous experiences with UBI and UBI-like interventions provide five lessons. They have to do with inflation risks, strains on delivery systems, communication, synchronization with other safety nets, and using temporary crises to make permanent changes.
- One-off transfers in Kuwait and Australia, as well as regular UBI payments in Mongolia, did not seem to generate significant inflation. This is because goods and services kept being supplied by private markets and public agencies and enterprises. But this should not be taken as a given during crises.
- The strength of delivery systems is key. If the movements of people are constrained (e.g., because of quarantines), massive pressure may be exerted on digital and online payments, the development of which lies at the heart of India’s “quasi-UBI” programs. Making sure that those systems are robust would be a priority during pandemics.
- The importance of a sound communication strategy around a UBI scheme cannot be overstated. UBI comes with competing narratives and expectations, putting a premium on clarity about its purpose, design, and eligibility requirements. This is even more important at times when people are prone to panic.
- If considered, a UBI program should fit within the ecosystem of existing schemes. A UBI could ensure rapid and widespread coverage, but it may lack nuance in addressing specific vulnerabilities (e.g., providing care to the elderly and other vulnerable groups such as children). And if the crises are prolonged or deep, the burden of supporting people will rest on existing safety nets. Making sure that they are scalable, tailored, and well-funded is key.
- Crises tend to shed light on the gaps in social protection systems. The experience in high-income economies, as well as in countries such as Indonesia, Egypt, Lebanon, and Ethiopia, shows that crises are often precious junctions for enacting long-term improvements. UBI may be the way to plug the hole but, equally possibly, it may not be the best to do so.
In fighting COVID-19, there might well be a role for developing this new form of one-off cash transfers. Hopefully cross-country learning on cash transfers will spread faster than the virus.
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Don’t repeat 2008 during today’s economic crisis. White House economic adviser Larry Kudlow broached the idea of the federal government taking equity stakes in companies to prop them up during the current coronavirus pandemic. When the US followed that strategy during the 2008 financial crisis, we did not use public ownership to demand public accountability, and then the ownership stakes were surrendered and the companies went back to their old ways. This time, they write, bailouts, through equity stakes or other means, should be conditioned upon “more democratic control over economic decision-making”—particularly to move the economy toward a green, fossil-fuel-free future. in OpenDemocracy…
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DOES THE CORONAVIRUS CRISIS HAVE TO END WITH A WEALTHIER WEALTHY?
By Sarah Anderson and Sam Pizzigati, Inequality.orgMarch 17, 2020 | STRATEGIZE!
This Time Around, Let’s Use The Power Of The Public Purse To Reduce Inequality.
We all have to come together. We need to help each other. We don’t have time for politics as usual.
In times of crisis — the current coronavirus pandemic, for instance — these sorts of calls for cooperation become the drumbeat of our daily lives. And most all of us march to that drumbeat because we understand that we do need to cooperate and help each other when crises crash down upon us.
Unfortunately, no drumbeat ever gets everybody marching in sync. In every society, some self-absorbed people will think first and always only of themselves. But these self-absorbed few, in relatively equal societies, pose no great problem. They just don’t have the means to mess things up.
In more unequal societies, we have a different story. In deeply unequal societies, nations where wealth and power have concentrated intensely, a few people do have the means to undercut the common good. These wealthy few can exploit the vulnerabilities of societies in crisis to make themselves even wealthier.
Back in 2007, Naomi Klein explored this phenomenon brilliantly in her landmark book The Shock Doctrine. Klein showed how corporate elites worldwide have repeatedly and brutally used “the public’s disorientation following a collective shock — wars, coups, terrorist attacks, market crashes or natural disasters — to push through radical pro-corporate measures.”
The 2008 financial collapse would vividly illustrate the dynamics Klein so powerfully described. The Wall Street giants whose reckless and even criminal behavior ushered in that crisis ended up, after the dust settled, even bigger and more powerful than before the crisis began.
Klein sees those same “shock doctrine” dynamics now resurfacing in the coronavirus crisis.
“We are seeing,” she noted earlier this week, “this very predictable process that we see in the midst of every economic crisis, which is extreme corporate opportunism,” a “dusting off” of the corporate and Wall Street wish list on everything from cutting and privatizing Social Security — by undermining its current payroll tax revenue stream — to enriching the fossil fuel industry.
LIVING IN INEQUALITY . . .
Dying In Despair
What can we do, this crisis time around, to prevent a “shock doctrine” repeat? We need, for starters, to provide immediate support for those the coronavirus is hitting the hardest: the sick and those who care for them, the workers who lose jobs and income.
But we can’t afford to stop there. We need, in effect, a “shock doctrine” in reverse. We need to seize the openings for change the coronavirus creates and challenge the capacity of our rich and powerful to become ever richer and more powerful at the expense of our greater social well-being.
One example: Within our increasingly coronavirus-ravaged economy, more and more families will be facing evictions as they fall behind on rents and mortgage payments. Progressive activists and like-minded elected leaders are now quite rightfully calling for a coronavirus moratorium on evictions.
But we have a chance here to go much further. Low-income families, a compelling new analysis of shelter in Southern California has just detailed, face a rental market that corporate landlords have thoroughly rigged against them. These corporate interests have created an “empire of fees and evictions” to gouge low-income families. Why not fight, in this coronavirus crisis moment, to rewrite the eviction-enabling statutes that let corporate landlords enrich themselves at the expense of families already reeling?
The coronavirus crisis also gives us an opportunity to use the power of the public purse to shift our economy towards greater equity and sustainability.
Various industries are already clamoring for federal loan guarantees and other bailouts to get them past the coronavirus crisis. We have an obligation to help workers in these industries. We have an opportunity to help these workers not just through the coronavirus crisis, but beyond.
The core of a reverse shock doctrine ought to be a massive public investment program designed to create good jobs, with a premium on projects that better position our economy to address climate change.
For immediate bailout funds, policymakers should consider attaching pro-worker strings. We could deny, for instance, tax-dollar support to private companies that pay their top execs over 50 or 100 times what they pay their most typical workers.
Moves in that direction would give top execs an incentive to pay workers more — and exploit them less.
Back in mid-20th century America, a time of much greater equality than we have now, corporate top execs only averaged 30 times more pay than their workers. That more equal America proved resilient enough to overcome a fearsome polio epidemic and prosper.
That more equal America, let’s remember, emerged out of the back-to-back crises of the Great Depression and world war against fascism. Progressives seized the opportunity those crises created and changed the face of American society. Why can’t we?
53:43 https://youtu.be/qBstcJ2GjGQ Nahko “Dear Brother”…there’s a future you can believe in… 1:10 “Love Letters to God”
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Coronavirus falls into the category of zoonotic disease, as do SARS, ebola, and MERS. It is widely accepted that humans contracted HIV from chimpanzees, through butchering and eating them; the 1918 flu that killed up to 50 million people had an avian origin.
Unfortunately, we don’t know all that much about zoonotic diseases. Fine and Kang write that in the U.S.-funded PREDICT program, “researchers estimate that there are more than 1.6 million unknown viral species in mammals and birds, 700,000 of which could pose a disease risk to humans.” They add:
“Facing such a vast, unknown and unpredictable universe of zoonotic agents, we firmly believe that limiting the chances of contact between human and wild animals is the most effective way to reduce the risk of emergence of new zoonotic diseases.”
So what does that mean exactly?
1. Stop wildlife trade
2. Stop wildlife consumption
3. Stop destroying nature
WCS has created a cheat sheet, of sorts, to help drive the point home.
© WCS
The problem is that when we handle or come into close contact with wildlife, we run the risk of a spillover of the pathogens – viruses, bacteria, parasites, and fungi – that they host. While the pathogens don’t make the creatures themselves ill, humans do not have the same immunity, and thus, can become sick.
Dr. Christian Walzer, executive director of the WCS Health Program, says this is a “global health priority that cannot be ignored.” As Fina and Kang note:
It is important to continue calling for three solutions to prevent this complex global challenge: close live animal markets that sell wildlife; strengthen efforts to combat trafficking of wild animals within countries and across borders; and work to change dangerous wildlife consumption behaviors, especially in cities.
Now this may be easy to say here in New York City, sitting in a place of relative privilege – and we must consider if closing wildlife markets will hurt the poor. But as WCS notes, “Wildlife populations are being depleted as they are poached and hunted. Viral outbreaks lead to mass culling of domestic animals, which increases the cost of basic animal protein, hitting the poor the hardest.”
And in the meantime, we need to address the ecosystem destruction as well. There’s been a steady rise of new zoonotic viruses in recent decades, which David Quammen addresses in a piece written for Yale Environment 360. While humans have always been killing wildlife and disrupting habitats, “now that there are seven billion of us on the planet, with greater tools, greater hungers, greater mobility, we’re pressing into the wild places like never before, and one of the things that we’re finding there is… new infections. And once we’ve acquired a new infection, the chance of spreading it globally is also greater than ever.”
In the fantastically informative video below, Dr. Walzer talks specifically of bats, who, because of their unique attributes, have an immune system that allows them to have a lot of viruses without having those viruses cause disease. But when those viruses make the jump to humans, mortality rates can soar.
But you know what? It’s not the bats’ fault. As Walzer points out, in these spillover events a lot of blame gets lobbed at the species where the virus originated, but the most important thing to understand is that humans have “created an environment where humans are in contact with a lot of wildlife species in close quarters and so this creates an environment where viruses can spillover.”
He concludes, “Our relationship with wildlife is what allows these viruses to get in, so let’s think about that and change our relationship to wildlife.”
Government interventions should be predicated upon making the urgently required transition to a post-fossil fuel economy and society. Rescued or subsidized institutions (especially oil companies, airlines, and the banks that finance them) should be put under public control as part of an emergency climate transition plan. – Parenti
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Governments have ‘historic opportunity’ to accelerate clean energy transition, IEA says
Climate Home News, March 17, 2020
IEA head Fatih Birol is calling on heads of state and international financial institutions to make coronavirus recovery plans sustainable. He told Climate Home News economic recovery packages to mitigate the coronavirus pandemic were “a historic opportunity” to boost clean energy investments.
By Chloé Farand
Fatih Birol, Director of the IEA said he had urged political and global financial leaders to design “sustainable stimulus packages” that focus on investing in clean energy technologies and accelerate the transition away from fossil fuels.
“This is a historic opportunity for the world to, on one hand, create packages to recover the economy, but on the other hand, to reduce dirty investments and accelerate the energy transition,” he said.
“The global economy is going through very difficult times and the energy sector is disproportionately affected,” said Birol. “Aviation represents 1% of the global economy but it’s 8% of global oil consumption.”
Birol was speaking before reports in US media that President Donald Trump would be seeking an $850 billion stimulus package, including $50 billion for airlines.
Last year, a report by UN Environment found the world needed to cut emissions by 7.6% per year until 2030 to limit global warming to 1.5C by the end of the century – the tougher temperature goal countries committed to under the Paris Agreement.
The massive investment plan outlined by Birol echoed proposals such as the EU Commission’s “green deal for Europe” aimed at accelerating the shift of capital towards the green economy while creating climate-proof jobs.
Birol also advocated for countries to capitalise on low interest rates to boost innovation on hydrogen and carbon capture and storage technology, and use the opportunity of steep reductions in oil prices to cut fossil fuel consumption subsidies.
The IEA estimates annual fossil fuel consumption subsidies are worth $400 billion worldwide, 40% of which are used to make oil products cheaper.
An IEA analysis found that 70% of global energy investments is driven by governments directly or indirectly as a response to policy. Meanwhile, the low cost of clean energy strengthens the economic case for the clean energy transition to drive stimulus packages.
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This could be the nail in the coffin for many small oil and gas companies
The U.S. is now the largest oil producer in the world, but it still imports roughly 9 million barrels of petroleum per day. The cost and availability of oil is therefore still very much dependent on market activity elsewhere. In a globalized world, the U.S. economy cannot escape the effects of a global pandemic, geopolitical upheaval, and the subsequent plunge in oil prices.
With prices cratering, oil and gas market analysts expect a slate of bankruptcies, job cuts, and slashes in expenditures across the globe — and especially in the supposedly “independent” U.S. This could well result in operators idling or abandoning wells, which can have detrimental effects on the environment. Unplugged wells leak methane, a potent greenhouse gas that contributes to climate change, and can contaminate groundwater.
“If this price war continues for a year or more, it can really be the nail in the coffin for many companies,” said Audun Martinsen, head of oilfield service research at Rystad Energy, an energy consulting group based in Norway. Martinsen projected that oil and gas companies worldwide will scale back capital and operational expenses by $100 billion in 2020 and that the shale industry in the U.S. would bear the brunt of the economic effects. About half of the 10,900 wells planned for 2020 might not be dug at all, he said.
While there are climate benefits that come with decreased fossil fuel extraction, environmental groups fear that oil and gas producers will also respond to this week’s crash by simply pausing production at many wells for months or years until it becomes profitable to pump again — or abandoning them altogether, leaving taxpayers to pay for cleanup costs.
A recent investigation by the Los Angeles Times and the Center for Public Integrity found that in California alone about 35,000 wells are already in “idle” status. About half of them have not produced oil and gas in more than a decade. Companies are required to post bonds to ensure the state has money to plug disused wells and clean up abandoned oilfields, but the investigation found that operators had only posted $110 million in bonds — even though it would cost about $6 billion to fully remediate the sites.
A similar analysis by the Center for Western Priorities, a Colorado-based environmental group, found that it would cost about $6.1 billion to clean up all producible oil and gas wells on federal lands, but companies had only ponied up $162 million — less than 2 percent of the projected cost. The more operators that close up shop during this price shock, the higher the risk that they will walk away from their cleanup responsibilities and leave the federal government holding the bag.
That shortfall might ultimately become the responsibility of state and federal governments. At the same time, lower oil prices could also affect state budgets. For instance, in Wyoming, a $5 per barrel drop in oil prices results in a $70 million decrease in revenue for the state annually. State lawmakers there are already dealing with a $150 million deficit over the next two years, and that’s without taking this week’s price drop into consideration.
Major oil and gas companies like Exxon and Chevron are likely to weather prolonged low prices without serious consequence. So will midsize operators with private equity backing. But small, family-owned businesses will struggle to stay afloat, Martinsen said.
That’s because the coronavirus-fueled price decline this week comes on the heels of sustained low prices over the last few years. In 2014, crude oil prices dropped from about $110 per barrel to less than $60 per barrel. In an attempt to force the U.S. to decrease production, the Organization of the Petroleum Exporting Countries (OPEC) — a cartel of 13 oil exporters including Saudi Arabia, Iran, and Venezuela — refused to cut production, pushing prices down further. By the time OPEC agreed to scale back production in 2016, prices had dropped below $40 per barrel. But the damage was already done.
The low prices between 2014 and 2016 put dozens of shale drillers out of business. “That was basically a bloodbath,” said Martinsen. “Big service companies were laying off big time and many remaining [companies] went under Chapter 11 [bankruptcy].”
U.S. oil production has continued to balloon since 2016, pushing prices down further. According to Haynes and Boone, a corporate law firm, nearly 200 oil and gas producers have filed for bankruptcies since 2015. As a result, many shale drillers facing this week’s drop in prices are already in a financially precarious situation.
Whether prices rebound again largely depends on whether OPEC and Russia can reach an agreement on cutting production, Martinsen said. Those efforts are further complicated by the spread of COVID-19. The two parties are scheduled to meet again in June, but Martinsen said “it is likely that they will not come to an agreement” then.
“It seems to be a challenging time ahead,” said Martinsen. “It’s all about trying to seek shelter — and trying to recover some of that potential loss that we’ll see in the future.”
