By Rudy Barnes, Jr.
The massive $2.2 trillion emergency stimulus act of 2020 instigated a quick and dirty economic revolution. Resonant of the Troubled Asset Relief Program (TARP) of 2008, it once again bails out Wall Street mega-corporations as “too big to fail,” and it’s coupled with cheap money through low interest rates of the Federal Reserve as a form of corporate welfare.
In addition to expanding the corporate welfare of the TARP, the 2020 act also includes long-term unemployment benefits that are likely to continue as a form of individual welfare similar to a guaranteed annual income. History tells us that such “temporary” or “emergency” measures for corporate and individual welfare are not likely to end anytime soon.
The 2020 stimulus act is the largest ever passed by Congress, and Its welfare policies go well beyond emergency relief. It reflects a rare alliance of Republicans who support corporate welfare and Democrats who support individual welfare. The 2020 act is a mix of neo-socialism and crony capitalism (an illicit relationship between the super-rich of Wall Street and the politicians they control) that lacks fiscal restraint and threatens libertarian democracy.
We should have seen this crisis coming. The COVID-19 pandemic was just the trigger event for the stock market crash. The economy already had serious underlying health issues, with excessive debt at personal, corporate and national levels; and the Fed’s low interest rates only encouraged increasing those debts. It was an invitation for an economic disaster.
An overvalued stock market and a seemingly endless bull market were other indications of the approaching stock market crash, but they were negated in the crash. Now it’s deja vu all over again, with a 2020 sequel to the 2008 TARP that features individual welfare benefits added to expanded corporate welfare benefits that were initiated in the TARP.
Excessive debt was the underlying cause of the economic collapse, and the political remedy only made the debt problems worse. With a projected annual deficit of over $3 trillion to be added to a national debt of over $23 trillion, it’s reasonable to ask whether increasing the national debt to such astronomical levels is dangerous. If it is, America is in big trouble.
Even during a booming economy, the Fed had kept the low interest rates of the 2008 TARP in place to feed the voracious appetite of Wall Street for cheap money. With no more room to lower rates, the Fed has once again instigated unlimited quantitative easing, an inflationary policy of buying troubled assets from uncreditworthy private and public entities.
The promise of bailouts from the 2020 stimulus act coupled with the continued flow of cheap money from the Fed through quantitative easing has enabled the stock market to recover much of its losses, but it no longer represents the health of the economy. Last week was the best week since 1931 for the stock market, but the worst week in decades for the economy.
Without regulation, the crony capitalism of Wall Street will continue to create dangerous disparities of wealth that undermine the middle class and deny economic justice. With a massive national debt hanging over the U.S. economy like a black cloud, crony capitalism must be reformed to prevent the excesses of Wall Street and socialism from dooming capitalism.
Congress has provided a quick and dirty revolution of the American economy. While it has provided much needed emergency relief for the COVID-19 pandemic, the 2020 stimulus act has also revealed the need to regulate crony capitalism to preserve a healthy middle class and libertarian democracy. Voters must hold the president and congress accountable to do just that.
Notes:
On what’s in the $2 trillion coronavirus stimulus bill, see https://www.cnn.com/2020/03/25/politics/stimulus-package-details-coronavirus/index.html.
On how Congress is bailing out firms that avoided taxes, safety regulations and spent billions boosting their stock, see https://www.washingtonpost.com/business/2020/03/25/still-too-big-fail-us-is-primed-bail-out-corporations-again/?utm_campaign=wp_evening_edition&utm_medium=email&utm_source=newsletter&wpisrc=nl_evening.
On how the 2020 stimulus act carves out billions intended for Boeing, despite its safety lapses, since the airplane maker is considered “critical” to national security, see https://www.washingtonpost.com/business/2020/03/25/boeing-bailout-coronavirus/?utm_campaign=wp_evening_edition&utm_medium=email&utm_source=newsletter&wpisrc=nl_evening.
On how the Dow’s 21% surge this past week was its biggest gain since 193, see https://www.marketwatch.com/story/the-dow-just-entered-a-bull-market-by-some-measures-but-it-sure-doesnt-feel-bullish-on-wall-street-2020-03-26.
On how last week was the worst week for the economy in decades, see https://www.washingtonpost.com/business/2020/03/26/it-was-worst-week-economy-decades-pain-is-just-beginning/?utm_campaign=wp_todays_headlines&utm_medium=email&utm_source=newsletter&wpisrc=nl_headlines.
On the sleeper issue of the coronavirus crisis (the economic weakness of state and local governments),
On how quantitative easing can cause dangerous inflation, see https://www.scmp.com/economy/china-economy/article/3077116/coronavirus-sparks-us-dollar-dilemma-china-federal-reserve.
On how excessive debt has weakened the economy:
David J. Lynch, Fears of corporate debt grow as coronavirus outbreak worsens.(3/10/20) See https://www.washingtonpost.com/business/2020/03/10/coronavirus-markets-economy-corporate-debt/.
Gretchen Morgenson, A dozen years after the 2008 recession, a different kind of debt threatens the world economy. (3/9/20) See https://www.nbcnews.com/business/economy/dozen-years-after-2008-recession-different-kind-debt-threatens-world-n1151801.
Annie Nova, Why people with student debt are refusing to repay it. (2/12/20) See https://www.cnbc.com/2020/02/12/student-loan-borrowers-announce-a-strike-refusing-to-pay-their-debts.html.
Jared Bernstein, We’re growing our deficits for all the wrong reasons. (1/30/20) See https://www.washingtonpost.com/outlook/2020/01/30/were-growing-our-deficits-all-wrong-reasons/?utm_campaign=wp_opinions_pm&utm_medium=email&utm_source=newsletter&wpisrc=nl_popns.
Jeff Stein, U.S. deficit to eclipse $1 trillion in 2020, CBO says, as fiscal imbalance continues to widen. (1/28/20) See
Robert J. Samuelson, America’s debt spree isn’t stopping. It might soon be too late. (1/28/20) See
Sam Meredith, World Bank warns of global debt crisis following fastest increase in borrowing since the 1970s. (1/9/20) See https://www.cnbc.com/2020/01/09/economy-world-bank-warns-of-global-debt-crisis-as-borrowing-increases.html.
Larry Elder, The Great Recession: “Reparations” Gone Bad. (1/9/20) See https://townhall.com/columnists/larryelder/2020/01/09/the-great-recession-reparations-gone-bad-n2559190.
Philip Inman, Debt will kill the global economy. But it seems no one cares. (1/4/20) See https://www.theguardian.com/business/2020/jan/04/debt-will-kill-global-economy-pensions-ageing-population.
On the Federal Reserve and interest rates:
Josh Barro, Here’s Why It Matters That Interest Rates are Cratering. (3/8/20) See https://nymag.com/intelligencer/2020/03/coronavirus-why-cratering-interest-rates-matter.html.
David McHugh and Christopher Rugaber, Negative interest rates turn saving, borrowing upside down. (2/14/20) See https://finance.yahoo.com/news/negative-interest-rates-turn-saving-131450036.html.
Gregg Robb, Fed Chairman says central bank will use “forward guidance” communication with markets about interest-rate plans (2/12/20) See https://www.marketwatch.com/story/powell-says-fed-will-aggressively-use-qe-to-fight-next-recession-2020-02-12.
Sam Bourgi, Jerome Powell Secretly Knows the Federal Reserve Is About to Crash the U.S. Stock Market (1/16/20) See https://www.ccn.com/jerome-powell-knows-federal-reserve-destroy-us-stock-market/.
John Mauldin, The Fed Is Creating a Monster Bubble. (1/3/20) See https://www.forbes.com/sites/johnmauldin/2020/01/03/the-fed-is-creating-a-monster-bubble/#af44c422670c.
Related commentary on Christianity and capitalism:
(3/8/15): Wealth, Politics, Religion and Economic Justice
(8/9/15): Balancing Individual Rights with Collective Responsibilities
(10/18/15): God, Money and Politics
(1/30/16): The Politics of Loving Our Neighbors as Ourselves
(6/4/16): Christianity and Capitalism: Strange Bedfellows in Politics
(10/1/16): The Federal Reserve, Wall Street and Congress on Monetary Policy
(2/11/17): The Mega-Merger of Wall Street, Politics and Religion
(3/11/17): Accountability and the Stewardship of Democracy
(9/9/17): The Evolution of the American Civil Religion and Habits of the Heart http://www.religion
(9/16/17): The American Civil Religion and the Danger of Riches
(12/16/17): Can Democracy Survive the Trump Era?
(1/20/18): Musings of a Maverick Methodist on Morality and Religion in Politics
(1/27/18): Musings on Conflicting Concepts of Christian Morality in Politics
(2/17/18): Musings of a Maverick on Money, Wall Street, Greed and Politics
(6/15/18): The Prosperity Gospel: Where Culture Trumps Religion in Legitimacy and Politics
(4/27/19): Musings on the Legitimacy of Crony Capitalism and Progressive Capitalism
(6/29/19): Musings on a Politics of Reconciliation: An Impossible Dream?
(8/24/19): Musings on How a Recession Could Transform Religion and Politics in 2020
(9/28/19): Musings of a Maverick Methodist on the Polarized Politics of Climate Change
(12/28/19): Musings of a Maverick Methodist on the End as a New Beginning
(1/4/20): Musings on How a Depression (or a War) Could Make America Great Again
(2/8/20): Musings of a Maverick Methodist on America’s Love of Money and Lack of Virtue
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