The two trillion dollar question
Mark it's Wednesday march twenty fifth and the country's gearing up to make it rain two trillion dollars. I'm Sean Romney's firm and this is your corona virus update from today explained. The biggest stimulus package in the history of modern American. Politics hasn't yet passed but Congress has reached a deal on the legislation much more on that in today's episode meanwhile crisis continues to worsen in New York City were governor. Cuomo's cases are doubling every three days and as many as one hundred forty thousand people might need medical care in the next few weeks people. Leaving New York City have been told to self quarantine for fourteen days in England. Prince Charles has tested positive for Cova. Nineteen for those of you who haven't watched the crown. He's the heir to the throne to queen herself isn't self-isolation and turns ninety four. Next month in Spain the Cova One thousand nine death toll has now surpassed China's. It's around thirty. Four hundred second only to Italy. Spain has asked NATO to step in and help with the epidemic and today is day one of India's full lock down one point three billion people or one of the world's population lastly Washington. Dc's National Cathedral said one of its stonemasons recently discovered boxes containing more than five thousand respirator masks in the Cathedral's Crypt The Washington Post reports. That the masks had been purchased in two thousand six during an earlier health scare will be donated to two local hospitals. So check your craftspeople. Your health care. Workers need those masks. Get in touch with today. Explained were on twitter at today. Underscore explained at Rama's firm. Email us today explain it. Vox Dot Com and you can call and leave a message at two. Oh two six eight eight five nine four four my email. Inbox is any indication. It's a it's a tough time for a lot of businesses right now and also potentially a good time for some others if you're trying to ramp up net suite by Oracle wants to help by giving you a full picture of your business finance inventory. Hr customers and more all in one place from work or from home can being anytime anywhere. You can use a net sweet to the number one cloud business system right now. Get your product tour and free guide six ways to run a more profitable business at net. Sweet Dot com slash explained that is net sweet dot com slash explained. Madam president after five days of arduous negotiations after sleep-deprived nights and marathon negotiating sessions. We have a bipartisan agreement. On the largest rescue package in American History Ellison box Congress has agreed on a two trillion. Dollar stimulus package. It's historic nothing like it has happened ever before in American politics. At least in the modern era and it makes the two thousand eight stimulus which was something like eight hundred billion dollars. Look like small potatoes. How did we get here? So it's important to remember that the deal that Congress reached on this two trillion dollar stimulus package very early this morning. This is phase three of the corona virus bills so a couple of weeks ago we had phase one which was a relatively small eight billion dollars for research and development for Corona Virus Vaccine Research. Then last week we had a hundred and four billion dollar bill that went for free testing creative. Irs testing for every American including those run insured and expanded paid sick leave and other things even though there were some loopholes in that bill. But this as as you say this was. This was the big one This is a two trillion dollar package. That kind of has something for everyone. It has five hundred billion dollars for big businesses. It has direct payments to Americans that are struggling on an expanded unemployment insurance and it has money for hospitals okay. Well let's talk about each of the sort of one by one starting with the aid to businesses. This was the sort of contentious element that held this thing up a few extra days right. Yes so this is a five hundred billion dollar loan program for for big businesses including airline companies companies. That have have seen through no fault of their own. Their business just drop off entirely. Because people aren't flying. Economic activity is is really ground to a halt so compared to two thousand eight and two thousand nine when we were bailing out banks that had arguably caused the financial crisis that we found ourselves in the government is now quote unquote bailing out these big businesses that are seeing of huge loss of revenue due to current virus. The obviously did not cause so the reason that this was so controversial was initially in the first draft that Senate Republicans put out late last week. The trump administration and the treasury secretary Steve Mnuchin had very large discretion over this five hundred billion dollar loan program. Bill still includes something that most Americans don't WanNa see large corporate bailouts with no almost. No strings attached. Maybe the majority leader thinks it's unfair to ask protections for workers and Labor to companies that are getting hundreds of billions of dollars. We think it's very fair to ask for those. Those are not extraneous issues that is a wishlist for workers. Nobody else and so we are looking for protection. We're looking for oversight. So if you're worried that you know Steven Mnuchin was just going to hand out. Billions of dollars to companies that were favorable to the president. That ain't going to happen anymore. Yeah it's going to have oversight attached to it. There's going to be an inspector general within the Treasury Department and potentially a congressional oversight panel so there are going to be outside people other than Steven Mnuchin now looking to see how the money will be spent having input on how these loans will be doled out to businesses and it's five hundred billion dollars that are going to go to like big corporations. How much money was set aside for small businesses three hundred sixty seven billion dollars for a small business loan program It's just interesting. Like three hundred and sixty seven billion dollars concertedly shore up companies. That are losing money right now but it can't bring them back the business that they need to thrive right. Well I mean ultimately the only thing that can bring these small businesses back is is consumer spending right. We just can't do that right now. So and and this was sort of the argument that Democrats were making throughout negotiations. Was this this trickle? Down stuff and bailing out these. These big companies isn't necessarily going to get to the root of the problem because the root of the problem is just that people are trapped in their homes right now and they're not going out and spending money at their local restaurants and spending money at stores. I think that what Democrats are arguing is an in Republicans to be fair. Came around to this idea pretty quickly to of direct cash payments to people because ultimately what you're trying to do is get people spending again. Well let's talk about what individuals are getting. What kind of casher regular people going to get out of this two trillion dollar stimulus that regular people will pay for if you are an American adults? Who is making seventy five thousand dollars or less annually? You will probably be seeing a twelve hundred dollar check or a direct deposit. Show up in your mailbox or your bank account or however it's going to be delivered to the American people and it's important to note. This is a one time check. Thus far in less Congress comes back and approves additional money to to get people additional checks so if you make more than seventy five thousand dollars you are not going to receive that full amount. It kind of depends on your income and basically the idea. Is that people who are pretty comfortable right now and are making a lot of money. You don't necessarily need as much government assistance. There will also be a five hundred dollar payment if you have kids so five. Hundred dollar payment to cover every child in qualifying households. What else can individuals expect out of this two trillion dollars? Another big thing. That Democrats were talking about that. They got out of negotiations was what Chuck. Schumer likes to call quote unemployment insurance on Steroids. Nice and this is increasing unemployment insurance by six hundred dollars per week for four months so if you are laid off and you are getting unemployment insurance. Duda CORONA virus. You are eligible for an additional six hundred dollars per week to again. You know help you cover your basic expenses like rent and food medical costs etc So this money is in addition to what states pay as a base unemployment salary and it's important to note that this benefit extends to people who work in the GIG economy so uber and lift drivers post mates delivery people people who are freelancers and then also furloughed workers and these are workers who are not no longer getting a paycheck but are still getting health insurance from their employers and then the third bucket of this is is medical aid. It's it's hospital. Aid Aid to healthcare workers. Is that right this? Is You know right now especially in in hard hit places like New York. Hospitals are struggling to meet. I mean they. They don't have enough capacity for the patients that they're seeing a lot of them are complaining that they don't have enough basic medical equipment. Like ventilators and masks there are big shortages. Not So what Congress has done here for. Hospitals is add an additional one hundred fifty billion dollars to hospitals who are treating chronic virus. Patience is this going to be enough especially when we talk about aid to hospitals and healthcare professionals. It just sounds like it might be too late. I mean New York has already had to suffer as a result of lack of supplies and and lack of hospital. Beds I mean and then more broadly speaking is this enough to shore up. Americans and American businesses and the economy. I mean that is the two trillion dollar question and I. I don't think we know at this point. Birther were already seeing more headlines of of more people getting sick death rates are going up as well so we haven't yet seen the worst of this. I think that there is a good chance that if Congress sees the need that they can come back and pass more money. There's there's always a way for them to do that. But despite president trump saying yesterday that you know he wants this all wrapped up by Easter. There is no immediate late at the end of the tunnel and I don't think we know yet if two trillion dollars is enough to save us from the damage that Chris is is wreaking not only to public health also to the economy after the break I asked as reclined the two trillion dollar question. It's today explained tech has consequences and recode by. Fox's exploring them all. With the new multi-platform journalism project called open sourced through videos and articles open source to explore and demystify controversial issues surrounding technology everything from facial recognition and surveillance to how add micro targeting will affect the twenty twenty election. The project is supported by the media. 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You need to make the right decisions and grow with confidence. Hopefully and right now you can schedule a free product tour of net sweet. You can receive your free guide six ways to run a more profitable business and met sweep dot com slash explained that is a net sweet dot com slash explained e. x. p. l. a. i. n. e. met sweet. It could be sweet but not spelt that way S. U. I t. e. is the sweet. We're talking about here. Good evening as reclined. Even with this two trillion dollar stimulus. There's a recession coming if not already here. Do we know how bad it's going to be? How will it compare to the last one in two thousand eight right now? The early economic data suggest it will be much worse at least at its peak than what we had in two thousand eight which is not something. I thought I would be saying anytime soon. Two dozen it was supposed to be a once in a generation economic flood. And now we're looking at something that is not even possible so if you look at early unemployment filings. They potentially went up to three million over the past week. We've just never seen a number like that if you look at what Goldman Sachs and some other economic forecasters are forecasting for the GDP. Drop in the second quarter of the year. They're now up to twenty. Four percentage point drop. That would be the single worst quarter in the history of GDP statistics US Treasury Secretary. Steve Mnuchin said that unemployment could go up to twenty percent before he walked out back but then over the weekend. The President of the Federal Reserve Bank of Saint. Louis said he thought thirty percent was possible at least for a minute. So we're looking at something that at the very least at it's worst could be unbelievably bad and one reason could be unbelievably bad is this is really different in its dynamics and not just two thousand eight but really any recession. We can think of in memory we. It's almost not correct to think about this as a recession. This is a combination of a recession a financial crisis potentially a war and in natural disaster. Great Great and this is just the opening salvo of this recession crisis. War Natural Disaster. Yeah I spoke to mark Zandi. Who is the chief economist at Moody's analytics so he's a very well? Respected economic forecaster and as part of. Moody's they get a lot of incoming economic data survey data actual data all the time so they tend to know the economy is going just about before anyone else. I've spoken to sandy a lot over the years. And he was ending almost apocalyptic here but to be more specific. What he said. We're GONNA see four waves of economic pain. The first wave is the sudden stop of the economy. That's what we're in right now right. I can't go into work the way I normally would. The restaurants in my town are closed and non essential businesses are closed. People are sheltering in place wave to which is already here as well is unemployment. People are laying off workers because they have no sales coming in PIBOR. Cutting back hours among workers mariette furloughed. A huge amount of their staff. So mass unemployment is just beginning but already we're seeing numbers like nothing we've ever seen before. Then the third wave is what he called the wealth effect. So there are all these people who have 401k's they have money saved in the market for the retirement. This is true. Everybody was particularly true for older people who are towards the end or Paseo end of their earnings. And now they're seeing those savings wiped out and so there's a lot of spending this group is going to disappear and then the fourth wave is business investment. So you think of corporations or even small businesses that were thinking of opening up a second location upgrading to better office. Space a media organization is going to start publication. Whatever it might be. That's all going to go on. Hold so all that spending those going to upgrade machines create new capital create new products. A lot of that is gonNA disappear from the economy for a while. So of Sandy's four waves were living at least the first two already. The ECONOMY STOPS UNEMPLOYMENT. Soars the next to our imminent if not already here. People can't retire and realize their dreams and industry has to scaled-back. Is there a way out? So those four waves. Zandi said they're definitely going to happen like they are already happening. But there's a question. Now is the kind of recession we have. What's called a v-shaped recession where the economy plummets in? Let's call it quarter to maybe quarter three and then rebound super powerfully in potentially quarter three quarter four and then into twenty twenty one in that case. This will be bad but not that bad. What Sandy said and this is I think. Clearly true is two things could happen. That could disrupt that and this is particularly going to happen. If we don't get the disease under control quickly. The first thing that could happen. Is We set a financial crisis financial panic somewhere so already seeing very scary things happening in debt. Markets in bond markets in currency markets are a lot of both countries and companies that need a lot of US dollars and they're having trouble getting them. The Fed is out a huge amount of new programs. Right now to try to deal with this but it's pretty scary so if we have two thousand eight in reverse a problem in the real economy that creates contagion in the financial economy. That's GonNa be very very hard to fix. That's GONNA be years dig out of the second which is also I think very very present as danger is a mass wave of business failures. More than fifty percent of small businesses cannot survive more than a couple of months without sales. They just don't have a big nest egg. Small businesses tend to be reasonably low margin. Except you even a lot of big businesses can't survive very long in a very down economy if their receipts have gone down. Fifty percent seventy five percent and so if you have mass closures then not only when the economy does come back. Do you have to rebuild those businesses or something like them you know? And that's hard right. You need to figure out leases. P- places need to rebuild. They need to hire New People. But also it's not like they're workers can just come right back on. They have to find new jobs. There's matching costs. It's hard to search. There's a lot of uncertainty in that and so if you have a huge wave of business failures it's very hard to come back. Because you've lost a lot of the structure in which the economic growth could have happened once you got back on your feet so preventing those two things a financial crisis and a mass wave business failures. That's really really important and Congress's hoping that's why this stimulus will do but what if it doesn't that's the best case scenario. What's the worst? The worst case in our right now is primarily economic. I mean the worst case scenario is an unchecked pandemic with millions of deaths hugely overwhelmed health systems creating behind it a total economic catastrophe in some ways the worst case scenario to be is one that we are beginning to flirt with because the worst case scenario is that we lose our nerve here at the Front End. There is an enormous return to acting quickly. You prevent many more cases if you are able to stop one person from passing on the disease to after that person has passed it on to ten people. If you're trying to stop ten people from passing it on we are already seeing at the highest levels of our political leadership a blink. My message is that Let's get back to work. Let's get back to living. Let's be smart about it And those of us who are seventy plus. We'll we'll take care of ourselves but don't sacrifice the country don't do that. Our country wants to go back to work and again to cure. It's it's like this. Cure is is worse than the problem again. People many people in my opinion more people are going to die if we allow this to continue. There's this fantasy of an economy out there that you could somehow just have the economy operating at full potential. Even disease is killing and hospitalizing millions of people. All at once right nine eleven's every day in this country and I think the raw right now. The curve of new cases in America's vertical we are rising faster than Italy was at this point. That's very scary. Because this is an exponential curve as you rise faster then rise even faster and so if what happens is we let off the pressure when it is currently completely uncontrolled but I think is going to happen. Is it three months from now or even two months from now? Maybe even just three weeks from now when our health system is overwhelmed. There's going to be an enormous demand for quarantine an enormous demand to get this under control and that will happen when the economy is now gotten much worse so Jason Furman Who was Obama's former chief economist? But he's been writing about this. A lot on twitter and elsewhere made this good point that he thinks the correct way to understand the choice. Here is between social distancing right now and a bad economy six months from now or two months of nothing and then two months of even more extreme social distancing followed by a much worse economy after that and so the nightmare scenario for me is one where we've let the disease get completely out of control and that also spins the economy out of control and I don't know I can't honestly cannot believe that after five days of acting like a real precedent or trying to act like a real president that Donald Trump seems to have lost his taste for this and is now telling people were going to be back at work in two weeks. We we just need better than that right now. We just do. What is he missing? What are all the people who are looking at these unprecedented economic consequences over two million people filing for unemployment? Who Warrant two weeks ago? Who are looking at something much worse than a recession and saying is this really worth it. What are they missing? The hardest thing in politics is to force pain now to prevent more pain later and it's not that they're missing something exactly. It's they're living in the present and not in the future. What Donald Trump would any political leader any leader needs to do in an organization is live somewhat in the future is see where things are going and work backwards from there so the organization is prepared that organization a country or a company. That is what we are doing. Even Vox media right now. We are trying to think about what all this is gonNA mean for business and trying to work backwards to how we need to prepare. Donald trump is a very present focused person and he runs a very present focused administration. And what is happening? Right now is that they are feeling the pain of social distancing and it is real pain the unemployment filings the GDP projections. It is real pain. Suffering it is a horror what he is not able to feel yet and so he's not truly responding to is the kind of economic social political and human pain of this disease flying out of control of what it will mean if you can't go deliver a baby or get treated for heart condition because you're stepping over bodies in the hospital infectious bodies of what it will mean if we have a national shortage of nurses doctors respiratory therapists etc that. He is responding to the political pressure on him now and the things that he can feel now the pain we are causing now. As opposed to the pain we are trying to prevent and if every epidemiologist and public health expert and frankly even just what we're seeing in other countries is right. The pain we're trying to prevent is a lot worse now. We can't ignore the pain we would cause on the way. We need more stimulus. We need economic support. We need to have the political imagination and will ambition to make this possible. We are not going to get out of this without real economic damage. Either way that is built in but we could get out of it with a lot of humanity A lot of social support we could also if we had anywhere near the kind of imagination required for crisis like this we could get out of it with a better structure for our economy altogether right. It could be that out of this. People GET GUARANTEED PAID. Leave as every other industrialized country has guaranteed health care. I mean you could imagine using this as a moment to say. Oh we are so interdependent that we can't just have solidarity in the moments of crisis we need to have it all the time. It's not that it would stop people from losing their jobs. It's not that stimulus or basic income. Payments are going to stop them from hurting. We're not gonNA stop the hurt here but we can do a lot to build better structures to protect people from it now and in the future As we're thank you and We'll be in touch. 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