New York Times Nobel winning economist Paul Krugman has a lengthily tweet thread slamming the corporate “slush fund” that Republicans are pushing in the two trillion dollar bail out bill.
First, beware analogies with 2008. There are some parallels, but this time the epicenter of crisis is NOT in the financial sector — and the McConnell stimulus bill is not the equivalent of TARP, which Congress eventually passed in the face of plunging markets 2/
— Paul Krugman (@paulkrugman) March 23, 2020
True, we're facing huge job losses: I wouldn't be surprised to see 10 million jobs lost over the next few weeks. But these losses are the result of social distancing, which is shutting down restaurants, entertainment, and other non-essentials 3/
— Paul Krugman (@paulkrugman) March 23, 2020
Stimulus can't and shouldn't bring these jobs back; that has to wait until the pandemic subsides. So what can we do for these workers? Aid: any kind of benefits we can manage, including incentives for firms to continue paying at least part of wages 4/
— Paul Krugman (@paulkrugman) March 23, 2020
That is, the clear and present need is for disaster relief, rather than stimulus. And notice how the debate over this relief is being framed: calls to help Americans in need are portrayed as "Democratic demands" rather than the decent thing to do. 5/
— Paul Krugman (@paulkrugman) March 23, 2020
What role, then, for stimulus? Well, there will be a second round of job losses as laid-off workers and shuttered businesses cut their purchases. This second round should be diminished as much as possible — but a few days' delay in getting stimulus right is OK 6/
— Paul Krugman (@paulkrugman) March 23, 2020
Again, not like 2008 when the financial system seemed on the verge of imploding. There are some major financial stresses, but the Fed is on the case. Oh, and aid to those in need bc of social distancing is itself a major source of demand stimulus 7/
— Paul Krugman (@paulkrugman) March 23, 2020
But McConnell wants everyone to imagine that it's like the immediate aftermath of Lehman, and that everything will collapse unless we give Trump a $500 billion corporate slush fund with no effective oversight. That's totally unacceptable 8/
— Paul Krugman (@paulkrugman) March 23, 2020
Even aside from trust issues, we have this thing called bankruptcy law that often allows corporations to remain viable entities even when they can't pay their debts. There may be cases where that won't be enough — but then you want conditions attached to aid, a la auto bailout 9/
— Paul Krugman (@paulkrugman) March 23, 2020
And then there is the question of trust. Nobody in their right mind believes that we can trust Trump to use a slush fund in a non-corrupt way, as opposed to rewarding friends — including himself — and punishing enemies. 10/
— Paul Krugman (@paulkrugman) March 23, 2020
I mean, he won't even use the power he has to order companies to produce urgently needed medical supplies. Not a chance that he would require good behavior from bailed-out businesses 11/
— Paul Krugman (@paulkrugman) March 23, 2020
And McConnell himself has shown that he can't be trusted when it comes to corporate giveaways. Remember how that huge 2017 corporate tax cut was supposed to lead to an investment boom, and instead was spent on stock buybacks? 12/
— Paul Krugman (@paulkrugman) March 23, 2020
Oh, and I hear that Rs are arguing that placing conditions on corporate aid might be too "onerous", so that companies won't take it. (a) I don't believe it (b) if they can refuse the aid rather than make sure it helps workers, maybe they didn't need it? 13/
— Paul Krugman (@paulkrugman) March 23, 2020
So, once more: this isn't 2008, when you arguably had to rush money to financial institutions to avoid immediate collapse. Stimulus is needed, but there's time to do it right. Just say no to slush funds 14/
— Paul Krugman (@paulkrugman) March 23, 2020