New Issue: The Coronavirus Economy

March/April 2020 cover

Our March/April issue is out, with coverage of the emerging coronavirus economic crisis. Today we posted Gerald Epstein’s piece on Fed Policy, The Fed and the Coronavirus Crisis.

Here is the p. 2 editors’ note for the issue:

The Coronavirus Crisis

We’re still in the early days of the economic crisis triggered by the coronavirus pandemic, yet the economic data are already unprecedented—and frightening. Our cover art by Brian Hubble includes a stunning graph showing how the spike of 3.3 million new unemployment claims from the third week of March towered above the one-week claims over the previous 20 years. Now we have data for the last week of March—an even more astonishing 6.6 million initial claims, for a total of 10 million new claims so far, just weeks into the crisis. By all accounts, we are facing a severe recession, even with the unprecedented multi-trillion-dollar spending by the federal government.

The virus is not the sole cause of this economic meltdown. A political and economic system that was unprepared for either a pandemic or its economic fallout has made both crises far worse than they needed to be, as Richard D. Wolff points out in the first of three “Making Sense” pieces on the coronavirus crisis in this issue. The private profits of capitalist firms didn’t give them the incentive to prepare for a pandemic, and a corporate-minded government wasn’t able to put public health first, as governments elsewhere have been able to. Leaving such a system intact after all of this “will guarantee the next catastrophe.”

Emmanuel Saez and Gabriel Zucman offer a proposal for social insurance to deal with the economic disruption of stay-at-home orders during the pandemic, based on the idea that the government should act as a “buyer of last resort.” Such a plan would keep businesses alive through the crisis, preserving difficult-to-restore relationships between businesses and employees until demand picks up and social distancing is no longer required.

Gerald Epstein’s contribution to this issue helps us understand the Federal Reserve’s actions so far in response to the crisis. The Fed must deal with both its traditional mandate of managing unemployment and price stability and also with preventing a meltdown of the financial sector. Epstein’s analysis puts the Fed’s actions in the context of the mostly unregulated financial system outside the banks and the troubles in the corporate bond market that were already brewing even before the pandemic hit. Epstein’s prescription is to turn the Fed into more of a public bank, but with greater accountability, transparency, and help for the (non-financial) “real economy” than we saw in the last crisis.
Paul Engler’s feature article depicts the pandemic as a “trigger event” that should show us the need to remake our social, political, and economic landscape through social movements. Reactionary forces will push austerity and a corporate agenda, so activists need to have plans for how to seize the moment and push forward “a counter-agenda rooted in a commitment to democracy and a deep sense of collective empathy.”

When you publish a bimonthly magazine, most articles are in the works for two months or more. But D&S’s perennial topics like inequality (the focus of John Miller’s column in this issue) and the need to move to a green-energy economy (the focus of Arthur MacEwan’s column) are as salient as ever. Débora Nunes’s feature on Brazil’s Movement of People Affected by Dams shows the struggles of activists in a country with a reactionary leadership whose response to the current pandemic will likely be catastrophic.

Our May/June issue will be our Annual Labor Issue, and we have lots of coverage in the works on the ongoing crisis and the labor movement’s response to it. Until then, stay healthy and safe. We will weather the storm.

Bernie Sanders: Nothing to Fear Except Fear Itself

By Thomas Palley

Cross posted at the author’s website.

“The only thing we have to fear is fear itself.” Eighty-seven years ago those were the words of Franklin Delano Roosevelt in his 1933 inaugural speech. Today, they resonate with Senator Bernie Sanders’ presidential campaign, which confronts a barrage of attack aimed at frightening away voters.

Fear is the enemy of change and the friend of hate. That is why both sides of the political establishment are now running a full-blown campaign of fear-mongering against Sanders.

The Democratic Party establishment likes the economy the way it is and wants to prevent change. Donald Trump and the Republicans have made themselves the party of hate. Both therefore have an interest in promoting fear, which explains the strange overlap in their attacks on Sanders.

The roots of our discontent

Let us backtrack a little. After the financial crisis of 2008 we escaped the threat of a second Great Depression, but we failed to address the root causes that have promoted wage stagnation and economic insecurity. The results of that failure have been twofold.

On the economic front, the US has had another stock market boom and an economic recovery that has ameliorated but not remedied past injuries to working families.

On the political front, economic distress and discontent has been exploited by Trump to push his conman agenda which uses hate to blind people to his economic swindle.

Economics: Sanders is an FDR Democrat

Sanders’ economic policies aim to tackle the deep causes of economic and political discontent. That threatens the establishment, which is why he is being red-baited by both Republicans and Democrats.

Far from being red, Sanders’ economic program is straight out of the American mainstream. It echoes FDR’s New Deal which saved American capitalism in the 1930s.

A higher minimum wage, stronger unions, green infrastructure investment, free public education, higher taxes on the wealthy, and reining in corporate power are programs which would have been supported by Presidents Roosevelt and Truman. They are the type of programs the Democratic Party used to advocate before its inside take over by Wall Street.

“Medicare for All” is being especially targeted by the fear-mongers, who have libeled it as socialist. There are four major approaches to healthcare: private health insurance (which includes Obamacare); private insurance with a public option; single-payer insurance (i.e. Medicare for All); and a national health system such as in the UK. All are consistent with capitalism. Moreover, Canada unambiguously shows single-payer delivers better healthcare for ordinary people than private insurance. That holds for healthcare costs, access, and well-being.

Politics: Sanders is an American constitutionalist

The economy is significantly a political creation. Our rotten politics have contributed to making the economy we have, and our rotten politics obstructs us from changing it.

Without political reform change will be near impossible, which explains Sanders’ call for a political revolution. The influence of money in politics must be reduced, which is why it is critical the Supreme Court’s decision in Citizens United be reversed.

But Sanders is no revolutionary. His political program harks back to the framing of the US constitution.

A fundamental concern of the founding fathers was excessive political power, be it via monarchy or plutocracy. Two hundred and fifty years ago the problem was monarchy. Today, the problem is plutocracy.

Excessive political power is now exercised via corporate political lobbying, payola for politicians, and the corporate controlled media. No clearer proof can be given than the fact that billionaire Trump heads the Republicans, and billionaire Bloomberg aspires to head the Democrats.

Red scare and the politics of fear

Both Democrats and Republicans are now engaged in a campaign against Bernie Sanders aimed at frightening voters and preventing change. Ironically, the fear-mongering of the Democratic establishment is even more dangerous than that of Trump and the Republican Party.

We need change to beat hate and restore shared prosperity, but the Democratic Party elite aims to block change by torpedoing Sanders. Worse yet, if they fail to sink Sanders, their “red scare” tactics will have played right into the hands of Trump who plans an even uglier more dishonest red scare campaign.

In these dangerous times, the words of FDR can help inoculate us against the politics of fear. When it comes to Bernie Sanders, there is nothing to fear except fear itself.

Thomas Palley is an American economist who has served as the chief economist for the US–China Economic and Security Review Commission. He is currently Schwartz Economic Growth Fellow at the New America Foundation.