US President Trump: None of the measures will sustain the economy
Photo: Andrew Harnik / APFor Americans, the coronavirus horror has reached a new high this week. The industrial nation now has more than five million infected people, more than any other state in the world. And at the same time, families all over the country are staring into the financial abyss. Because the Democrats and Republicans could not agree on a new aid package, the additional aid for the unemployed of $ 600 a week expired in early August.
The money was a "godsend" for her, says 30-year-old Jackilyn Lopez. Her employer put the dental hygienist on the street in March when the dental practices had to close due to the pandemic. Her husband works on the production line in a laser factory. The couple have an 18-month-old daughter and are expecting their second child soon. Lopez will only get $ 213 per week in support. "Our weekly purchases cost more than that, with diapers and baby food," she told the AP news agency.
For the US economy, the individual fates of the around 30 million unemployed add up to the mega-risk: Economists fear that consumer spending will collapse if the state cuts its aid. The special unemployment benefit together with the stimulus checks of up to $ 1200 per person were decisive in boosting incomes - and thus private consumption - despite falling wages, says Bernard Yaros from the research institute Moody's Analytics. "Fiscal policy was incredibly important to propping up the economy during the downturn," said the President of the Federal Reserve Bank of Chicago, Charles Evan: "And it continues to be important because we have no control over the spread of the virus . "
At least once, the economists agree: A new aid package is needed. But negotiations between Democrats and Republicans have failed. It is already disputed how much money the government should take in hand. The Democrats want to mobilize another $ 3.4 trillion. The Republicans in the Senate have submitted a draft for around one trillion dollars, which is already going too far for some in their own ranks.
There is just as little agreement on the content. While the Democrats insist on an extension of the $ 600 payment, conservatives warn that this will undermine the incentive to work. Because many low-wage earners would then get more money from the state than they would normally earn.
Four decrees instead of agreement in Congress
In the end, however, in the political tussle, one goal is at the top of the list for both sides: to improve their own chances for the November election. This is especially true of Donald Trump, who is losing ground in the crucial swing states given the failure of the government in the corona crisis. So the president is trying to cut the Gordian knot with a brutal solo effort: During an appearance at the golf club, Trump signed four decrees over the weekend to keep the economy going and to demonstrate his ability to act to the voters.
But on closer inspection, the ego package turns out to be an air number. Not only the top democratic politician Nancy Pelosi considers Trump's actions to be a violation of the constitution because budget law falls within the competence of parliament. Republican Senator Ben Sasse also said the president did not have the power to change tax law. He received an angry tweet from Donald Trump for this.
Above all, none of the measures are suitable to sustainably support the economy:
Trump decreed that the unemployed should continue to receive a lower special payment of $ 400 instead of the previous $ 600. However, when and how this will be implemented is unclear. Trump misappropriated the budget for disaster relief for his plan in a flash - and just at the beginning of the hurricane season. But the pot would be exhausted after just a few weeks. And his demand that the states should fund 25 percent of the disbursements is unrealistic. Even Ohio Republican Governor Mike DeWine has raised concerns.
Even more half-baked is Trump's decision to lower non-wage costs , which hardly anyone apart from him likes: The President wants the 6.2 percent social security contribution to be suspended by the end of the year for incomes below $ 100,000. However: In the next year, the employees would then have to pay. For the companies that withhold the levy, this creates a legal and practical problem. Experts therefore expect that they will circumvent the deferral.
Trump's announcement that the ban on eviction will be upheld for defaulting tenants also appears shaky . The statutory moratorium is a thing of the past, it merely instructs the authorities to avert the eviction of rent arrears as far as possible.
His package does not include further help for smaller companies whose sales have collapsed due to the corona-related shutdown of the economy. A wave of bankruptcies has long been rolling through America. A further distribution of helicopter money based on the example of the $ 1,200 check is also not planned.
The states, cities and municipalities that are losing their tax revenue will go away empty-handed, Trump will . The administrations are therefore likely to massively cut staff in the coming months in order to reduce their costs.
Trump's plan is "inadequate, legally questionable and falls dramatically behind the booster vaccinations that the economy desperately needs," says Lydia Boussour of Oxford Economics.
Chris Rupkey, chief financial economist at MUFG Union Bank, is more sober. The White House's slimmed-down economic program will not even reach the implementation phase, he predicts. The American economy is now left to its own devices. You will "go under or swim alone."
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