–President Trump Says Payroll Tax Cut, Income Supplements Suggested to Congress
–DJIA Closes -7.8%; S&P -7.6%; Nasdaq -7.3%; 10-Yr 0.575%; German 10-Yr -0.858%
–Markets Show a Positive Bounce After Trump Comments as Asia Markets Opened
By Denny Gulino
THE WHITE HOUSE (MaceNews) – “Good for the consumer, gasoline prices coming down!” Guess who tweeted that? And prompted 85,000 “likes?”
Of course President Trump’s followers have cheered his optimistic views about the corona virus, the pummeled oil market and his attacks on the media which he says are exaggerating the virus dangers.
His critics, though, ask what’s more scary, his occasional avoidance of virus reality or the possibility he actually believes the media is exaggerating the dangers.
When Trump tweets his supporters are reassured. He posted Monday, “So last year 37,000 Americans died from the common Flu. It averages between 27,000 and 70,000 per year. Nothing is shut down, life & the economy go on. At this moment there are 546 confirmed cases of CoronaVirus, with 22 deaths. Think about that!”
His critics ask if simple arithmetic would then suggest that if the corona virus fatality rate is 1%, 2% or, as the World Health Organization says, 3.4%, does that mean say 37,000, the 0.1% who died from ordinary influenza two seasons ago, should be multiplied by 100, 200, or 340 to suggest the total of eventual U.S. deaths? That’s reassuring?
The ultimate death total will depend both on the proven lethality rate of COVID-19 and the time it takes to distribute an effective vaccine for healthy people, as well as the treatments that are developed for those who become ill. The experts see the safety tests for a new vaccine taking a year and more to complete enough case studies to show the vaccine doesn’t spread illness instead of preventing it.
Upon President Trump’s return from Mar a Lago Monday afternoon, advisers had options ready for him to choose in view of the day’s plummeting markets, the threatened murder of the American shale industry, the suspended animation encompassing airlines and cruise line companies, the cash-flow starvation facing many small businesses and all the other casualties that seem to be nearly here.
The $7.8 billion anti-virus package signed into law Friday did include provisions for billions in small business loans. Trump’s economic policy coordinator Larry Kudlow had suggested that “timely and targeted” aid can be expected, aimed at sectors like small business that expect to suffer. But not hundreds of billions for shovel ready projects.
And when it came time for the daily Corona Virus Task Force to hold its evening briefing for reporters Monday evening President Trump did indeed show up with some new proposals to Congress. A payroll tax cut, is one particularly expensive option, and he said he wants some kind of income guarantee for those wage earners who are forced to stay home.
The total will be “a big number,” Trump said of his proposed tax cut, something that would cost government tens of billions for every basis point cut in the tax rate. “We’re also going to be talking about hourly wage earners getting help so that they can be in a position where they’re not going to ever miss a paycheck.”
“Also,” he added, “we’re going to be seeing the Small Business Administration and creating loans for small businesses.” The administration will also be working with “the airline industry the cruise ship industry, which obviously will be hit.”
Also at the podium was Treasury Secretary Stephen Mnuchin who said he is in “daily” contact with Federal Reserve Chair Jay Powell, without saying what they talk about. The New York Fed Monday did increase the amount it’s willing to inject into the money markets. The Fed and other banking industry regulators also advised bank examiners to allow some wiggle room so banks could exercise some forbearance to prevent loan defaults because of the effects of the virus.
Trump promised to hold a news conference sometime Tuesday after talks have been held with Republican congressional leaders.
However for all those taking heads who Monday suggested other large fiscal stimulus programs, like mandatory paid sick leave, their hopes lie with a Congress that hasn’t demonstrated a great tendency toward speed. Another week’s recess, aka district work period, is scheduled to begin at the end of the week.
In any event, Trump’s words may have helped stocks futures which, while he talked, turned positive as Asia markets opened, at least for an hour and a half.
The already-passed anti-virus legislative package, which pays for masks, other supplies, vaccine development, enhancement of rural care facilities and a lot of other concrete needs, was the low-hanging fruit among the congressional possibilities so it remains to be seen if Congress – including Democrats – is ready to write some much larger checks.
Monday’s markets convulsion, the fourth worse in percentage terms since World War II – which Trump’s tweets blamed on the Saudi-Russia oil disagreement as well as “fake news” – might or might not be repeated as the U.S. experience with the COVID-19 virus evolves. What are now mostly fears currently either turn into the reality that some other countries are already seeing or don’t, perhaps because the virus in fact does recede in ferocity somewhat because of warmer spring weather – an outcome yet to be demonstrrated.
Whether or not that happens, however, might not prevent a lot of pain for millions of American workers and the firms that employ them. Their fate seems to have been sealed by what is already known about the virus, that it only gets worse, that it’s not all that temporary and that instead it is the containment phase that is, in fact, temporary, a prelude to a very long “mitigation” phase.
The timeline to a vaccine, which depends on the science employed by the nation’s medical establishment, is the one that counts the most, not the measured pace of the reaction of government and its economic levers no matter how enlightened.
As in last Thursday’s White House Watch, titled, “ Is It Finally Time to Buy the … Abyss,” the command economy and culture of China may have lowered their rate of transmission to less than one additional infection per virus victim, the tipping point toward control. So far there’s been no assurance from any direction that’s politically possible in the United States since it would involve increasingly draconian restrictions on domestic travel, education, commerce, sports, recreation and entertainment.
Even without that kind of all-out containment effort, the day’s market events suggest a mild recession has become the best-case scenario for the months and quarters immediately ahead, not the worst-case outcome.
The credit events threatened if not now assured for the overleveraged oil patch – staggered by the day’s worst oil prices – the most severe collapse in nearly three decades – are one of several triggers that can easily prompt cascading knock-on effects. Like stock futures, oil price futures did bounce back up more than 4% early in the evening.
The U.S. consumer-dominated economy, mainly dependent on the services industry which in turn is dependent on people and ensemble production, is particularly vulnerable to “social distancing.” Italy and some other countries are imposing drastic distancing, including in one case a mandatory six-foot circle of isolation for every individual, rigorous restrictions on any public gatherings and harsh penalties for violations.
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Contact this reporter: denny@macenews.com