NDN Blog

Please join NDN on Wednesday, June 10th at 2pm ET for our regular showing of our "With Dems, Things Get Better" webinar.  This new recurring webinar marks the debut of a new initiative here at NDN, “The Asymmetry Project.”  This project builds on a body of our work over the past few years, and makes the argument that one of the defining political developments of our time is just how different the two American political parties are, and have become.

This webinar will take place on Zoom, you can register for the event here. 

"With Dems Things Get Better" is a data rich dive into what has happened in America since the Berlin Wall fall in 1989 and a new age of globalization began. We ook at the performance of the two parties during this time – the 16 years of Obama and Clinton, the 15 plus years of the Bushes and Trump.  What the data shows is that America has prospered and made progress when Democrats have been in power, and fallen behind, again and again, when Republicans have held the White House.  We then spend time discussing what this all means for the coming recovery, policy making more broadly in the years ahead and in the short term, the 2020 election itself. 

We hope you can join us!  And do invite others - all are welcome.

NDN is pleased to invite you to a new weekly series every Friday at 2pm that will feature Simon Rosenberg and Rob Shapiro discussing the latest updates and analysis on COVID-19. 

The weekly briefings will take place on Zoom and will last for 45 minutes each. You can register for our April 17th discussion here, and our April 24th one here.  Once you register, you will find a link to the briefing location on Zoom that will go live at 2pm on Friday.

Simon is NDN's President and is a frequent political strategist and commentator in the national media, appearing regularly in the New York Times, Washington Post, and MSNBC. In this past election cycle, he was a senior advisor to the Democratic Congressional Campaign Committee, helping craft the strategy which netted Democrats 40 seats and earned the highest vote share by either party since 1986. 

Rob is a long-time contributor to NDN and was the Undersecretary of Commerce for Economic Affairs in the Clinton Administration. He was a senior economic advisor to Hillary Clinton, Barack Obama, and John Kerry in their presidential campaigns, and is currently the Chairman of Sonecon LLC, an economic and security policy consultancy. 

As background, Simon keeps a live document with his latest thinking on COVID that you can find here. As well, Rob published a new piece in The Washington Monthly last month that examines what a long-term economic recovery plan would look like in the face of several different scenarios of the coronavirus's severity. 

The economic impact of the coronavirus pandemic will be the most severe shock to hit the US since the depths of the 2008-09 financial crash, and could rival that crisis in intensity. JP Morgan projects that growth in Q2 will fall by an annualized 14%, while Bank of America estimates a 12% hit. Both of those numbers would be the steepest quarterly decline in growth since 1947, and far worse than the 8.4% decline in Q2 of 2008. As a result, it is critical that economic policymakers in Congress and the Administration take immediate action to prevent likely 2-3 quarters of negative growth from turning into a deep, years-long malaise as we saw in 2007-2010.

Importantly, while the Trump administration has blown up the deficit in recent years largely through reckless tax cut policies, now is not the time to worry about debt-related issues. Long-term interest rates are at all-time lows, so the government has much greater ability to sustainably borrow without risk of hefty interest payments. Furthermore, a deep recession would actually likely increase deficits to a greater extent than a large fiscal stimulus now, given that long periods of weak growth tend to boost deficits because they harm revenues and increase automatic stabilizer spending, as we saw in the weak recovery after the financial crisis.

Therefore, Congress should aim for a massive fiscal stimulus right now, and should aim to achieve three broad goals with their proposal: shore up the healthcare system and pandemic-response, provide aid to workers and businesses directly harmed by the pandemic, and conduct a massive cash transfer program to boost the overall economy.

The first part of the fiscal stimulus proposal must deal with critical shortfalls in both the national coronavirus testing regime currently in place and in critical hospital equipment that will likely occur over the next week. First, on testing. The federal government must immediately ramp up testing by a factor of dozens (through an all-of-the-above approach that incorporates tests produced by the CDC, private labs, and WHO-approved firms), implement drive-through testing in all states, and begin a system of temperature checks in most high-traffic public areas (including all international airports). Each of these steps has been implemented by South Korea weeks ago and most of Western Europe now, and there is no reason why the US can’t do the same with adequate funding.

Second, it is likely that many US hospitals will run out of both ICU beds and ventilators in the next week, something that could cause a large spike in mortality as we’ve seen in both Lombardy and Hubei when medical equipment ran out. This is a problem that can be solved immediately with proper funding. New reports indicate that ventilator production can be increased by 500% if the federal government puts in the order, and the National Guard can quickly set up triage units and greatly expand the number of hospital beds with adequate resources. Third, access to testing and treatment must be widespread regardless of income, so all coronavirus testing and treatment care should be free of charge to patients (through government-provider burden sharing so that healthcare providers remain fiscally above water themselves). The quicker that the spread of new coronavirus cases diminishes, the smaller the economic impact of the crisis will be – if these steps are taken immediately, both the number of deaths and hit to the economy from this crisis will fall greatly.

The second piece of the stimulus must address workers and businesses that have been impacted by the pandemic. With the shutdown of a huge number of retail, entertainment, and restaurant businesses in the past few days, and likely much more to come across the country, businesses will find it extremely difficult to continue future operations without government support. This will severely jeopardize the economic recovery after lockdowns have ended, as businesses could lay off their workers en masse if they can’t survive during the lockdowns. As a result, the federal government should offer interest free loans to all small and large businesses impacted by the pandemic to ensure that they can continue paying their fixed costs during the crisis.

Workers have also been greatly impacted, and it is likely that mass layoffs and working hour cuts will start in the next few days as businesses see their revenue dry up. Indeed, jobless claims surged over 33% last week, and that was before the large wave of layoffs beginning on Monday took effect. To support workers and encourage them to take sick leave to avoid spreading the pandemic, the stimulus should include 1) Paid sick and family leave set at 75% of median income using a government funding mechanism (versus coming from already hard-hit businesses), 2) Enhanced unemployment insurance benefits set at 75% of median income and lasting indefinitely (until the crisis is over), and 3) Increased provision of more generous food stamps, housing support, Medicaid, and SSI payments. By supporting businesses and workers who have been hard hit by the pandemic, we can ensure that there is no large-scale collapse in consumption and business-investment once the lockdowns end, and that all workers are still able to purchase necessities right now even if they lose their job.

Finally, the federal government should unveil the most ambitious cash transfer program in American history to support the overall strength of the economy, by providing $1,000-2,000/month to all Americans. The exact monetary amount of the cash transfer, and any means testing of the payments (i.e. more to households making under $100,000/year), can be determined by the severity of the crisis as economic data comes in and by the simplicity in actually running the program, but the key point is that checks should begin arriving for the vast majority of Americans as soon as possible. A key factor behind the slow recovery in 2007-2010 was that the Obama administration’s $800 billion fiscal stimulus, opposed for being too large by some Democrats and almost all Republicans in Congress, was actually far too small considering the severity of the 2008-09 economic crisis. Economists today now generally agree that a stimulus twice that size would have led to a far more robust recovery in 2009 and 2010, and today policymakers must ensure that they don’t make that same mistake of going too small and thus handicapping income and jobs growth for years to come.

Direct cash transfers to every American have benefits that other, more targeted programs like a payroll tax cut don’t have. First, it necessarily applies to all low- and middle-income Americans, including those who are out of work, disabled, or elderly. A payroll tax cut wouldn’t provide relief to any of those groups, because you have to have a job to pay payroll tax in the first place. Second, providing these lump sums of $1,000/month would put hundreds of billions of dollars in the hands of the poor and middle class, whereas the rich pay more money in payroll tax (because they have higher incomes to begin with) and many poor households don’t pay much payroll tax (because they are out of work or make low incomes), so a payroll tax cut would end up being regressive and targeted towards the wealthy. And importantly, cash transfers appear to have wide bipartisan support in Congress today. Republican Sens. Tom Cotton and Mitt Romney have come out in favor alongside Democratic Sens. Sherrod Brown, Cory Booker, and Michael Bennet, and Chairman of Obama’s Council of Economic Advisors Jason Furman. As a result, it could likely get large support right now and pass quickly, which is a critical necessity.

Now how much would all of this cost? Giving a $1,000/month payment to all Americans would cost about $320 billion (1.5% of GDP) per month. The combined cost of more spending on healthcare/testing equipment and subsidies to hard-hit businesses and workers is harder to tell, but a bill proposed by Senate Minority Leader Chuck Schumer with many of those provisions has been estimated at $750 billion (3.5% of GDP). So an initial bill would cost about $1.1 trillion (5% of GDP), with an additional $320 billion per month until the economy is sufficiently recovered. A hefty price tag yes, but necessary to ensure that Americans who are suffering right now are taken care of, and that the economy sees a robust recovery once the pandemic begins to abate. In preparing for a recession in 2020, it is critical that we remember the lessons of 2008. In that crisis, Americans who owned mortgages worth more than their homes received little support and lost their life savings as a result, while unemployment remained far too high for too long due to a lack of fiscal and monetary stimulus. Today we should ensure that those most vulnerable to the crisis receive support immediately, and that significant stimulus is available once the lockdown ends to rejuvenate the economy rapidly.

Over the past week, the S&P 500 has fallen by almost 5%, the yield curve - considered a reliable recession indicator by the Fed - has inverted to its weakest level since October, and a key survey of the manufacturing and service sectors has dropped to its lowest level since October 2013. All of a sudden, the tepid economic recovery since late last year has ground to a halt. Two key factors underlie this startling new trend. The first, of course, is the emergence of the coronavirus epidemic, which has ground the Chinese economy to a halt with major knock-on effects for the rest of the world. The rapid spread of the virus in recent days to Italy and Iran, the first major outbreaks in countries not neighboring China, have in particular sparked fears that the epidemic will last longer than expected. The second factor, however, is that the US economy was in a weak structural condition even before coronavirus began affecting global markets. While swift action by the Fed likely forestalled a recession in 2019 or early 2020, growth was still forecast at 2% or lower for 2020 and manufacturing remained mired in a deep recession.

Much of this pre-coronavirus stagnation is due to the fact that, even with the phase 1 trade deal with China, Trump's trade wars are very much still alive and running. The average US tariff on Chinese imports is still today at 19.3%, compared to just 3.1% when the trade war began in March 2018 (and Chinese tariffs average 20.3% today, compared to 8% in March 2018). Furthermore, steel and aluminum tariffs are still in place on the EU and Japan, and the President continues to habitually float imposing major auto tariffs on the Europeans. As a result, if the Administration wants to cushion the likely significant impact of coronavirus on the US economy this year, it would be wise to also de-escalate its ongoing trade wars which have harmed American jobs, growth, and wages. For more on NDN's work on economic and trade policy under the Trump administration, please click here.

NDN is pleased to pass along a letter released today by the New Democrat Coalition that strongly criticizes the President for withholding the Section 232 report on potential auto tariffs that the President is legally required to release to Congress. This refusal to respect the basic separation of powers in our government is another threat to our constitutional framework, and follows repeated illegal impositions of tariffs without the consent of Congress.

NDN has long urged Congress to challenge the President's reckless and extra-constitutional tariff policies, and we are very pleased that the New Democrat Coalition has taken this important step. You can find the letter here, and below.

New Democrat Coalition Letter On Section 232 Auto Tariffs

Dear President Trump,

American autoworkers, parts suppliers and retailers, dealers, vehicle service providers, and millions of consumers have lived under the threat of tariffs since you initiated the Section 232 investigation into auto imports on May 23, 2018. The Secretary of Commerce submitted the Section 232 report to you in February 2019; however, the report continues to be hidden from Congress and the public.

As Members of the New Democrat Coalition Trade Task Force, we once again want to reiterate that we do not believe that imported automobiles and auto parts and the hard-working Americans in the auto sector are a national security threat. As you have admitted publicly, there is no national security risk from automobiles and auto part imports. In fact, your abuse of the Section 232 tariff process jeopardizes our national security by alienating our allies and threatening the economic security of American workers. Imposing tariffs under Section 232 on autos and auto parts for reasons not related to national security clearly oversteps the authority granted by Congress.

Further, to help bring more transparency to this process, Congress included a provision in the Consolidated Appropriations Act for Fiscal Year 2020 which required the release of the section 232 report by January 19th of this year. You signed this legislation into law; however, you continue to refuse to release the report to Congress and the public.

You are therefore not only in violation of Section 232 of the Trade Expansion Act of 1962, but also the Consolidated Appropriations Act for Fiscal Year 2020.  Your willful disregard for these laws threatens American workers as well as the balance of power that is so essential to our Constitution. We implore you to not only release the Section 232 report on imported automobiles and auto parts as required by law, but strongly urge you to abandon any further tariff action that threatens the American automotive sector, auto workers, and our economy.

We look forward to the immediate release of the Section 232 auto report to Congress and the abandonment of the tariffs you are considering implementing. 

Sincerely, 

Reps. Terri A. Sewell (AL-07), Suzan DelBene (WA-01), Ron Kind (WI-03), Rick Larsen (WA-02), Gregory W. Meeks (NY-05), Lizzie Fletcher (TX-07), Don Beyer (VA-08), Veronica Escobar (TX-16), and Susan Davis (CA-53)

Three years of economic policy under the Trump administration are well represented by just a few words: incoherent yet immensely dangerous. First, incoherent. The President promised that his tax cut would pay for itself and super-charge economic growth to a sustainable 3%/year. Instead, the tax cut has cost over $180 billion/year and growth has never come in at 3% or higher during his Administration (and was just 2.3% in 2019). Furthermore, Trump promised that his trade war would revitalize manufacturing and create far more jobs than during the Obama administration. Instead, his tariff policies have led to a deep manufacturing recession and job growth through his first three years is almost 40,000 jobs/month slower than during Obama's second term.

Second, immensely dangerous. As a result of Trump's attacks on Obamacare and his support for new restrictions on Medicaid access in the states, the uninsured rate has begun to rise rapidly after years of declines under Obama. In 2019, almost 8 million fewer people had health insurance than did when Trump took office in 2016. In addition, the sharp decline in pollution of almost 25% from 2009 to 2016 has rapidly reversed under Trump. As a result of his gutting of several major environmental programs such as the Clean Power Plan, emissions have actually increased by over 5% since 2016, a development that his own EPA estimates will cause 1,400 additional deaths per year in the US. 

It is fitting then that the budget proposal released by the administration today continues this trend of being implausible yet significantly harmful to the most vulnerable Americans. First, the budget proposal projects economic growth of 3.1% in 2020 and 3%+ every year up to 2024. This is a wildly unrealistic and downright laughable estimate. Growth was 2.3% in 2019, and the IMF and Fed both estimate that it will be just 2% in 2020. Furthermore, the Fed projects that growth will hit just 1.9% in 2021 and 1.8% in 2022, nowhere close to the administration's 3% estimate.

And second, the budget proposal includes significant cuts to the social programs that disproportionately help poor Americans. Trump's proposal would cut Medicaid and food stamps by almost $300 billion and reduce federal disability benefits by almost $100 billion, targeting literally sick, hungry, and disabled Americans. Furthermore, he proposes significantly cutting the budgets of critical future-looking federal departments such as the Environmental Protection Agency by 27% and the Department of Health and Human Services (which funds medical research organizations such as the CDC and NIH) by 9%. For more on NDN's work on economic and trade policy under the Trump administration, please click here.

During last night's State of the Union address, Trump heavily focused on his supposed economic achievements and tried to contrast his record with one of decline under Obama. He described a world in which the economy had been long suffering under the Obama administration, but was now prosperous and strong thanks to his policies. Of course, the entire story is preposterous. While it is true that the economy is quite strong today (although large structural problems remain), that strength is a result of a largely unbroken trend that began under President Obama. Indeed, most macroeconomic indicators show either a continuation or slight decline in the pace of economic progress under Trump compared to Obama's 2nd term.

First, job growth has slowed moderately under Trump. From January 2013 to January 2017 under Obama, monthly job growth averaged 217,000 jobs. From January 2017 to December 2019 under Trump, meanwhile, it has averaged 177,000 jobs. Similarly, real median household income grew at an average annual rate of 2.6% from 2012 to 2016, while it has risen at an annual rate of only 1.1% in 2017 and 2018.

The only macro indicator that has seen even a slight pick-up has been economic growth, but even this will very likely be the same as under Obama after the 2020 data is in. In Obama's second term, quarterly GDP growth averaged 2.37% while so far quarterly GDP growth under Trump has averaged 2.54% - already very similar. For 2020, however, the IMF projects that growth will be 2%, meaning that quarterly GDP growth for Trump's four years will likely average 2.41%, essentially identical to the 2.37% average growth under Obama. 

And this doesn't even get into the significant decline in other key indicators of economic well-being under Trump. After the uninsured rate fell from 16% in 2012 to 11% in 2016 thanks to Obamacare, the trend has sharply reversed under Trump and the uninsured rate rose to 14% in 2018. Furthermore, after air pollution declined by 20% from 2012 to 2016 thanks to tighter environmental regulations under Obama, that trend has also gone backwards and pollution rose by 6% from 2016 to 2018. Even Trump's EPA estimates that this increased pollution will cause about 1,400 more deaths per year. As can be seen, it is simply not true that Trump has overseen an economic revival since 2016, and actually almost every macro-economic trend has declined to some extent under Trump. For more on NDN's work on trade and economic policy under the Trump administration, please click here.

This piece was originally published by the Washington Monthly. Below is an excerpt from the piece, and you can find the whole piece here.

Democrats should be pleased with the successful negotiations over the USMCA and the deal’s passage in the Senate. While the trade agreement’s scope is clearly quite limited—and more work remains to be done on the environmental impact of continental trade—the pact achieves some much-needed tariff reduction, modernizes some aspects of digital trade, and helps to improve labor standards in Mexico. Importantly, House Democrats were able to negotiate stronger labor rights for workers on both sides of the U.S.-Mexico border, with more effective enforcement provisions for those rights, which helped give the deal more teeth. These are all positive steps that will help American workers and businesses.

All that said, Democrats cannot wash their hands of trade policy now that the USMCA has been completed. Quite simply, the deal is only a minor piece of the president’s overall trade strategy. His larger trade agenda is undoubtedly malignant. He has attempted to tear down the global trading system by illegally circumventing the legislative branch­—moves that must be challenged strongly by Congressional Democrats. Otherwise, their win on the USMCA will be significantly undermined by a broader trade policy that has created major losses for incomes, jobs, and the rule of law. 

To read the rest of the piece, please click here.

Congress should be pleased with the soon-to-be successful passage of the USMCA, a deal that is quite limited in scope and impact but does achieve some real advances in modernizing digital trade, reducing agricultural tariffs, and improving enforcement of labor protections. However, it is critical that Congress doesn't wash its hand of trade policy now that the USMCA debate is over, because the President's larger, destructive trade strategy continues to erode the global rules-based trade system. Over the past two years, Trump has an undertaken an unprecedented experiment with protectionism, hoping to rejuvenate US manufacturing and broader jobs and growth. Instead, manufacturing has been driven into a deep recession while hundreds of thousands of jobs and tens of billions of dollars in total income growth have been destroyed. It is time now that Congress finally step up to challenge this failed experiment. 

First, Congress must end the trade conflicts that even in the best case scenario don't serve any purpose, are largely targeted at US allies, and are done merely to harm the global trading system. The most important of these is to re-open the WTO's dispute resolution court, which was effectively shut down when the Trump administration refused to appoint new judges to fill open seats. With the dispute process closed, there is no legal way for countries to appeal protectionist measures taken against them, a process that has benefited the US significantly over past decades (indeed, the US has won 11 disputes against China, compared to China winning only 4 against the US) and whose dismantling serves no US interest whatsoever. Congress must also once and for all repeal Trump's tariffs on key US allies who are not committing trade abuses, particularly the steel and aluminum tariffs and threatened auto tariffs on Japan and the EU. These tariffs serve only to weaken jobs and income growth both in the US and abroad, and have no strategic goal because our allies aren't committing any trade abuses that would justify them. 

Second, Congress must develop a coherent strategy to address the more difficult trade problems facing the country. The most prominent of these is dealing with China, a country that systemically commits trade abuses but whose "phase one" deal with Trump contains no details about addressing them. The President's unilateral trade war with China has not created the leverage to force them to actually pursue structural reforms in their economy, while significantly harming the US economy in the process. Instead, Congress must begin crafting a multilateral strategy that works alongside our trading partners and allies and offers benefits to China if it commits to genuine liberalization. You can read more about NDN's analysis of the economic costs of Trump's trade war here, and find NDN's broader work on trade and economic policy under the Trump administration here.

NDN was an early opponent of the trade war launched in March 2018 by the Trump Administration. We argued that China did in fact commit trade abuses on a wide scale, but that the most effective mechanism for forcing a change in that behavior was through multinational trade negotiations involving US allies that offered China benefits if it committed to genuine liberalization (such a mechanism, the TPP, did exist before Trump unilaterally withdrew in January 2018). We predicted that Trump's alternative, a significant unilateral trade war with China, would instead cause significant pain to the US economy, would not create the leverage to force actual structural reforms, and would likely end with Trump "achieving" some cosmetic concessions from China as he worried that the trade war would harm his re-election chances in 2020.

As has become clear over the past week, this is exactly what has happened. The trade "deal" announced on Friday contains no details about the structural reforms that were the explicit justification for the trade war in the first place - no meaningful commitments on forced technology transfers, no meaningful commitments on industrial subsidies, and no changes to Chinese law regarding IP theft (for years China has made similar "directives" on IP reform as it did in Friday's announcement but has habitually broken them). Instead, the only "achievement" from the deal was a promise by China to increase its purchases of US agricultural exports, but even here there are major problems.

First, the level of promised exports is just not very large compared to the pre-trade war trend. The Council on Foreign Relations estimates that without the trade war, US agricultural exports to China would have hit $27 billion in 2019 and over $30 billion by 2022. In addition, the International Trade Commission estimates that the TPP would have further increased US agricultural exports by $7 billion/year - bringing the total to about $37 billion by 2022. In the new China deal, meanwhile, Ambassador Lighthizer announced that China would purchase a total of about $40 billion in US agricultural products in 2021 and 2022. As a result, this "deal" gets American farmers a paltry $3 billion/year more in exports than if Trump had done nothing on China and signed the TPP deal that was on his desk in January 2017.

Second, it isn't even particularly likely that China ends of purchasing this level of agricultural exports in the first place. A key sticking point for the Administration was that China agree to this level of purchases in a written and signed contract, but the trade deal didn't do this and instead just included a promise by the Chinese that they would do this level of purchases (the Chinese themselves gave no specifics on their level of purchases). Even more striking, Chinese officials on Friday still said that their level of purchases would be market-oriented and in compliance with WTO rules, while the $40 billion in purchases likely runs afoul of both of those metrics. As a result, it is very unclear if China will even uphold their end of the bargain, and over the past year they have routinely committed to purchases that they have then not done.

Finally, even if the purchases get done, encouraging the Chinese government to control the export process of the whole Chinese economy is counter to the entire economic strategy of the US vis-a-vis China. We want China to become a more market-oriented economy with a private sector free to import goods from firms and countries of their choosing, but this directly increases state control by the Communist Party. Furthermore, the purchases almost certainly violate WTO rules (for they impose de facto quotas on agricultural exports from other countries), something ironic given that the US has long (correctly) attacked China for violating the WTO with their trade policies. 

What, then, has Trump's trade war with China actually accomplished since it began in March 2018? It has reduced US economic growth by 0.6% ($128 billion), cost over 300,000 American jobs, and reduced the disposable income of the average American household by over $1,000. And what has Trump gotten from China in return? A paltry amount of increased exports and no structural reforms. You can read more about NDN's analysis of the economic costs of Trump's trade war here, and find NDN's broader work on trade and economic policy under the Trump administration here.