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How Much Does the Stimulus Package Help Working People?

28-Mar-2020Ramy Khalil

Photo by Andrew Neel, Greensboro, NC (pexels.com)

The stimulus provides some relief to workers and small businesses, though not enough. It also includes a $500 billion handout to big business with hardly any strings attached.

The coronavirus has sparked a sudden, massive healthcare crisis and an economic collapse. This represents a sharp turn in the economic and political situation with far-reaching consequences.

In early March, one-fifth of US workers reported they lost their jobs or had hours reduced. The following week 3.3 million workers applied for unemployment insurance, the largest number in US history by far. In addition, many face steep medical bills, evictions, and denial of paid sick leave.

This comes after five decades of growing inequality that has resulted in a situation where nearly 70% of people in the US have little to no savings to ride out this storm. As corporate bosses attempt to unload the costs of the crisis onto the working class, an explosive situation has developed with a new political dynamic that was unimaginable only a few weeks ago.

Activists and socialists need to take stock of these dramatic changes, develop a clear analysis, and work out a program of the most appropriate demands and campaigns to confront the new challenges.

Trump’s Hubris

The Trump administration's response is massively aggravating the human and economic toll. Last year Trump eliminated a position at the Centers for Disease Control which was tasked with helping to detect, investigate, and contain disease outbreaks in China. He also ignored warnings by health experts both last year and this year that a global pandemic was likely.

On February 25, Trump’s chief economic advisor, Larry Kudlow, claimed, “we have contained this. I won’t say airtight, but it’s pretty close to airtight.” Yet Trump and his administration wasted two months downplaying the severity of the crisis, losing precious time to contain the spread of the virus.

This lethal cocktail of incompetence was then laced with a poisonous dose of racism as Trump administration officials called the coronavirus the “Chinese virus” and “Kung Flu.”

Trump declined the United Nations’ offer to give the US test kits, despite our country’s dire shortage. Trump also spent weeks resisting using the Defense Production Act which enables the federal government to order private companies to produce urgently needed supplies. Trump stated, “We're a country not based on nationalizing our business... Frankly they don’t need someone to walk over there with a hammer and say do it.” Trump has even advocated reopening non-essential businesses before the virus has been contained, shamelessly prioritizing corporate profits over human life.

While the ruling elites have focused on downplaying the crisis, using their knowledge for insider trading, and bailing out Wall Street, working-class people have risen to the challenge of fighting this pandemic. Many working-class people are stepping up, helping their neighbors with shopping, daycare, and other needs in acts of solidarity. Nurses, grocery workers, delivery drivers, and many other workers on the frontlines are heroically putting themselves at risk in order to support our society and those most in need. This crisis has revealed how our society truly depends on the working class to function even though the workers are usually underpaid and underappreciated under capitalism.

New York’s Democratic Governor Coumo has stood out as providing competent leadership in contrast with Trump’s buffoonery. Coumo has also developed a high profile for calling out Trump’s failure to mobilize sufficient resources, rightly so. But Coumo has not fought for the full range of policies that working-class communities really need.

In contrast, Bernie Sanders and Alexandria Ocasio-Cortez (AOC) have played an exceptional role in this crisis, giving a real voice to the needs of working people. The left-wing policies they are fighting for and won in some cases, such as expanded unemployment insurance, stand in contrast to the vast majority of Democratic politicians. This underlines the class divide within the big tent Democratic Party. Huge events like the coronavirus will increasingly clarify for progressive workers and youth the need to form our own independent, mass membership, democratically run political party to fight effectively for working-class interests as opposed to being subordinated to the capitalist interests which dominate the Democratic Party.

Socialists call for these emergency healthcare measures:

  • Free testing and treatment for all coronavirus victims, paid for by Medicare
  • All frontline workers must be guaranteed strict safety protocols and provided protective gear by their employer or the government.
  • The federal and state governments should immediately organize an all-out mobilization of healthcare personnel and order companies to produce enough test kits, N-95 masks, ventilators, hospital beds, and other necessary supplies.
  • Essential workers forced to risk their safety must be paid “hazard pay” of at least “time and a half.”
  • Take emergency measures to house all homeless people in vacant buildings and hotels.
  • Release all non-violent prisoners and immigrant detainees which can reduce the spread of the virus.

Socialism for the Rich

At the first signs of upheaval on Wall Street, the Federal Reserve immediately stepped in on March 12 to provide $1.5 trillion of ultra-cheap loans to big banks and financiers. However, it was not until two weeks later, on March 27, that the government passed a stimulus package to provide some relief to working people.

The $2 trillion stimulus is unprecedented in its size. While this bill provides much needed relief to working families, it falls short of what is necessary. It also contains $500 billion in corporate welfare with hardly any strings attached or protections for workers.

The Republicans and Democrats did not unite to pass the largest Keynesian stimulus package in modern US history out of a humanitarian concern for working-class people. They are desperately trying to give workers money to stimulate consumer demand in order to prop up US businesses and the capitalist economy. The politicians are also terrified of the political consequences of failing to alleviate the suffering of middle-class families and working people.

In such a deep crisis, the capitalists can be very flexible and ditch their traditional attachment to free market fundamentalism. They have no objections to state intervention in the economy when their corporations need bailouts, as we saw in the 2008 Great Recession and again today. The ruling class has been compelled to completely violate its own neo-liberal dogma in desperation to try to prevent the system from collapsing.

The main features of the stimulus bill are:

  • $500 billion lending program for large corporations with few conditions or protections for workers
  • $367 billion in loans to small businesses for up to 10 weeks. If a small business continues to pay workers throughout the crisis, eight weeks of those loans can be forgiven.
  • $300 billion for one-time direct payments to individuals who earn up to $75,000/year, specifically $1200/person plus $500/child
  • $250 billion for laid off workers, “the largest expansion of unemployment insurance in history,” according to Bernie Sanders. The bill provides $600 more per week than the usual amount, for four months ending July 31. This will provide most of the bottom half of the workforce essentially 100% of their former wage. Unemployment compensation was also extended for an additional 13 weeks, for a total of 39 weeks in some states. It also extends payments to independent contractors, tip workers, and part-timers, though it appears undocumented workers are probably not eligible.
  • $150 billion of aid to state and local governments to help them weather the drop-off in tax revenue and fight the pandemic
  • $130 billion to hospitals fighting the pandemic

Many elements will help working-class families, but a number of policies were not included that working-class people desperately need:

  • The bill does not cover the expensive costs of COVID-19 treatment. We need free treatment for all coronavirus victims, paid for by Medicare.
  • Payments to individuals should be $2,000 every month until the crisis ends, as Senator Sanders is demanding, not merely a one-time payment of only $1,200.
  • Many workers' hours have been reduced. Yet bills continue to pile up. The stimulus failed to include a moratorium on rent, mortgage payments, utility payments, student loans, or credit card payments. DSA is calling for these bills to be waived until the corona crisis ends. In the meantime, at a bare minimum, local, state, and federal governments should ban evictions and foreclosures during the crisis.
  • Many workers are compelled to work when they are sick because they are not provided paid sick leave and they live paycheck to paycheck. Forcing workers to work when they may have the coronavirus is a dangerous threat to them and their communities. Congress passed a previous bill on March 18 that provided paid sick leave but only for 20% of the workforce. (Later, Congress watered this down even further under pressure from corporate lobbyists.) The new stimulus package passed on March 27 does very little to close the enormous gaps in paid sick leave. DSA is calling for universal paid sick leave for all workers now, including independent contractors, part-timers, undocumented workers, and domestic workers.
  • The $150 billion in aid to state and local governments and the $130 billion for hospitals will help, but more federal support is urgently needed to deal with the surge of COVID-19 patients and mitigate the economic damage.

A Bailout for Big Business

The largest part of the bill is a $500 billion slush fund for corporate welfare, and the Federal Reserve plans to leverage this $500 billion to create a gargantuan $4 trillion corporate bailout fund! Never mind that corporations have enjoyed record profits, massive bailouts in 2008, and Trump’s tax cut in 2017 which handed them $1.9 trillion!

An entire quarter of the stimulus package goes to big business, with little accountability. The Democrats in Congress voted down Republican drafts of the bill twice, saying they wanted the loans to corporations to include more oversight and protections for workers. In the end though, they accepted a deal with a largely toothless Inspector General and Congressional oversight panel. The Democrats also pressured Republicans to require bailed out companies to halt stock buybacks for as long as they are receiving government assistance, plus an additional year.

However, the Economic Policy Institute wrote a useful critique, which is worth quoting at length:

[The legislation has] no guardrails to ensure that public money is directed toward saving the jobs, wages, and benefits of typical workers rather than the wealth of shareholders, creditors, and corporate executives. The bill calls for industry bailouts to preserve jobs “to the greatest extent practicable,” which is utterly toothless language. Further, there are no explicit protections for worker safety. Given that this entire crisis is driven by an epidemic and that many, including the President, want a premature return to economic activity in the face of this virus, it is imperative that U.S. workers be given protection against being forced to work in unsafe conditions. It is astounding that this basic protection cannot be made explicit for industries seeking public aid.

We could undertake a key test for whether corporations genuinely need public aid or are simply trying to exploit this crisis to grab public money by demanding these companies give the federal government equity stakes in exchange for immediate aid. By granting the government equity, these companies would dilute existing shareholders’ claims on future profits. If these existing shareholders are unwilling to allow this dilution, this is a clear sign that they firmly expect the company to continue operations even without a bailout. This can be seen in Boeing’s response to suggestions of granting equity stakes in exchange for aid—the company said clearly they would find other ways to cope. But if there are other ways to cope, then a bailout is by definition not needed.

Another shortcoming of the legislation is its assumption that the crisis will last only a month or two. Stan Veuger, an economist at the conservative American Enterprise Institute said, “I am skeptical that the size of the package is large enough to cover the entire shutdown-slowdown period.” If the crisis persists, the government will have to provide more relief to avoid a downward spiral.

Bail Out Workers, not Wall Street

The Republicans and Democrats carried out bailouts in 2008 and again today in a way that benefits capitalists much more than workers. Socialists vigorously oppose the $500 billion in corporate welfare included in this new package.

At the same time, socialists cannot ignore the danger of major companies and industries collapsing, and we need to protect workers by arguing for government intervention. But rather than bailing out the executives and wealthiest shareholders, socialists should argue that, in return for federal funds, the government should take failing companies into public ownership. The workers at these publicly owned companies should fight to remove the old board of directors and executives and elect a new council of the workers and community representatives to run the company democratically.

In response to this crisis, Spain and Ireland were forced to nationalize all their hospitals, and Italy was compelled to nationalize the country’s already struggling main airline. During this crisis socialists can popularize the idea of public ownership specifically of failing corporations such as the airlines, and build a movement to achieve this where possible.

In situations where we are not strong enough to win public ownership of failing companies, we should demand, as a bare minimum, that government loans to failing companies be attached to strict conditions, including:

  • Opening the books of companies that apply for bailouts to verify if they really need support and identify any mismanagement that led them to need a bailout
  • No layoffs of their workers; no cuts in worker pay or benefits
  • $15 minimum wage for all their employees and contractors
  • Paid sick leave for all their employees and contractors
  • Company-provided healthcare for all their employees and contractors
  • The company must sign an agreement to remain neutral if the workers choose to unionize
  • No using bailout funds for executive bonuses, stock buybacks, or profiteering
  • Government equity stakes in all bailed out companies
  • Production shifted toward goods or services according to an emergency plan to address this crisis

In recent weeks, thousands of people have joined Democratic Socialists of America. The unfolding social crisis makes it more urgent that even more people join our organization. DSA should link up with Bernie, AOC, fighting unions and allies to build a stronger movement of virtual protests (online petitions, letter campaigns, phone zaps, etc.) and workplace actions to pressure local and national politicians and companies to implement these policies.

Ramy Khalil is a Seattle DSA member. He was the 2013 Campaign Manager for Kshama Sawant, the first independent socialist elected to the city council of a major US city in decades.