How will the COVID-19 pandemic and the protests over the police murder of George Floyd and other black people affect the political mood in the United States?  The libertarian-leaning economist Tyler Cowen suggested in March that the COVID-19 pandemic would mark the “death of the progressive left.”  It would erode support for key progressive goals, including redistributive economic policies and aggressive action on climate change.  He asked provocatively what we have heard about climate activist Greta Thunberg recently, and suggested that the pandemic will make protecting the climate “seem like another luxury from safer and more normal times.”

Cowen may be proved right, but progressives and Biden apparently did not get the memo.  Since Cowen wrote Biden has moved to the left and expanded his polling lead over Trump, and there are reasons to think the pandemic and the protests over police violence will shift the center of gravity in this country to the left.

There are some specific ways the pandemic is likely to increase support for the policy agenda of progressive Democrats.  The pandemic has highlighted gaps in our health care system that will likely increase support for universal health insurance.  The pandemic-induced recession may create an appetite for government spending to create jobs, including jobs to fight climate change.  Biden has proposed a massive green infrastructure program that polls well.  The plight of parents trying to balance work with the need to take care of children may increase support for childcare.  Covid-19 has revealed serious weaknesses in our aging unemployment insurance system, which seems ripe for a make-over.

These examples share a common logic that undermines the case for laissez-faire and may shift the mood of the country to the left in a fundamental and enduring way.

Apropos my previous post, a new NBER paper by Casado et al estimates the effect of pandemic unemployment benefits on local spending:

The FPUC supplement to unemployment insurance of $600 ended at the end of July 2020. Prior to its expiration, the average weekly benefit paid was $812, which would fall to $257, implying a decline in the replacement rate of 68%. The replacement rate was roughly 1.25 in the latest data, so the new replacement rate would be roughly .4, all else equal. At the unemployment rate of .077 in the latest data, spending this reduction in benefits would lead to a decline in spending of 44%. If the FPUC supplement is reduced to $200, the replacement rate would fall by 44%. The implied reduction in spending from these benefits would be 28%. Even if the FPUC supplement is reduced to $400, the replacement rate would fall by 19% and spending would fall by 12%. Thus, substantial declines in the generosity of UI benefits are predicted to have dramatic adverse effects on local spending.

Sure, you can question the results, and wonder about the size of multipliers, but this could be a disaster and the only reasonable policy choice is to extend the UI benefits.

In a semi-rational world, Trump and Senate Republicans would have agreed to a reasonably generous economic relief package along the lines of the HEROES Act approved by the House.  Without an extension of the special pandemic unemployment benefits and aid to state and local governments, a humanitarian disaster is inevitable and a macroeconomic disaster a real possibility.  Trump’s executive orders are grossly inadequate to prevent mass homelessness and hunger.  This will quickly become evident.  Layoffs of government workers will mount.  How on earth do Trump and Republican members of Congress think they can avoid electoral accountability for the coming train wreck?  How will Trump explain breaking off talks and rejecting a much more generous aid package, when it will be obvious that a bigger package was needed?  What will Republican Senators say to their constituents?  Remember, the party of the president gets the blame for bad outcomes, deserved or not.

Maybe Trump still wants to win but doesn’t have the mental capacity to game this out.  Krugman argues that Trump is way out of his depth and has surrounded himself with sycophants who promise miracle cures; payroll tax cuts are just another hydroxychloroquine.  Some Trump critics have consoled themselves with the thought that even if Trump is evil, at least he’s incompetent and lazy.  There is something to this idea.  But it’s hard to shake the feeling that a president who understood where his electoral bread was buttered would be a real asset on economic policy right now.

There are other possibilities.  Perhaps McConnell feels his position as party leader will be threatened if he tries to move a bill without majority support within his caucus.  A few days ago I expressed cautious optimism that Republicans would not try to hobble a Biden presidency by destroying the economy in the run up to the general election.  But maybe I was wrong.  Or maybe Trump and McConnell are betting that their indifference to suffering will let them get a relief bill without measures to protect the November vote, or with more corporate goodies, or with less overall spending.  Whatever is going on, Republicans are playing a dangerous game.

According to the Washington Post:

Half of Americans oppose renaming military bases currently named after Confederate generals, while 42 percent support the changes. Once again there is a significant partisan split, with 81 percent of Republicans and 50 percent of independents opposed and 66 percent of Democrats in favor. A majority of Americans ages 50 and older are opposed to any renaming, while a plurality of those under 50 support the change.

Despite the fact that the public leans slightly towards keeping current names, military and political elites (with the notable exception of the President) seem to be fairly unified in favor of renaming.

Senator Mitch McConnell of Kentucky, the majority leader, told The Wall Street Journal last week that he would not block the effort to rename the bases, and in an interview with a Louisville radio station, he said he didn’t “have any problem” with renaming the bases for “people who didn’t rebel against the country.” He has urged the president not to veto the bill.

“The issue of Army bases being named after Confederate generals is a legitimate concern in the times in which we live,” said Senator Lindsey Graham, Republican of South Carolina. “I’m OK with a process that the Senate came up with. And there’s a lot of good things in this bill.”

So . . . what gives?  Why are Republicans refusing to play the race card here?  I can understand why military leaders object to having bases named after traitors, and they also need to create a force that can function effectively in a diverse world.  But what about Republican politicians?  Is this all being driven by members of Congress in tight races?  Is that plausible, given that most Americans oppose renaming?

Or at least think about how you will talk about them in January . . .

It now seems likely that Joe Biden will win the presidency, and there is a reasonable chance that Democrats will capture the Senate as well.  If they do get unified control of the government, climate policy will high on their legislative agenda.  What is unclear is whether their approach will include a carbon tax.  This is troubling, because carbon taxes have very substantial economic and political advantages over other approaches to climate policy.

No doubt many Congressional Democrats understand the arguments for carbon taxes, although some progressives seem to be skeptical of using prices to reduce emissions.  Joe Biden’s climate plan says that “polluters must bear the full cost of the carbon pollution they are emitting”, which seems like an oblique reference to a carbon tax.  But so far Democrats have been avoiding the “t word” and instead emphasizing subsidies, direct job creation, and social justice, and this will make it difficult to switch gears after the election and implement a carbon tax.  The Democrats may be painting themselves into a rhetorical corner.

Any strong climate bill will face real challenges getting through Congress and maintaining political support.  Getting a carbon tax through Congress and preventing a public backlash will clearly require an effort to familiarize the public with the idea.  I believe this is possible, but Democrats (and Republicans) who support carbon taxation need to think about how and when this conversation will unfold.

In a post today at Econlib, David Henderson writes:

Postscript:

There was an unusually high percentage of good comments on my op/ed on the WSJ site. Here’s one I just noticed:

In Michigan, our Governor ordered auto insurance companies to issue rebates – due to folks driving less I guess.

But amazingly, our Governor who is owned by the teachers union, gave no such order  to rebate the portion of property taxes that go toward public schools. Even though there is no way teachers, who stopped in school teaching in March, provided the same level of service.

This needs to change.

Indeed!

This is, in fact, an absurd comment, strictly on economic grounds.  The cost of producing auto insurance has gone down due to the pandemic – people are driving less and having fewer accidents.  In fact, many auto insurance companies are offering rebates to customers as a good will gesture.  In contrast, it is not at all obvious that the cost of producing public education has gone down.  Of course, the quality of public education has gone down – on line learning is, for many students, a decidedly inferior alternative to in person instruction, and on line instruction does not provide child care to parents.  But as Henderson is well aware, price is driven by cost, not quality.  The bundle of goods and services I get when I go to the grocery store today is decidedly lower quality than it was 6 months ago, because I risk getting COVID-19 when I shop.  Yet the price of food has risen because the cost of grocery store inputs has risen.  (To be clear, I am not defending the governor’s order on auto insurance, or her handling of schools and property taxes, just explaining why the two situations Henderson is comparing are not at all comparable, on narrow economic grounds.)

Paul Waldman asks the question I’ve been worrying about for a few weeks:

Do Republicans even want to help the American economy through this crisis?

. . .

But McConnell knows what’s happening. He has surely looked around and realized that with the pandemic surging, there is simply no way the economy is going to come roaring back before November. He’s seen the polls showing Trump trailing presumptive Democratic nominee Joe Biden by 10 points or more. He knows that the political environment grows less favorable to the GOP by the day. He understands that the odds his party will retain control of the Senate are probably 50-50 at best.

So from where he [McConnell] sits, the best outcome now may be to use the next stimulus package to win some minor ideological victories, but not allow it to be substantial enough to set the stage for a genuine recovery. That way, if and when Biden becomes president in 2021, the situation will be no less dire than it is now — and maybe more so.

And the worse things are in the country at that point, the better it is for Republicans. Just as they did when Barack Obama was president, they can blame Democrats for their own mistakes, then force austerity measures that sabotage the economy and slow the recovery.

If you were a Republican and you thought that Trump was doomed no matter what, this might be your best-case scenario.

I think there is a possibility that this is what McConnell is doing.  However, I am not sure of this.  It is possible that he is just posturing and angling for more corporate goodies, but will be happy to agree (“reluctantly”) to a large rescue package.

The House Democrats took automatic stabilizers off the table with the HEROES Act, and a large stimulus now that expires just when Biden takes office might be the “best” bet for Republicans – it would maximize their share of seats in the Senate, and position them for “optimal” obstruction even if they lose control.  An inadequate stimulus package that creates a full-fledged economic disaster now would be quite risky for the Republicans in narrow political terms.  Starting out with an inadequate stimulus package and bargaining for more corporate goodies in exchange for more stimulus might be McConnell’s game, just as in prior rounds.

A few further thoughts.

Republicans will argue for austerity – cluelessly or shamelessly, possibly now and certainly after a Biden win in November – to justify opposition to desperately needed stimulus spending.  James Kwak is right to worry that these arguments will lead centrist Democrats to go small.

The $2 trillion stimulus package over 4 years that Biden just proposed last week may not be sufficient, especially if McConnell refuses to pass a substantial bill now.  At a minimum, a Democratic stimulus bill in 2021 should have automatic triggers to extend economic support if the economy does not recover, because public opinion will turn against Biden and the Democrats if the recession drags on, and Democratic centrists may focus too much on current opinion polling about “deficits” rather than “latent” or future opinion about “recession” when voting on additional stimulus.

It is hard to say what the Democrats should bargain for without seeing what the Republicans propose, but I think Democrats should offer to let any state end the $600 weekly UI supplement (a “key” Republican demand) if they instead switch to 100% wage replacement of the first (say) 50k in wages, and 75% replacement up to 80k or 100k.  Let the states decide.  Aid to state and local governments should be close to non-negotiable.

I would seriously consider giving the Republicans corporate liability protection.  Sure, it sucks as a policy, but more because it reflects callous indifference to worker safety than because the status quo will actually benefit many people.  There are very few lawsuits so far and little reason to expect this to change.  If liability protection is symbolically important to Republicans, Democrats could try to pair it with an increase in life insurance and disability payments under Social Security and free coronavirus medical care for all, or they could agree to allow employers to avoid liability if employers agree to pay for workers’ comp that covers lost wages, medical care, and scheduled payments for death and permanent disability due to Covid.  (This tradeoff of negligence liability for workers comp is what greased the wheels for workers’ comp originally.)  These proposals seem hard to reject – you want people to go back to work without any legal protections, and you’re not even willing to support sick workers or the widows, widowers and orphans left behind?  Or Dems can demand that workers remain eligible for UI even if they refuse to return to work.  That would allow the most vulnerable workers to protect themselves.  Any of these trades would probably be good for workers, especially if they get Republicans to agree to a generous UI program and aid to state and local government.

I can’t say I’m looking forward to watching this play out over the next few weeks.

A month ago, when the public health community was warning about the dangers of premature opening and our reality show President was turning mask-wearing into a culture war issue, David Henderson and Jonathan Lipow decided to use precious space on the Wall Street Journal op ed page to publish an essay titled “The Data Are In: It’s Time for Major Reopening” (ungated at the link).  They argue that “populationwide lockdowns should end” and even suggest that social distancing has been harmful.  OK, then, I guess there’s no need to second-guess re-opening bars in Florida or Arizona.  And no need to worry about testing and contact tracing, despite the fact that one of the papers they cite to support their position recommends it.  And no need to tear our hair out worrying about masks.  It’s all good.

Robert Kuttner on public approval of Trump’s handing of the economy:

As general support for Trump keeps sinking, there is one anomaly. According to this July 15 Wall Street Journal/NBC poll, which finds Biden leading Trump by 11 points, fully 54 percent of Americans approve of Trump’s handling of the economy.

Really? That would be the corona economy, the worst since the Great Depression, thanks substantially to Trump’s catastrophic policies. How can this possibly be?

I put the question to some leading pollsters and strategists. One person whom I greatly respect told me that in focus groups several people volunteered that they credited Trump personally for the supplemental unemployment checks and one-time $1,200 relief payments because his name was on the checks.

I suspect there is more going on here than Trump’s name on checks.  Part of what is going on is issue ownership.  Voters tend to trust Republicans more on the economy than Democrats.  This seems to be true even on budget deficits (seriously).  You can scan through some old polling data here.  Why this is the case is not entirely clear; perhaps it is because business is generally a Republican constituency and people equate the economy with business.  Another factor is likely Trump’s carefully crafted reputation as a “successful” “businessman”.  Voters tend to trust business people; they want government to be run more like a business, etc.  Remember Ross Perot.

Of course, these factors will only take Trump so far; his ratings on the economy are slipping along with his overall approval:

As recently as last month, even as Mr. Biden led the presidential race, a majority of voters said they trusted Mr. Trump more on economic matters. But a poll released Wednesday by Quinnipiac University showed Mr. Biden edging ahead on that question, 50 percent to 45 percent. Quinnipiac found that 53 percent of registered voters disapproved of Mr. Trump’s handling of the economy, and polls from CNBC and the Democratic firm Navigator Research found similar disapproval numbers.

Given the state of the race, people are starting to ask what this would mean for the future of progressive politics in America.

James Kwak is gloomy:

I think the policy solutions are obvious . . .

The problem, of course, is the politics—not just President Trump and the Republicans, but a Democratic Party controlled by its conservative wing, defined primarily by its insistence on fiscal responsibility, and terrified of doing anything that anyone might call socialist . . .

Julia Azari is more open to the possibility of a new political era:

An important feature of these orders are the social movements that energize the parties in power and help to define the issues. These movements tend to start their work creating a new political order well before the transition to a full reconstructive politics. The conservative movement that defined the Reagan years began to really gain influence during the Nixon years. The abolition movement helped shape the politics of Lincoln’s presidency. FDR was drawing on decades of Progressive movement thinking and action.

Simply put, Biden’s party affiliation allows him to reject the politics of Trump, Reagan and the Republicans in between – but no matter who the Democrats nominated this year, that person was never going to actually be the engine for major political change. Rather, that groundwork has been in progress for many years. If Biden wins in November, he might be in a good position to be a reconstructive leader. He’s an odd candidate for such a position – he seems much less likely than Obama at first glance. The thing is that reconstructive politics is about more than the president.

I see arguments on both sides . . .

Beginning with the case for pessimism.  There are several reasons for doubting that a big Democratic win in November will signify the beginning of a long run shift in American politics to the left.