Jack Rasmus

As the 2020 year closes, Congress is about to pass a $900B Covid Relief spending bill. But make no mistake. It’s Senate leader Mitch McConnell’s proposal. And it will hardly dent the rapidly slowing US economy this 4th quarter and the increasingly forecasted coming double dip recession early next year.

The new spending shouldn’t be confused as a ‘stimulus’ bill. It won’t stimulate the economy much, if at all. A stimulus requires significant net new spending. Most of the deal is just a continuation of past spending levels, and in some notable examples it’s a reduction in spending levels. The same can be said for the companion legislation to keep the US federal government funded. That’s another $1.4 trillion. But that too is just continuation spending. Nevertheless, we hear from the mainstream media it’s a $2.3 trillion total spending package, the second largest in US history (the first largest being the past March Cares Act which the same media keeps misrepresenting as a $3 trillion package).

For the record, the $3T Cares Act amounted only to $1.4 trillion actual spending that got into the US economy. More than $1 trillion in loans initially earmarked for medium and large corporations, and 11 financial markets, never got spent by the Federal Reserve. In addition, $650 billion of the $3T was actually tax cuts for investors and businesses. That’s mostly been hoarded. The only actual spending that got into the real economy and GDP was the $500 billion for income checks and unemployment benefits for workers, plus $525 billion in loans and grants for 5 million of the 31.7 million US small businesses, plus another $100B or so to the Federal Reserve’s ‘Main St.’ lending programs and less than $100B for other Fed lending. So the much touted March Cares Act actual spending was less than half the media’s reported $3T.

It’s Mitch McConnell’s Bill

Since the passage of the Cares Act in March (with a supplement in April), McConnell has insisted a follow up package would be no more than $500 billion. That’s been his position since last June. The Pelosi-Shumer team passed a $3.2 trillion true stimulus proposal in the US House called the Heroes Act in late May. McConnell rejected it out of hand and has done so for the past six months.

Pelosi-Shumer reduced their $3.2 trillion to $2.2 trillion in August. That too was rejected by McConnell and the Trump administration, who have been engaged in a phony tactical ‘hard cop/soft cop’ negotiation since July designed to break down the Democrats’ proposals. They have finally succeeded in the $900 billion deal about to be signed. The Democrats, as they guessed, finally capitulated at the 11th hour.

Here’s why the $900B is McConnell’s proposal: It amounts to the $500 billion he insisted on since last June plus the $435 billion that Treasury Secretary, Mnuchin, clawed back from the Federal Reserve earlier this month. That’s the roughly $900 billion that McConnell has agreed to.

The $435B clawed back from the Fed was money the Democrats agreed to in the March Cares Act to be given to the Fed to loan out to medium and big corps, theoretically to companies that would invest it and expand production and hiring. It didn’t happen. Big corporations in particular didn’t want the money from the Fed and its banks. They were already flush with cash. In terms of corporate bonds alone, Fortune 500 corporations alone had raised more than $2.2 trillion—thanks to the Fed’s other policy of reducing interest rates (and bond rates) to near zero.

So the money parked with the Fed in March was never used, and Mnuchin simply took it back earlier this month, gave it to McConnell, which the latter added to his $500 billion. And there you have it. Voila! The $900B forthcoming deal.

The McConnell package

• $325 billion for small business grants ($135 billion of which was left over from March)
• $166B in $600 one time income checks (cut by half from $1200) for working families with incomes less than $100k/year
• $120B in $300/wk. unemployment benefits (for 90 days, & at half former $600/wk)
• $45B for transport (including $15B for airlines already sitting on $billions of cash)
• $13B for food stamps (despite 20% American families now officially food deprived)
• $25B for rent assistance (for one month moratorium on rent evictions for 11.4 million behind on their rents owed totaling more than $70 billion)
• The rest for schools, vaccine distribution, hospitals, and other spending

The reduction in the level of the unemployment benefits and the one time
income checks represents at least $150B to $200B a month, every month, taken out of previous levels of household spending. That’s not counting its ‘multiplier effect’. That’s a hundreds of billions of dollars of reduction in consumer spending and therefore US GDP that will hit the economy come January!

Just maintaining prior levels of spending has already resulted in a rapidly slowing US economy this fourth quarter 2020.

US Economy Sliding into Double Dip

After having collapsed quarter to quarter by -10.5% in early 2020, the economy briefly rebounded in part as the economy prematurely reopened in the third quarter 2020. That was a 7.4% rebound off the -10.5% collapse. In other words, only 2/3 of what was lost in GDP terms. But that tepid rebound (not to be confused with a sustained recovery) has relapsed seriously this current 4th quarter. Many economists’ estimates, even mainstreamers, is the US GDP will grow at best around 1.5% this quarter—i.e. down from 7.4%.

Retail sales turned slightly negative in October and then sharply fell by -1.1% for the recent month of November. It will likely turn even more negative in December. Even the much announced gains in Manufacturing and Construction—together barely 20% of the economy—are now showing signs of slowing. Indicators of industrial production and manufacturing in the Chicago area and Mid-Atlantic states are slowing sharply.

More economists are forecasting a broad economic contraction—i.e. a technical double dip recession—in the coming January-March period. That includes JP Morgan bank’s research. A condition that this writer predicted last March when the economic crisis emerged. As in all cases of Great Recessions, double dips typically occur, and sometimes triple dips. The 2020 Great Recession 2.0 today is no exception.

It is in this context of a sharply slowing US economy fourth quarter, and a growing likelihood of a second bona fide contraction in early 2021, that Congress is about to pass the $900 billion McConnell package.

It’s important to understand that it’s not at all an economic stimulus proposal. It’s the weakest of possible ‘mitigation’ bills. Mitigation is about just buying time (30-90 days) until a real stimulus can be passed. Even the Cares Act of last March was acknowledged as a mitigation measure, not a stimulus, bill by its Congressional proponents.

This McConnell $900B proposal is even less a mitigation measure. It’s more a temporary palliative at best, buying 60 days of a partial offset to a coming contraction.

Moreover, one should not assume all the $900B—or even a part of it—will actually get in to the real US economy. Apart from the reduction in unemployment benefit levels, not all of the $325B money earmarked for small business PPP will be spent soon, or even at all. Studies and research shows that the PPP program of last March did not all go to those small businesses that needed it most. And much of it was used not to retain workers and wages, as the legislation proposed in March, but went to pay down business debt or was used to increase business savings that were subsequently then stuffed into business bank accounts by those businesses that scammed and skimmed off the PPP funding.

With virtually no oversight in the case of the $525B PPP from last March’s Cares Act having occurred over the past nine months, it will be significant if even half of the $325 billion is actually spent. The same can be said for much of the $44B now allocated for the airlines and other transport businesses. And even in the case of the $82B targeted for schools and colleges. It won’t all be actually spent and therefore will provide no actual stimulus or mitigation to the real economy.

In short, out of the $900B will be 2/3 at best actually spent and entering the US economy and GDP next quarter. That’s not much of even a ‘mitigation’, given the accelerating slowdown of the US economy at year’s end 2020 now underway.

The Corporate Democrats’ Spin is In

Nevertheless, Democrat party leaders—i.e. the corporate wing of that party—are spinning the capitulation to McConnell as just the first of further coming legislation after Biden is inaugurated January 20, 2021. That’s how they’re selling it to John Q. Public.

But don’t expect much in terms of fiscal spending legislation forthcoming after January 2021. That’s especially true if McConnell remains in control of the Senate, which is more likely than not, and it’s especially the case if Republicans win at least one of the Georgia Senate run off elections on January 5, 2021. McConnell will continue to say ‘No No No’ to just about everything proposed in Congress should he retain control of the Senate.

Democrats are naïve to think that, after having agreed to $900B, that McConnell after only 45 days will agree to anything more in terms of emergency fiscal spending come February-March 2021!

In this scenario, as the US economy likely slips into a double dip recession next year Biden will be relegated to any new spending via Executive Order and other presidential actions. But his already announced policy of resurrecting bipartisanship with McConnell will ensure Biden will go slow, if go at all, in terms of governing by Executive Order. He could do a lot, but he won’t. He’ll extend the bipartisan hand to McConnell again, as had Obama for years; and again the Republican dog will bite the hand and little will change.

In summary, what we have in the pending $900B ‘relief bill’ is virtually no relief at all. Even for the next 90 days; it’s a partial relief, a palliative that barely even qualifies as a mitigation. The $900B will definitely not turn around the impetus and trajectory of a rapidly slowing US economy and the likely coming double dip recession approaching in 2021.

But what’s to worry? The stock markets are hitting records daily. Money from the Fed for investing by corporations, hedge funds, private equity firms, and other professional speculators is virtually free. More business tax cuts are being added in the pending legislation to the $650B passed last March in the Cares Act (and the $4T passed before that in 2018-19). The 651 US billionaires added $1T to their wealth in just the last eight months!

Besides, Trump’s leaving the White House…maybe! (if he doesn’t declare martial law first).

Dr. Jack Rasmus
December 21, 2020

Jack Rasmus is author of ’The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump, Clarity Press, January 2020. He blogs at jackrasmus.com and hosts the weekly radio show, Alternative Visions on the Progressive Radio Network on Fridays at 2pm est. His twitter handle is @drjackrasmus.

By Dr. Jack Rasmus
copyright 2020

As of mid-December 2020 the US economy has begun showing increasing signs of an exceptionally weak 4th quarter, October-December, growth. After having collapsed -10.5% in the March-June 2020 period, followed by a partial ‘rebound’ (not sustained recovery) in the 3rd quarter, July-September 2020, the economy is now slowing rapidly once again.

Dismal reports of consumer and especially retail sales in October-November appear driving the slowing growth—in turn driven by rising unemployment claims, a growing number of permanent layoffs by large businesses as the economy structurally changes long term, and, shorter term, by a sharp rise in Covid deaths, infections, and consequent partial shutdown of the services sector of the US economy throughout the US.

This scenario and trends has pushed more economists, mainstream included, to predict an even sharper 1st quarter 2021, contraction in the economy. Even a normally conservative forecast source like JPM Chase Bank’s research has raised the likelihood of a bona fide 2nd contraction of the US economy early next year—i.e. a ‘double dip’ recession, that this writer has been predicting since last March 2020.

The failure of both parties in Congress to pass a fiscal stimulus bill as late as mid-December 2020 has exacerbated the slowing economy and likelihood of a further contraction.

Ranks of Unemployed Rising; Benefits Falling

Latest initial unemployment benefit claims have risen, from the steady 1 million per week through the fall, to 1.28 million in early December, a weekly rise of 28%. As claims rise, a steady million per week have been exhausting their benefits for months. This is about to accelerate greatly, as a large block of 12 million are scheduled to end benefits by the last week of December.
Despite the US Labor Department’s monthly ‘low ball’ estimates of a jobless total of only 10.5 million and 6.7% unemployment rate, more than 20 million without jobs are still collecting unemployment benefits—twice the number the Labor Department and media consistently repeat as total jobless today!

Simultaneously, the ranks of the jobless without benefits, or having exhausted benefits, continues to rise as well. Four million workers have dropped out of the labor force altogether. Another 1-2 million have had to quit, in order to manage their K-6 grade children’s remote education. Millions are ‘furloughed’ at home with hope of at some point returning to work but not yet—a status the Labor Department erroneously calls working, and not unemployed, even though they aren’t being paid by their employers. (An error the Labor Dept. has made since last April, acknowledged it was an error, but has refused to correct nonetheless).

Easily at minimum 25 million American workers today as of December 2020 are jobless, either with or without benefits, not 10.5 million. And the unemployment rate is thus closer to 18%-19%–i.e. not even remotely close to the official, cherry-picked low ball number of 6.7% reported monthly by the Labor Department, which even most mainstream economists now ignore.

The Trump administration allowed the expiration of the supplemental $600/week unemployment benefits for millions of jobless last August. That reduced GDP spending by $65 billion a month (not counting multiplier effects on GDP of roughly 2X that amount). Some of that was restored for 5 weeks with $300 supplement unemployment benefits by Trump Executive Order in August. But the money was funded by reducing other government spending elsewhere, so there was no effective positive impact on total spending. That $65 billion (times 2X) negative spending effect on the US economy continued through December, and has no doubt played a part in the 4th quarter US consumer-retail spending slowdown.

The negative impact of reduced unemployment benefits is about to get much worse, however. The 12 million more that will lose benefits on December 26, 2020 is estimated to reduce household spending by another $150 billion per month (plus multiplier). Should current proposals restore half of that $600/wk., the negative household spending impact will still be $75 billion more in addition to the previous $65 billion reduction since August.

Renters’ Crisis Deepening

The real economy’s actual deteriorating condition is further illustrated by the renter crisis gaining momentum weekly. Of the 43 million total rental units in the US, 11.4 million are behind in their rents, averaging around $5,800 per household, for a total of $70 billion, according to the business research company, Moodys Analytics. As evictions moratorium ends in January 2021 many renters (mostly still unemployed) will not only have to start paying rents once again, but will have to make up the $70B in lost rent payments or still face evictions. Even after having been evicted, landlords will still legally pursue back payments.

The renewal of rent payments by renters, while still jobless, combined with back payments, will have a devastating impact on household spending and consumption in 2021, the latter of which accounts for 68% of all US economic spending and GDP.

Contrary to the media reporting, millions are already undergoing evictions and facing legal orders to repay back rents. The initial rent moratorium passed last March as part of the Cares Act (‘mitigation bill 1.0’) did not cover all renters, as the mainstream media consistently suggests, but covered mostly those whose housing was associated with government aid by the HUD and FHA agencies. States and cities in some cases had initiated local moratoria . But most of those local moratoria expired months ago. Trump’s Executive Order last August 2020 extended rent moratorium on federally supported rent units, but only until end of December 2020.

Issued by the Trump administration’s CDC in September, Trump’s EO for rent moratorium expiration will result in 2.4 to 5 million of renters evicted in January 2021 alone, with millions more per month thereafter, according the Wall St. Journal. Moreover, the Trump EO did not prevent landlords from initiating legal action to evict. Hundreds of thousands of evictions are already in progress and legally proceeding in cities across the US, per the Princeton University Evictions Lab. Most heavily impacted are minority households. A recent survey by the US Census Bureau indicates 32% of black renters and 18% of Hispanic renters were behind on rent payments, and about 12% of white renting households.

Homeowners Mortgages Crisis Brewing

While the picture is not as dire for homeowners as for renters, it too is deteriorating and will be intensifying in 2021.

There are 82 million single homes in the US. 49 million (62%) have mortgages. At present 3.6 million are in forbearance, meaning mortgage payments have been temporarily suspended. Suspended payments will have to resume in 2021, however, much like rent back payments suspended require payment. Like renters, homeowners may have to double up on mortgage payments, in whole or part, commencing 2021. It is estimated that 6.8% of homeowners have missed payments in 2020. That’s 5.5 million of homeowners—i.e. the 3.6 million in forbearance but another 1.9 million not and who have been missing monthly mortgage payments.

The percentages and totals for mortgage payments in arrears may seem less a problem than the renters’ missed payments. But the totals are actually far greater in terms of back money owed: all the deferred and missed mortgage payments amount to $752 billion in back payments that have to be made up. That make up will reduce household spending by another hundreds of billions of dollars in 2021, with further negative impact on US GDP in 2021.

Student Loan Forbearance Ending

Like renters and homeowners, the March 2020 Cares Act permitted suspension and deferral of student loan payments until year end 2020. Also like rent and mortgages, however, that deferral is scheduled to end in 2021. Students will have to make up payments and in effect ‘double down’ on payments in most cases.
The negative impact on ‘doubling down’ and making up lost payments is massive. There are 44.7 million student loans in the US, averaging $36,500. Hundreds of thousands own much more. Many more than $100,000. 35 million of the 44.7 million student loans were in forbearance in 2020 and the deferred principal will have to be repaid. The total principal alone, temporarily deferred, amounts to $777 billion in arrears.

Payroll Tax Deferrals

When Trump and his negotiators abruptly broke off negotiations on the fiscal stimulus bill in August 2020, they issued 4 Executive Orders with 24 hours (thus indicating they had planned to do so from the beginning, after having lured Pelosi-Shumer and the Democrats to reduce their May 2020 $3.2 trillion original stimulus proposal called the Heroes Act by $1 trillion).
Among the Trump four EOs was one that deferred payroll taxes of 6.2% for workers for the rest of 2020. (The other three EOs were the temporary substitution of $300/wk. supplemental unemployment benefits for five weeks; extending student loan forbearance to end of December; and the CDC’s partial extension of rent moratorium for 5 million renters). The EO affecting payroll taxes was clearly unconstitutional. Only Congress could change tax laws. But Trump went ahead anyway with the 6.2% payroll tax deferral. Not all businesses followed suit, however.

Since employers by law are responsible for collective payroll taxes, they knew they were on the hook to repay the deferred 6.2% in 2021. They would have to add 6.2% to their employer share of 6.2% nonetheless in 2020 and then repay that in 2021. That meant doubling up on paying their share and their workers’ share of 6.2% (deferred September to December 2020) starting January 2021.

It could mean paying payroll taxes of twice that 12.4% in 2021, however. Employers were allowed to temporary suspend their 6.2% payroll taxes since March 2020, and starting repaying that deferred amount plus new payroll taxes by end of 2021. Not many wanted to face the prospect of paying double payroll taxes for both themselves, the company, and collecting and paying double for their workers as well—or 24.8% in payroll taxes. So most opted out of the Trump EO and didn’t stop their workers from paying the 6.2% in 2020.

Most large corporations opted out, including GM, UPS, Fedex, Costco, grocery chains, health companies, big Pharma, utilities, and many states as well. Trump forced federal government employees to suspend their payroll tax payments, September-December 2020. Other states and local governments did so as well. Starting January 2021 now many will have to start paying double payroll taxes. That will in turn reduce millions of public employees’ available disposable income for consumption in 2021. And that too will reduce US GDP in 2021.

Small Business Collapsing

Even greater magnitude of potential negative impact on the US economy is the current accelerating closing of many small businesses. There are an estimated 30 million small businesses in the US economy, which include millions of small ‘independent contractors’. Estimates by the National Federation of Independent Businesses, the trade organization for small business, are 3.3 million have permanently closed as of November 1, 2020. More than 110,000 restaurants, or every one of six. Hundreds of thousands more restaurants, bars, entertainment, travel, and related service small businesses are likely to close over the coming winter months. The impact on consumption, as well as business spending and unemployment, promises to be significant—and in addition to all the preceding negative effects on the US economy.

What is especially concerning about this scenario is that ever since August 2020 the Trump administration has sat on $135 billion in unspent funds allocated by the March 2020 Cares Act for loans and grants for small businesses assistance. $670 billion total was approved by the Cares Act for the PPP program, as it was called, to provide assistance to small business. Much of that was siphoned off and redirected to larger businesses. Millions of very small businesses received nothing. Despite the need in August, the program was ended in August with $135 billion unspent.

From Stimulus to Mitigation 2.0 Negotiations

What started out as a true economic stimulus bill in the form of the Heroes Act, passed by the US House last May 2020, has by mid-December collapsed into a partial economic ‘mitigation’ bill. Mitigation means just buying time until a true fiscal stimulus can be introduced. Mitigations simply slow down the economic collapse and crisis temporarily, to buy time. True stimulus proposals do just that: generate economic growth that is sustained for months and years to come.

The May 2020 Heroes Act was a true stimulus, proposing $3.2 trillion in new spending across a broad set of programs. It was immediately rejected by McConnell and the Trump administration, both of whom then played ‘hard cop/soft cop’ in negotiations with Democrats over the next six months. In August 2020 Democrat negotiators, Pelosi and Shumer, were lured into reducing their package of Heroes Act spending by $1 Trillion, down to $2.2T, in expectation—signaled by the Trump administration it would similarly respond with a major counteroffer to the Democrats $1 trillion proposal reduction. But they didn’t. Trump’s negotiators, Mnuchin and Meadows, simply walked out of negotiations after Pelosi-Shumer had come down $1 trillion. Meanwhile, McConnell sat back watching the show, holding firm on his no more than $500 billion spending proposal he offered in June.

As the 2020 election grew closer, Trump-Mnuchin offered several new proposals—without any details—to ensure it appeared they were interested in a deal. The latest in October was reportedly as high as $1.8 trillion. It appeared a deal was possible, with the Democrats at $2.2 trillion since August. However, McConnell scuttled the negotiations by making it clear he would not approve more than his $500 billion. Having been burned the previous August, Pelosi and Shumer did not ‘bite’ at the Trump shadow offer, correctly assuming it was pre-election posturing. Had they done so, Trump would have taken credit; no deal would have been reached; and McConnell would have stalled discussions—as he has ever since to the present.

Following the election in November 3, the next development was Mnuchin recalling $455 billion in unused funds from the Federal Reserve given to the central bank the preceding April as part of the Cares Act. That was to be used to help bail out businesses. The Fed did not use much of the Cares Act given it by the US Treasury and Congress, including $135 billion unspent on the small business aid program called the Payroll Protection Program, PPP. That program ended in August, but the Fed held onto the $135 billion, as well as other funds for medium sized and larger businesses and various financial markets. The total unspent came to $455 billion, which Mnuchin then told the Fed to return to the Treasury, which it did. Both Mnuchin and McConnell would use the $455 billion to pay for McConnell’s $500 billion long-standing offer in stimulus negotiations in December.

To attempt to break the bargaining logjam, in December a bipartisan group of Senators and Representatives offered a compromise package of $908 billion. There were no $1200 income checks, only half of unemployment benefits for only 90 days, no aid to state and local governments, and numerous other provisions missing from the Democrats’ $2.2 trillion package on the bargaining table. Nevertheless, McConnell still rejected the $908B compromise. He then cleverly offered to drop his ‘stalking horse’ proposal for business blanket liability if the Democrats dropped their $160 billion in aid to state and local governments.

In the latest iteration of the negotiation charade, the bipartisan group on December 14, 2020 revised their $908B proposal, reducing it to $748 billion by taking out the $160B for state and local government. It split its prior single $908B offer into two parts: one with the state-local government aid and the business liability; the other with all the remaining proposals it had originally offered.

As of mid-December, the proposal on the table by the bipartisan group, accepted in principle by the Democrats but not McConnell, is as follows:

• Unemployment half benefits at $300/wk through March 2021
• PPP small business funding of $300B, now with no need to use to pay workers’ wages
• $45B for airlines & transport businesses (despite airlines with $billions of cash on hand)
• No $1200 checks
• Student loan forbearance continued for 3 more months
• Renter evictions moratorium continued for one month
• $82 billion for education
• $13 billion for emergency food assistance
• $35 billion for health care providers
• $13 billion more for farmers & agribusiness (after receiving $70B since 2019)
• $25 billion rent assistance (payable to landlords)

The important point of the total $748B, however, is that it too is a temporary ‘mitigation’ proposal—not a true stimulus bill.

Like the March 2020 Cares Act, also a mitigation bill, it will only buy a little more time for an economy clearly in a deep slowdown in the 4th quarter and on the brink of another double dip recession in 2021, if one were to agree with Chase bank!

The Cares Act of March was only $1.1 to $1.5 trillion in actual spending—not the $3 trillion mainstream media often noted. $650 billion of $3 trillion was business tax cuts that were mostly hoarded. And more than $1.1 trillion for medium and big business bailouts that didn’t happen by the Fed loans, the funds of which were returned to the Treasury in December. Big businesses were bailed out, but via Fed other $3 trillion plus money injections into the banks and markets—not by the Cares Act.

So the Cares Act was a temporary mitigation bill that ran out of spending by late summer. And the bipartisan group proposal of $748 billion is an even smaller mitigation bill that will run out of funds well before next spring.

There is, and there has been, no fiscal stimulus since the crisis began. Nor is a stimulus on the horizon. More importantly, what this means for the economy is that the lack of a true fiscal stimulus for 2021 means the double dip recession looms ever larger on the horizon now! Unemployed workers, renters and homeowners, student debt, double taxed workers, and small businesses will get another temporary partial assistance. And should the Democrats not win both seats in the Georgia Senate runoff elections on January 5, 2021, McConnell will retain control of the Senate and it will be four more years of ‘No, No, No’ in help to those truly in need. The implications of that for the US economy, and for Democrats in 2022 mid-term elections, is obvious. But that’s the likely intention and game plan of McConnell and the Trumpublicans no doubt.


Dr. Jack Rasmus
December 15, 2020

With McConnell & Republicans stonewalling any settlement on passing a fiscal stimulus bill in Congress, the real economy continues to deteriorate (while 651 US billionaires increase their wealth by $1T since March and US stock markets reach daily record highs). The consequences of failure to pass a fiscal stimulus bill in Congress reaps daily ever-deepening hardships on real people–especially the 25m still unemployed (now rising weekly), the 11.4m renters unable to make payments, the 3.6m homeowners behind on the mortgages, the 35m students who soon will have to repay $777B in student loans in arrears, the more than 3.3m small businesses already permanently closed as of October, and the millions of workers who will have to start paying double payroll taxes come January. Despite the crisis, McConnell & Republicans refuse to budge off of their $500B offer unchanged since last June, as Democrats agree to reduce their $2.2T to the $908B ‘bipartisan’ Senate proposal (a second time they reduced proposals by $1T since August). What’s behind the refusal to negotiate by McConnell & Trumpublicans? Why no stimulus deal will mean a relapse into a double dip recession in January-March (predicted as well by Chase bank).

Listen to my two radio discussions on this last friday, December 11, 2020. The first in my hour long Alternative Visions radio show; the second a 15 min. short version interview with Critical Hour radio host, Wilmer Leon.

TO LISTEN GO TO:

https://alternativevisions.podbean.com/e/alternative-visions-economics-consequences-of-a-failed-stimulus-trump-s-plan-b/

https://drive.google.com/file/d/1FBlp7JhdTWauobJSIrt_wo–ZuRaTbDQ/view

Listen to my 12 min. interview today with Critical Hour radio explaining how Mitch McConnell is successfully manipulating splits in the Democrat party to get Pelosi-Shumer to lower their proposals still further. Meanwhile, the real US economy stumbles toward a brink as unemployment rises, benefits run out, rent forebearance ends, rent payments double, and evictions grow, and 35m students face double payments in January. In first quarter 2021 US economy will take a hit to GDP of more than $500B throwing it into a double dip recession, according to JP Morgan Bank research

TO LISTEN GO TO:

https://drive.google.com/file/d/1I0oqfwuUmYA1j2ePxbgjdfBSj_zrxMvy/view

Three Radio Interviews: Equal Time Radio of Vermont, Critical Hour Radio, & By Any Means Necessary Radio in Washington DC.

Why last Friday’s Labor Dept. ‘Jobs Numbers’ Grossly Understate the 20 million plus Unemployment, why the stimulus program in Congress will be an insufficient ‘mitigation 2.0’ bill, and why new wireless technology being trialed by the USAF will expand government spying of citizens. Listen to Critical Hour Radio at:

https://drive.google.com/file/d/17t-TGVpEYoBAtG19i5soCAfHItMAtTYx/view

Dr. Jack Rasmus about the Prospects for Coronavirus Stimulus, the Economy & the Impending Loss of Unemployment Benefits & Paid Sick/Family leave for Millions of Workers, plus an Assessment of Biden’s policies and appointments. Listen to Equal Time Radio at:

https://equaltimeradio.transistor.fm/episodes/2020-election-and-the-prospects-for-coronavirus-stimulus

Why Congress Will ‘Low-Ball’ the next fiscal ‘stimulus’. Listen to By Any Means Necessary Radio at:

https://www.spreaker.com/user/radiosputnik/help-from-congress-looking-less-likely-a

Following are 3 short (15-20 min.) radio interviews of this past week on topics of the US economy, jobs, stimulus, Fed, and other

https://drive.google.com/file/d/1EZ4tWVvrXHMGqW_TqSDEnCo08GZeFX_O/view

Critical_Hour_606_Seg_2.mp3

https://www.spreaker.com/user/radiosputnik/economist-explains-why-little-coronaviru

If you’re worried about the capability of government to conduct surveillance of citizens engaged in political assembly and protest, or even just personal activity, then you should be aware the technological capability of government surveillance is about to expand exponentially.

The US Air Force’s Research Lab (yes, it has its own lab) has recently signed a contract to test new software of a company called SignalFrame, a Washington DC wireless tech company. The company’s new software is able to access smartphones, and from your phone jump off to access any other wireless or bluetooth device in the near vicinity. To quote from the article today in the Wall St. Journal, the smartphone is used “as a window onto usage of hundreds of millions of computers,s routers, fitness trackers, modern automobiles and other networked devices, known collectively as the ‘Internet of Things’.”

Your smartphone in effect becomes a government listening device that detects and accesses all nearby wireless or bluetooth devices, or anything that has a MAC address for that matter. How ‘near’ is nearby is not revealed by the company, or the Air Force, both of which refused to comment on the Wall St. Journal story. But with the expansion of 5G wireless, it should be assumed it’s more than just a couple steps from your smartphone.

One can imagine some scary scenarios with this capability in the hands of government snoops:

Not only would the government know your geographical location via the GPS signal to your cellphone. They’d know what you are doing. And with whom.

A political gathering would allow them to see all the owners of other cellphones in the vicinity of a protest or demonstration. How many are gathering at a particular street or location. The direction they might be heading. Or whether there’s an organization meeting in a hall or room and who (with a cellphone as well) might be attending.

If you’re driving on a winding coastal or mountain road, it would know, and could possibly access, your car’s various electronic systems to turn them off. It might access your car’s circuit board that governs your power steering when you’re driving in an area of winding roads. Or it might be able to just shut down your car’s electrical system and remotely lock all your doors. The police no longer have to engage in highway chases until capture.

The new tech would allow the government to access the data on your fitbit device while you’re jogging. Or worse, maybe even interfere with the signal on your heart pacemaker device.

The technology might be used to access your smartphone, and from there to turn on your home Alexa device to listen in and record conversations without you ever knowing. Or to listen in on your zoom conferencing on your laptop. Or maybe even worse, to shut down or bypass the safety features on your home furnace equipment. Or turn off your home security system.

And with 5G wireless broadband, the tracking might be extended well beyond the range of a bluetooth device. Add 5G broadband wireless to SignalFrame’s technology, and then wed that to the capability of machine learning and artificial intelligence, and you get instant processing of a massive amount of data on any targeted person or gathering!

This problem of government surveillance on free citizen activity is not new. It took a giant leap after 9-11 with the Patriot Act and acquisition of phone data by Homeland Security and other government agencies. It was supposed to have stopped. But it hasn’t. The snoops have continued to ignore Congressional resolutions and court decisions on privacy invasion of citizens. The latest Air Force lab testing is likely just a recent ‘tip of the iceberg’ revelation. And if the Air Force is doing it, be assured so are the Army, Navy, the NSA, CIA, FBI and all the other government snoops.

Certainly this kind of technology would be used not only by the US government. If the USA has it, you can bet other governments do too–especially China, Russia, Israel, and probably some of the Europeans as well.

Unlike in 2001, in 2020 SignalFrame’s technology takes government surveillance to a new level–given the ubiquity of smartphones, Internet of Things (IOT) devices, digital circuit board dependent autos, and all the many household devices now with MAC wireless access addresses. And now, unlike circa 2001 and the passage of the Patriot Act (and its continuation in annual NDAA legislation), we have AI, machine learning, neural nets everywhere, and massive government data processing power.

In short, Technology is becoming a growing tool and power in the hands of governments, to use to thwart democratic and constitutional rights–as well as to detect, apprehend, and ‘deal with’ those who protest and oppose those governments.

The coming decade in the USA will be increasingly difficult economically, increasingly unstable politically, but will be a decade in which technology is increasingly threatening basic civil and constitutional rights.

Dr. Jack Rasmus
November 28, 2020

Last week US Treasury Secretary, Mnuchin, ordered the Federal Reserve to Return $455 billion of unspent stimulus funds given the Fed in last March’s ‘Cares Act’ passed by Congress. Today’s Alternative Visions show discusses the politics of the move within the context of the history of the relationship between the Treasury and the Fed, going back to the early attempts to create a central bank in the 1780s, 1790s, and beyond up to the creation of the Fed finally in 1913. Dr. Rasmus restates some of these major themes in his recent book, ‘Alexander Hamilton and the Origins of the Fed’ (2019) and its sequel book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the coming Depressions’ (2017). What are the central bank ‘functions’, whether administered by a formal central bank, like the Fed, or by the Treasury? Why the Fed was created by the big private bankers. How it functions today in 21st century US global capitalism to ensure the subsidization of financial interests and corporations among the US capitalist class. Why the so-called ‘rift’ is no rift at all. And what are the politics of Mnuchin’s recall of the $455 billion given to the Fed last March and still unspent–even as unemployment remains in excess of 25m today in the US, food lines grow, rent evictions accelerate, and hundreds of thousands of small businesses are failing and closing.

To Listen to the Hour Long Alternative Visions show GO TO:

https://alternativevisions.podbean.com/e/alternative-visions-us-treasury-vs-us-federal-reserve-rift-functions-of-capitalist-central-banks/

This past week the US Treasury and the US Federal Reserve Bank engaged in a rare public disagreement. US Treasury Secretary, Mnuchin, in a letter to Jerome Powell, chair of the Federal Reserve, last week directed the Fed to return $455 billion that the Fed was holding in reserve should future lending to banks and non-bank businesses become necessary if the US economy and markets further deteriorate in 2021.

Fed chair Powell initially balked at Mnuchin’s request, replying that the Fed needed the funds to ensure market stability since the US economy was entering a “difficult period” in late 2020 and early 2021. According to Powell, the $455 billion was essential “as a backstop for our ill-stressed and vulnerable economy”. Returning the funds therefore was “not appropriate”. To do so now was not the right time. Not “yet”, replied Powell. Not even “very soon.”

The Fed’s initial response to Mnuchin no doubt reflected Powell’s concern the US economy may very likely weaken in the current 4th quarter, compared to the 3rd. That means possibly more defaults and bankruptcies could be on the agenda for the 1st quarter 2021—in particular for junk bond heavy businesses and state and local governments that appear most vulnerable at the moment. The Fed therefore needs to keep the $455 billion funds in reserve to address a potentially worsening economic situation.

If the differences between Mnuchin and Powell represented a ‘rift’, as the mainstream media often reported, it was undoubtedly the shortest Treasury-Fed rift on record. It wasn’t twenty-four hours after Powell’s initial resistance statement that the Fed capitulated to the US Treasury. Powell quickly retreated publicly, saying the Fed would comply. In retracting his position of the day before, Powell declared the US Treasury had “sole authority”. The Fed would return the funds. The ‘rift’ was over in less than 24 hours.

What then were Mnuchin’s rationale for insisting the funds be returned to the US Treasury? What were his public reasons given for taking back $455 billion at a time of intensifying Covid impact on the economy; as fiscal stimulus appeared dead for months to come; and as 12 million workers were about to lose unemployment benefits in December while simultaneously hundreds of thousands were experiencing rent evictions, lines for food banks were growing throughout the country, and student loan forebearance for millions was about to end?

Mnuchin’s Rationale

To deflect critics Mnuchin floated a number of obviously false narratives to justify his decision to take back the $455 billion. He said it was Congress’s intent to end all the funding by December 31, 2020. Even so, he added, he was allowing Fed programs like the Fed’s commercial paper and money market mutual fund special lending facilities to continue for an additional 90 days into 2021. Then there was the $74 billion in the Fed’s Financial Stabilization Fund (FSF) which would remain at the Fed. He puffed up the $74 billon saying the Fed “would still have $800 billion”, assuming the $74 billion represented a fractional reserve that allowed the Fed to fund up to 10X that amount. The central bank could also keep another $25 billion to cover distribution of funds in progress. He further noted that the $455 billion was needed to fund spending in what might be an eventual fiscal stimulus bill later negotiated in 2021 between the US House and the Senate.

It is perhaps interesting to note that Mnuchin’s retraction of the funds came barely a month after in October he wrote a letter indicating that all the Fed’s funds, including the $455 billion, could be retained by the Fed into 2021. The October letter, followed by his November decision to retract the $455 billion, suggests strongly that some kind of decision was made by the Trump administration, or McConnell in the Republican Senate, or perhaps both, sometime after the November 3 election in order to make it as difficult as possible for the incoming Biden administration to address the deteriorating US economic situation.

McConnell had signaled quickly after November 3 there was no chance for a new fiscal stimulus in 2020; Mnuchin then retracted the $455 billion and McConnell was among the first to publicly endorse his move. The timing of both was unlikely merely coincidental.

The Reactions

The Democrat and mainstream media reactions to Mnuchin’s move were swift and to the point.

Typical was Democrat Maxine Waters’, a key player in the US House of Representatives: “It is clear that Trump and Mnuchin are willing to spitefully destroy the economy and make it difficult as possible for the incoming Biden administration”.

Even more to the point were business media editorialists and comments that followed Mnuchin’s announcement: The Financial Times declared Mnuchin has “aligned himself with Mr. Trump’s ‘burn the house down’.” The Wall St. Journal added “The termination is also important to limite the demands by politicians to use the Fed for policies they can’t get through Congress”. Fidelity Investments’ Market Watch online news service concluded the “intent of the Mnuchin move appears to be to prevent the next Treasury Secretary extending relief to state and local governments”.

In other words, the real rationale of Mnuchin was Politics, first and foremost. One might add a close second: i.e. improving Bank profits. Stripping the funds from the Fed would now force borrowers to turn more to capital markets to raise funds, instead of relying on government funding programs made available through the Fed.

The Politics of $455 Billion

Despite Mnuchin’s various explanations to the contrary, his withdrawal of the funds from the Fed is clearly about denying the incoming Biden administration from perhaps convincing the Fed to expend the $455 billion to provide loans to hard pressed state and local governments in 2021 and/or for making additional loans & grants available to small businesses.

For the Biden administration, getting the Fed to provide the financial assistance in loans to local governments and small business would obviate the need for the Biden administration to have to fight a Republican Senate, led by McConnell, to pass the same amount of aid targeting local governments and small businesses as part of an eventual Biden fiscal legislative package.

Mnuchin and McConnell have long opposed fiscal support for state and local governments, which they view as heavily weighted toward Democrat ‘blue’ states and cities. They preferred these governments raise money in capital markets instead of getting financial aid via government programs. Providing loans via government programs, with terms and conditions more favorable to borrowers (and not to banks), means less profits for private banks and private lenders. The same applies to small businesses as well as local governments. Republicans want to redirect their financing needs to private markets, instead of through government programs.

That economic motive fits nicely with the political objective of Mnuchin, McConnell, and other Republicans to deny the Biden administration access to funding already on the Fed ‘books’, i.e. funding that was already established in March 2020 as part of the Cares Act passed at the time.

The fact that $455 billion has not been spent as part of Cores Act after almost nine months is of course a related question of importance. Given the great distress of small businesses and 22 million still unemployed in the US as of late November, one might well ask why hasn’t that $455 billion been provided to businesses and their employees still in need? Why has the Trump administration not comitted it, given the growing stress on small business and expiring unemployment benefits? And why have the Democrats not more insisted it be spent, as was intended in March. Congress and the Trump administration have been at stalemate for months over passing a new fiscal stimulus bill, when $455 billion in funds was, and still remains, available.

In recalling the Fed’s funds back to his Treasury, Mnuchin’s strategy is clearly to force the Democrats to confront McConnell and Republicans directly via renewed fiscal stimulus negotiations sometime in 2021, and to do so starting from scratch. Biden and the Democrats won’t have that $455 billion potentially available from the Fed. And they’ll have to in effect ‘renegotiate it all over again’.

Moreover, should the Republicans retain control of the majority of the Senate in 2021—to be determined after the Georgia state Republican Senator election runoffs—McConnell can dictate with his Senate veto the scope and magnitude of any future fiscal stimulus in 2021. The Fed and its $455 billion ‘back door’ possible funding source for state and local governments and small businesses will be denied to Biden and the Democrats.

The Mnuchin move is therefore political—i.e. to deny Biden the availability of nearly a half trillion in bailout financing especially for small businesses and state and local governments—and to force the Democrats to renegotiate it with McConnell again. A corollary gain for the Republicans is to force the same governments and small businesses to access the private capital markets for future financing needs, thus benefiting private lenders more than they would otherwise by simply playing ‘middle men’ distributing government program loans for a fee.

Banks have consistently complained since March that the Cares Act lending programs did not provide them sufficient profits. Their interest rate spreads are too narrow. Redirecting lending from Fed programs to private capital markets would prove more profitable.

Just What is the $455 Billion?

The $455 billion represents the unspent funds left over from the Cares Act passed in March 2020. That Act consisted of four parts. One part provided $500 billion in emergency unemployment assistance and $1200 per person checks for households whose annual income was less than $75,000. The checks were spent within 60 days. A good part of the unemployment benefits later expired at the end of July 2020; the rest will expire around Christmas and thus leave 12 million workers without any unemployment benefits any longer. It is estimated the August partial ending of the benefits reduced US GDP household spending by $65 billion a month; the December expirations will reduce it another $150 billion per month.

Another part of the Cares Act amounted to $350 billion to provide loans to small businesses, called the Payroll Protection Program or PPP. That $350 billion initially proved insufficient, as larger businesses quickly scammed and exhausted the funds with the help of their banks that were responsible for distributing the funds. Many of the banks simply disbursed the funds first to their larger, preferred customers even if they didn’t qualify as ‘small business’ under the PPP program. As a result, another $320 billion supplement to the PPP was passed by Congress in April. That brought the total available in the PPP to $660 billion ($10B of which was put aside for administration). The PPP was shut down in early August 2020, even when only $525 of the $660 billion was distributed. So $135 billion of the PPP remains unspent. That remainder is apparently part of Mnuchin’s order for the Fed to return $455 billion.

As a third element, the March Cares Act provided for another $600 billion for medium sized corporations, and for a host of special directed financial bailouts of financial institutions and corporations. A number of the bailouts were created under the umbrella of what is called the ‘Main St. Program’.

The Main St. program included Fed purchases of corporate bonds for the first time in its history, including Exchange Traded Funds (ETFs) which are traded like stocks. It also included Fed financial support for the Municipal Bond market, for asset backed securities, for nonprofit businesses, commercial paper issuers, and for money market mutual funds, among others.

Most of these were special lending facilities resurrect from the 2008-09 experience, with the exception of funding for corporate bonds and ETFs which were historically new and unprecedented. What was also precedent setting was none of the above markets had actually collapsed in March. The Fed resurrecting of the special lending facilities was in anticipation of a possible collapse. So much of the Fed lending to big corporations and financial markets was a pre-emptive bailout before an actual crash! So too was the Fed lending to non-financial corporations!

In short, there was at least $1.1 trillion put aside in the Fed—supported by Treasury funding—for the purpose of bailing out medium and larger corporations and targeted financial asset markets like commercial paper, asset backed securities, corporate bonds, municipal bonds, etc. But it mostly wasn’t used.

Why Big US Corporations Didn’t Need Fed Loans

Medium and large corporations didn’t require emergency liquidity from the Fed. They were able to accumulate trillions of dollars to add to their balance sheets quickly as the real economy began to crash in March-April. The Fed enabled their liquidity accumulation in significant part by pumping $120 billion a month via its QE program into the economy, and by other measures, which drove interest rates to record lows. That enabled large businesses to issue record levels of new corporate bonds. For the Fortune 500 alone it raised $2 trillion in funds. Hundreds of billions of dollars more were added by big firms drawing down their credit lines at their banks, again enabled by low rates thanks to the Fed. Nearly all big corporations suspended their dividend payouts, which in prior years had exceed more than $500 billion a year. Still other firms boosted available liquidity by saving on their daily costs of operations as workers were either laid off or allowed work remotely and facilities were shuttered.

In other words, most medium and large US businesses were fat with cash, could borrow at lower rates in private markets, and simply didn’t need the $1.1 trillion in emergency loans provided for them, through the Fed, as a result of the March Cares Act. So Mnuchin’s request for the $455 billion returned from the Fed included the funds the Treasury had given the Fed in March for possible lending to medium and large corporations—lending that never materialized because it was never needed.

About $100 billion was loaned by the Fed to date for various ‘Main St.’ lending facilities and other programs. In March the US Treasury provided $195 billion for Main St. programs. Another $25 billion was allowed the Fed to complete funding in progress. That left $70 billion of the $195 billion that Mnuchin now wants back. Add to that $70 billion the roughly $135 billion in unused PPP funds. And to that total ($70 + $135) another approximate $250 billion in funds allocated for large corporations and for other sources, and the grand total is the $455 billion that Mnuchin told Powell he wants back.

Jerome Powell’s Conundrum

The Fed will be left with the $25 billion to cover Main St. loans still being disbursed, as well as $74 billion in its ‘Financial Stabilization Fund’ (FSB) for future emergencies.

Cleaned out of most of its emergency funding originally allocated under the Cares Act, the Fed will be forced to address any future financial instability and emergencies by providing even more QE in addition to the $120 billion a month already. But that’s quite ok with financial investors and markets, since it will mean even lower (and longer duration) interest rates on Fed government securities. It may even force the Fed to introduce nominal negative interest rates, as have other central banks in Europe and Japan.

By his action, Mnuchin signaled the Republican preferred policy is to force monetary policy to again play the lead role in any future recovery. Fiscal stimulus is not primary, or even likely, in 2021. That explains in large part why both the Trump administration and McConnell’s Republican Senate have stonewalled any fiscal stimulus package subsequent to the March Cares Act. The Democrats’ ‘Heroes Act’ of $2.4 trillion passed back in June 2020 by the Democrat majority US House of Representatives has been thwarted and delayed by various tactics and means by McConnell and Trump coordinated maneuvers. Nor will McConnell permit any reasonable fiscal stimulus in what remains of 2020. Should he agree on anything, moreover, it will be to ‘give’ the Democrats back the $455 billion he took from the Fed with the assistance of Mnuchin. Moreover, should the Republicans retain control of the Senate by winning the run off elections in Georgia on January 5, 2021, McConnell’s Republican Senate majority will continue to oppose any fiscal stimulus proposed by the new Biden administration. It will mean a continuation of virtual veto of fiscal stimulus proposals that McConnell and Republicans have adhered to since at least 2012-14.

The Cares Act March 2020 fiscal stimulus was an aberration to this strategy. Immediately after, the Republicans returned to their monetary policy/central bank as primacy policy that has been in effect ever since the 2008-09 great recession 1.0. But even that generalization may be an exaggeration, since by monetary policy in this Republican strategic view is meant only QE and near zero rates—and does not include special lending to small businesses or employment assistance. In short, soon after the passage of the Cares Act it was back to monetary policy designed to benefit private markets and investors and not to benefit small business or wage earners.

The GDP Effect of Fiscal-Monetary Policy in 2020

The Cares Act has been consistently estimated as a $2.4 trillion stimulus event (or $3 trillion if one counts the $650 billion in business-investor tax cutting also provided by that legislation). But in fact the actual fiscal stimulus—in the form of PPP $525 billion and $500B employment assistance—amounted only to around $1 trillion! Add another $200 billion in direct spending assistance to hospitals and for Covid emergency health care, plus the minimal $125 billion or so in Main St. and other corporate lending, and the total actual fiscal stimulus to the general economy has totaled less than $1.5 trillion under the Cares Act. That’s around only 7% of GDP!

That compares to roughly $5.5% stimulus in the 2009 Obama recovery act, which proved grossly insufficient to generating a sustained economic recovery for most of the real economy after 2009. The 2020 contraction of the real economy has been at least four times as deep as the 2008-09 contraction. So the stimulus in GDP terms in the Cares Act was even less sufficient than was the Obama 2009 recovery package. How long it will take the 2020 great recession to recovery in employment and business activity terms with this even less sufficient stimulus to date remains to be seen. But history suggests recovery in the current great recession 2.0 will be measured in more years than the last 2008-09 great recession 1.0.

There has been much hype by politicians and media about the so-called economic recovery 3rd quarter in the USA. But the facts show the economy contracted sharply by 10.8% from March through June. It then ‘rebounded’ (not to be confused with ‘recovered’)in the 3rd quarter by 7.4%. More importantly, many key economic indicators have been flashing in the 4th quarter that the 3rd quarter recovery will weaken appreciable in the 4th. And some predict even more so in the 1st quarter 2021. Like Europe, the US Economy may be headed toward a double dip contraction over the winter months ahead. That will result in a clear ‘W-shape’ recovery (not V-shape) that is typical of all great recessions—which this writer has been predicting since last March.

The economic ‘relapse’ to a slower growth path in the 4th quarter is all but ensured by the current failure to quickly pass a sufficient fiscal stimulus bill at year’s end 2020, by the intensifying negative impact on the US economy by the Covid 3rd wave surging in America today, and for months still to come, and by the continuing political instability and gridlock in policy impacting the economy as well.

Much is made by optimists of the strength of recovery of US manufacturing and Construction sectors—i.e. the goods sectors—in the US economy. But together they constitute only 20% at best of the total US economy and GDP. Moreover, the recovery here is deceptive. Manufacturing is still 5.6% below 2019 and employment not recovered by any estimate. And Construction recovery is limited to new single family housing—with apartment and multiple housing barely improving—and commercial property construction still mired in a deep recession with no end in sight. This is not the basis for a sustained full economic recovery by any means. Especially since much of the services sector will lag in recovery for some time as well.

It is in the context of this questionable ‘recovery’ of the US economy in late 4th quarter 2020 that a fiscal stimulus package appears dead on arrival in Congress for the rest of the year; that Covid continues to surge with its expected economic impact; that the last vestiges of the Cares Act will soon expire before year end; and political instability threatens to create more business investment uncertainty.
In the midst of all this, Mnuchin and Republicans have acted to pull much needed funding from the Fed, making it even more difficult to restore economic resources needed in 2021.

Dr. Jack Rasmus
November 24, 2020

Dr. Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020. He blogs at jackrasmus.com. His website is http://kyklosproductions.com and his twitter handle @drjackrasmus.

Today the political crisis in America may be entering an even more dangerous phase–a phase that I predicted was possible months ago. Today reportedly Trump has asked Republican state legislators in Michigan, where he lost the popular vote, to come to the White House. Trump no doubt wants them to select electors who will vote for him, not for the winner of the vote in Michigan, Biden.

The veil of Democracy in America is being ripped away from the body politic right before our eyes. Not only can the Electoral College thwart the popular vote for president; but there are even more nefarious ways for political elites to circumvent the Electoral College if they don’t like it.

The electoral college is, of course, the means by which the popular vote for the president is prevented. Instead of Democracy’s principle of ‘one person, one vote’, we have electors who are selected by their state legislatures who then cast their vote for president. That’s the appearance. But it’s even worse than that.

The timeline for the Electoral College to meet and cast their votes for president is December 8. Each state’s vote in the Electoral College’s must then be sent by December 14 to their state’s governor, who must send that decision to Congress by December 23. Congress then confirms the president by January 6. That’s the actual process how presidents are ‘elected’.

The problem is that state legislatures select the electors who vote in the electoral college. But the electors they select don’t necessarily have to vote for the candidate the majority of the people of their state vote for. The legislature can select electors, or direct the electors they already selected, to vote for a candidate who the people of the state didn’t vote for. Court decisions prohibiting this are not clear cut, so it can be argued the legislatures can select the electors who can vote for whatever candidate they want. Even recent US Supreme Court decisions on this are ambiguous.

By calling Republican state legislatures from Michigan today to the White House–an act that in itself is intimidating, since Republican politicians know Trump can unseat them next primary–Trump is clearly attempting to ‘convince’ them to select, or order, electors to vote for him instead of Biden. If successful in Michigan, Trump will no doubt target another couple Republican majority state legislatures to do the same between now and December 14. Like Michigan, Wisconsin, Pennsylvania, and Georgia are all Republican state majority legislatures. That’s how he’ll try to ‘reverse’ the electoral college vote in his favor, or at least he clearly now thinks he can or he wouldn’t bother ‘inviting’ Republican state legislatures from Michigan to the White House. He’s not doing so for any other obvious reason.

Those who disagree with this analysis may say, ‘even if he convinces Republican state legislators to select electors for him, the governors of those states will not send the vote of those ‘reversed’ electors to Congress on December 23′. So he won’t get away with that maneuver.

But wait. Not so fast. Trump can then use that refusal of a governor to send Trump electors to Congress as an excuse to call in the US Supreme Court to decide the issue. Trump’s lawyers will then argue to the Court there isn’t a complete electoral college vote total to determine the outcome of the election if one or more governors don’t send in the results. The Supreme Court would then likely ‘pass the buck’ and order the decision on the election referred to the US House of Representatives, per the US Constitution.

Here’s where US Democracy is further revealed as the ‘fig leaf’ it is. In the House of Representatives the vote for president is done by one vote per state, not by total representatives. 435 Representatives don’t vote if the election is thrown into the House, which has a majority of Democrat legislators. No. Each state in the House gets just one vote. All the states with a majority Republican state legislature get to cast one vote for president. With Republican politicians cowering everywhere, fearful of Trump’s 70 million Republican voters, guess how they’ll vote in the House?

And if Trump has more red state Republican majority legislatures–which he does–the majority of red states would out-vote blue states by a vote of around 27 or so to 23. Trump wins!

If this sounds incredible it is nevertheless arguably legal and politically possible. And we know Trump will go to any length over the next 60 days–regardless if it results in the destruction what’s left of even the fig leaf of Democracy in America. Even if it leads to a political breakdown of the system or violence in the streets between Trump’s supporters and the rest of the country’s voters and citizenry (which Trump would no doubt like to see as well).

By calling Michigan state legislatures to the White House today it is clear this is the trajectory Trump now has in mind. We should all be forewarned! The fight to restore what’s little left of American Democracy may just be beginning.

Dr. Jack Rasmus
November 19, 2020