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Trump Takes (Political) Charge Of COVID-19 Economic Recovery – Analysis

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By Kashish Parpiani and Ananya Koppikar-Moorthy

US President Donald Trump recently signed an executive order on continuing unemployment benefits for millions of Americans out-of-work due to the coronavirus pandemic. In bypassing the US Congress’ constitutional mandate of determining federal spending, the order continues federal employment benefits — albeit reduced to US$ 400 per week as compared to US$ 600 under the Coronavirus Aid, Response and Economic Security (CARES) Act. Signed into law by Trump in March 2020, the US$ 260 billion-worth unemployment benefits under that US$ 2.2 trillion Congressional economic recovery bill expired on July 31.

Over the past few weeks, as negotiations for extending those benefits through 2021 stalled, Congressional Republicans alleged Democrats of working from a “my way or the highway” disposition as both sides differed on the scale of the recovery package. In accusing Democrats of having “obstructed people from getting desperately needed money”, Trump invoked his powers under the Stafford Act to repurpose US$ 44 billion from the Department of Homeland Security’s Disaster Relief Fund to extend unemployment benefits. Trump hailed the same as his administration’s effort “to take care of our people” amidst the coronavirus pandemic impeding the US economy’s recovery.

This sense of urgency behind the announced executive actions stood in stark contrast to Trump’s record of often understating the severity of the coronavirus pandemic.

American exceptionalism under COVID19

The United States has long defined its role in the world by purporting itself as an inherently exceptional nation — stemming from either its primacy of economic/military capabilities or the liberal tenets espoused by the “American creed”. A widespread belief in ‘American Exceptionalism’ has also animated US activism in its various forms abroad — from heady neoconservatism’s push to military adventurism in the post-9/11 timeline to liberal internationalists’ push to shape global economic interdependence in their own eyes.

However, amidst the coronavirus pandemic, belief in this extraordinary character of the United States has declined to an all-time low with “only 1 in 5 Americans” being “satisfied with the direction of the country.”

Compounded by policy gridlock at the hands of intense political polarisation, the United States — which is a mere four percent of the global population now accounts for a quarter of confirmed COVID19 cases. Moreover, the same has also spurred an economic crisis, with America’s unemployment rate rising from 3.8 percent in February — known to be amongst the lowest on record in the post-Second World War era, to 13 percent around May — after peaking with April’s 14.7 percent. These rates have also been noted to have surpassed the 2007-09 recession’s peak unemployment of a little over 10 percent.

Hence, despite the US’ long-known untoward distinctions of having the highest incarceration rate in the world or having the highest proportion of gun-related killings in its reported homicides, the coronavirus pandemic is being reported as a time signifying the end of American Exceptionalism.

Further compounding the pandemic’s impact on the socio-economic level, has been the international humiliation at the hands of America’s chief executive. Over the course of the pandemic, Trump has said the novel coronavirus would one day disappear “like a miracle”, blamed his predecessor for his administration’s weak federal response (“No, I don’t take responsibility at all… we were given rules, regulations and specifications from a different time”), and even suggested research into treating COVID19 by injecting disinfectants. Trump has even invoked American Exceptionalism in some inverse sense to argue that the US having the world’s highest number of confirmed COVID19 cases is “a badge of honour”, as that is indicative of his administration’s scale of testing.

With Trump now taking executive action to offset the economic impact of the coronavirus pandemic, it seems the US president has finally taken note of America’s ‘exceptional’ ordeal with COVID19. However, the underlying politics of his actions only disprove that.

Protracted negotiations

In pushing for a comprehensive package worth over US$ 3 trillion under the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act passed by the Democrat-led House of Representatives in May, Democrats sought to take the lead on the post-COVID19 economic recovery and construe Republicans and the Trump administration to have dropped the ball on handling one of the “greatest challenges since the Great Depression.” Moreover, with their prescriptions, Democrats sought to also further their (increasingly leftward) socio-economic agenda such as gradually actualising the idea of universal basic income — by proposing another round of US$ 1,200 stimulus for adults making less than US$ 75k and families being eligible for additional US$ 1,200 per dependent (up to a total of US$ 6,000 per family). Wherein, immigrants without Social Security credentials, but with taxpayer identification numbers would also qualify.

In contrast, Republicans dismissed the same as a “liberal wish list” and criticised the bill for having “many provisions seemingly unrelated to the current economic crisis.” In rationalising their call for a “tailored and targeted” US$ 1 trillion package, Republicans underscored the turnaround in the US economy under Trump. In arguing against spending more federal money, Republicans referenced gains noted by recent jobs reports — as with the US economy adding 4.8 million jobs in June, to push for limiting unemployment benefits to 70 percent of the wages workers received before losing their jobs. In hoping to aid the trend of job creation, Republicans explained that as a measure to incentivise people to go back to work. In alleging many people to have made more money from unemployment benefits than when they were working, Sen. John Cornyn (R-TX) said, “We should never pay people not to work.”

Trump’s executive action however, hardly solves the contention. Reportedly, some have noted his executive order’s mandate of states contributing 25 percent of the US$ 400 support as hardly being feasible with finances of many US states “already stretched thin because of the pandemic

Nevertheless, Congressional Democrats find themselves in a quandary: If they challenge the legality of Trump’s actions (as some Democrats have suggested), they risk appearing as being against his efforts to arrest the economic collapse spurred by the coronavirus pandemic. Trump officials have already set the narrative for such an event. For instance, US Treasury Secretary Steven Mnuchin said, “If Democrats want to challenge us in court and hold up unemployment benefits to those hard-working Americans that are out of a job because of COVID, they’re going to have a lot of explaining to do.” Alternatively, if Democrats return to the negotiating table to broker a deal — most likely with a bigger compromise on their recent offer to reduce the HEROES Act’s ask by US$ 1 trillion, Trump scores a political victory for himself and his conservative agenda.

Moreover, Trump’s executive actions also included the deferral of payroll tax from August 01 through the end of the year. In proposing, “If I win, I may extend and terminate” the requirement for the late payment of those taxes, another predicament for Democrats emerged. With those deferrals to be due at the end of the year i.e. under a post-election lame-duck session, Democrats risk ending up with that as their cross-to-bear if Trump loses. Alternatively, Democrats would have to hit square-one with a re-elected Trump to manage the deferral’s impact on their perpetual agenda of securing social security programs, as initiatives like Medicare mostly depend on the 7 percent tax on employee incomes.

Hence, with the aim of strong-arming Congressional Democrats amidst negotiations for an economic package and towards the long-term conservative agenda of weakening social security, Trump’s recent executive actions constitute a mere smokescreen for election-year politicking.The views expressed above belong to the author(s).

Observer Research Foundation

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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