The actual number of people who stand to benefit the most from last month’s CARES Act could fit into Dodger Stadium and still have plenty of elbow room to catch any foul balls that might come their way. Just 43,000 of the richest Americans, those making at least $1 million a year, were handed a $1.6 million-dollar average “windfall” by provisions included in the bipartisan bill by Republicans.
Sections 2303 and 2304 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspends a limitation on tax deductions for capital gains and other “nonbusiness income,” effectively handing hundreds of billions of dollars in tax breaks to the wealthiest Americans worth an estimated $80 billion in 2020 alone.
On Friday, Nancy Pelosi and the Democrats introduced a massive $3 trillion-dollar stimulus package called “The Heroes Act,” named in honor of the monies allotted to front-line emergency workers. The new bill also seeks to repeal the egregious provisions included in the CARES Act, which allow hedge fund managers, real estate speculators, and business owners to apply them retroactively all the way back to 2017.
According to a study commissioned by Senator Sheldon Whitehouse (D-RI) from the Joint Committee on Taxation (JCT) at the end of April, less than three percent of the tax-relief benefits included in the CARES Act will go to people earning $100,000 a year. “Relief legislation ought to address the needs of small businesses and workers,” said Whitehouse, “not fleece taxpayers to benefit real estate moguls and hedge fund billionaires.” The Senator introduced a bicameral piece of legislation with Congressman Lloyd Doggett (D-TX) to “unwind” the tax-liability reductions and is part of the Heroes Act.
Despite the clear political advantages of attacking such a grossly unfair gift to the most well-off at the expense of the most vulnerable, the Democrats’ HEROES act actually goes further in undermining the help offered to small business owners by excluding the Paycheck Guarantee Act, which would have assured 100 percent coverage of workers’ wages up to $90,000 a year.
A “mini-rebellion” reportedly ensued among progressives in the House over its exclusion but was eventually squelched by Pelosi, leading to the passing of the controversial bill in a 208-199 vote. In addition, the legislation stamped out efforts to provide monthly recurring relief checks of $2,000 per household, opting instead for a one-time payment in a second round of the $1,200 stimulus checks. Other measures aiming to correct some of the shortcomings of the CARES Act were also rebuffed by the Democratic leadership, such as automatic stabilizers to tie federal aid to economic conditions and logistical improvements for the delivery of funds to individuals.
While the Heroes Act was immediately pounced on by Senate Majority Leader, Mitch McConnell, and other Republicans, who derided it as an election-year ploy with “no chance at becoming law,” the implications of their political infighting for millions of Americans could prove very costly in both the short and the long term.
Raiding the castle
The disconnect between reality on the ground and Capitol Hill is staggering. As the Trump show continues and each side of the political aisle takes aim at each other, the economy’s freefall is quickly reaching catastrophic levels.
A recent University of Chicago poll found that 37 percent of unemployed Americans ran out of food in April. Kate Maehr, executive director of the Greater Chicago Food Depository, has “never seen anything like it,” referring to the 60 percent increase in the number of people visiting food pantries that are part of her organization.
Meanwhile, 46 percent of those surveyed confessed to worrying that they, too, might run out of food in the near future if they didn’t find employment soon. Their prospects depend heavily “on whether states can restart their economies without creating new surges in COVID-19 infections,” according to Gabriel Ehrlich of the University of Michigan. His assessment was echoed by the Federal Reserves’ Financial Stability Report last Thursday, which noted the “sharp economic contraction” resulting from the economic shutdowns would “create fragilities that last for some time.”
Fed chairman, Jerome Powell, stated last week that “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage,” calling out the GOP for “pumping the brakes” on Pelosi’s $3 trillion stimulus bill. Senate Majority Leader, Mitch McConnell said the government should “take a pause here” and evaluate what has been done to this point.
Other Republicans voiced their opposition to the Heroes Act calling it “bloated” and “nothing more than the Democratic policy agenda masquerading as a response to the coronavirus crisis,” according to Rep. Tom Cole of Oklahoma. Only one Republican House member voted against his party and for the Democrat-led bill. Soon-to-retire Rep. Peter King of New York, who has served 14 terms in the U.S. Congress, told Fox News that he “had no choice,” asserting that “New York will absolutely collapse if that aid money is not there,” and adding that this wasn’t a time for politics.
Canary in the coal mine
New York City, in fact, provides a clear picture of what is in store for the country as a whole as the crisis motivates the wealthy to escape to safety and the less fortunate are left behind to deal with increasingly deteriorating circumstances. A recent article published by the New York Times delves into data provided by Descartes Labs and others, which analyzed smart-phone data to determine where New York residents had been over a two-week period in February when the pandemic began to unfold in the United States.
Notwithstanding the broader implications of smart-phone data surveillance, the results of the analysis determined that the city’s population declined by almost 5 percent as people with the means to do so fled to second homes out in the country or elsewhere. Peter Bearman, a sociologist from Columbia University, highlighted the contrast in inequality this phenomenon makes clear, stating that “everybody is really aware of the uneven distribution of risk, and the unfairness of having to work to provide services to people who are wealthy enough to avoid providing services for themselves”.
As the crisis deepens and those who don’t have the luxury of riding it out in the Hamptons or some other place are forced to stay behind in an economy in free fall, where unemployment is projected to reach unprecedented levels of 40-45 percent, the pussyfooting and pettiness that has become endemic in the American political system – run by the same class of people running for the hills with their million-dollar tax breaks – will inevitably give way to a mass insurrection by those most affected by their contempt, that not even a pandemic can hold back.