Both Trump and Biden are willing to hand out trillions to virus-affected workers, provided they keep their jobs. Unfortunately it doesn’t help when the business shuts down.
One of the hard-won components of the weekend’s coronavirus stimulus package guarantees up to $200 a day in federal sick leave for up to 12 weeks if you need to quarantine yourself.
Unfortunately, you need to be sick and employed to qualify. That’s going to make it extremely hard for the service workers in states where all public gathering places have been shut down.
That means bars, restaurants, gyms, movie theaters, casinos and other businesses in New York, Connecticut, New Jersey, Massachusetts, California, Ohio, Michigan, California and elsewhere.
It’s a lot of people. It doesn’t matter now if they need to take time to protect customers from viral infection. There are no customers. Everyone is staying home anyway.
But those workers now need a way to pay the bills that doesn’t revolve around sick leave. One benchmark: 160,000 people in Connecticut alone work in the restaurant business.
They can file for unemployment insurance to help, but they aren’t going to be able to find work in their industry. This isn’t just one restaurant or bar closing down and rivals absorb the people.
This is all the restaurants and bars in many of the country’s major population centers. Sick leave isn’t going to help. You need a note from your employer to file for that. No employer, no $200 a day.
This makes the stimulus package obsolete before the Senate could even be bothered to debate it. The good news, of course, is that if the Senate approves the package, nobody who works in a public-facing role will be financially obligated to come in and spread contagion.
The sick leave is even federally funded for the duration of the crisis. Small businesses don’t have to pay it. It’s all thanks to the U.S. government.
Biden loves it. If he’s elected, it’s going to be a real challenge to roll back. And of course Trump loves it. Printing money to keep people solvent is what he does.
Fiscal conservatism, of course, is dead either way. Mitt Romney is talking about simply handing every U.S. adult a $1,000 check.
On one hand, that’s enough to cover five days of “sick leave” for everyone, which is enough to really slow the virus down. The next few weeks will apparently be the hard ones. Beyond that point, the outbreak should ebb.
But on the other hand, we’re talking about $200 billion in one-time consumer stimulus. That’s a lot of money to print if you’re really worried about deficits and balancing the budget.
And that’s where we are now. In theory, zero rates will help relieve the fiscal stress. The government can simply print money and borrow for nothing as long as demand for Treasury debt continues.
When that stops, we have problems. For now, the diehard budget hawks have gotten really quiet because other countries have it worse.
Near-zero Treasury yields look amazing compared to countries that pay negative interest. We are truly the least dirty shirt in the fixed-income pile right now.
That’s a blessing. Because if restaurant workers can’t pay the rent, they either lose their apartments or the government needs to enforce an eviction holiday.
Eviction holidays cut off the cash stream landlords need to make their own payments and make REIT shareholders happy. The alternative is vacancies and rent deflation.
We won’t go there. But as a longtime New York resident currently living in a restaurant mecca, you see my alarm.
These people are the real economy. You might not be them, but they’re your kids, your clients’ kids, your tenants. They’re the people in your community. Sick leave won’t matter if they’re staying home anyway.
I remember how scary it got after 911 when everything shut down. It was much, much worse than 2008. Multiply that by a lot of cities.
