Friday, April 24, 2020

We Need a Shadow Government

Republican rule in the US is a horror show.  We get incoherent ramblings from our president on injecting bleach into our veins, calls for the states to file for bankruptcy from the Senate majority leader, a veto of modest IMF support for developing countries hammered financially by the virus, and a complete absence of guidance on the most crucial aspects of public health.

We already know this.

The greater tragedy is that the Democrats are barely better.  Their program, to the extent it makes sense to speak of one, is protecting the immediate interests of their key constituents.  This begins with the financial sector, and since the Republicans share the same commitment, their multi-trillion dollar bailout zipped right through.  Small business is also important to both parties, if not quite as much, and upwards of a billion will wend its way to them—via the banks, of course.  Lots of health sector money flows to the Democrats, and Pelosi and Schumer found a way to bail them out too.  Beyond this it has been hit or miss.  The unemployed will get greater wage replacement, even above 100% for the bottom end of the labor market.  There may be future money for the states.  A few billion for testing, and that’s about it.

What all this adds up to is top-heavy interest group protection.  It’s not a plan.

The irony is that informed opinion has largely converged in the two key areas of public policy.  To overcome the pandemic we need four things:

  • A rapid increase in the production and dissemination of personal protective equipment, first to the health care sector and then to other workers who can’t avoid social contact.  This should be mandated and organized by the government through established emergency powers.
  • Mandatory use of face masks in public by everyone—no exceptions.  Masks, even simple homemade cloth coverings, are highly effective in reducing transmission.  (No, they don’t do much to shield the wearer from ambient exposures; yes they eliminate most transmission by the wearer.)


  • The government should make an immense expansion of testing capability its top priority.  No resources should be spared.  In addition, all available R&D capability should be directed toward improving the specificity and sensitivity of testing methods.


  • Measures should be taken immediately to establish a network of local and regional contact tracing systems.  Doing this in a manner that minimizes broader loss of privacy risks should be a primary concern.  Between vastly expanded testing and contact tracing, we have a pathway out of economic lockdown without inviting an even more devastating second wave of infections and deaths.

Economically, we need three broad initiatives:

  • A payments moratorium, with no accrued interest.  No rents, mortgages, premiums or other payments for essential services.  This means stopping the clock for the duration of unavoidable economic restrictions.
  • Universal income maintenance.  Income streams disrupted by the response to the pandemic should be sustained at public expense, with some percent reduction to reflect reduced spending opportunities—especially if a payments moratorium is also in effect.\
  • Liberal use of the Fed’s asset book to finance public services and sustain incomes.  We should have unrestricted ability to borrow to achieve all of the above, and the Fed should be authorized to purchase all such loan instruments.  Money should never be a constraint on policy, only real constraints like people, skills, resources and productive capacity.

My reading of the policy chatter is that, while emphases differ, in broad terms both agendas have overwhelming professional support.  What they lack is a political vehicle.

In a better world, that vehicle would be the Democratic Party, which would establish a shadow government to refine these proposals and push for their adoption.  It would assemble committees for particular policy areas, conduct regular—even daily—press briefings, organize petition campaigns, and in general act as though it had responsibility for progress in this country in economics and public health.  In their absence, which is the world we actually live in, no one is assuming this responsibility, and policy is in chaos.

Note that this is separate from the debate over how progressive the Democrats should be—whether they should campaign for Medicare for All, free public higher education and other reforms.  The need for leadership on matters of basic governance is prior and does not depend on resolving political disagreements over the future of the country once the pandemic has passed.

15 comments:

  1. What is/should be the role of government?
    What should an economy do?

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  2. Terrific essay; now for another reading and thought about the range of ideas.

    Terrific...

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  3. Also, there is as yet no rescue-recovery plan agreed on for the Euro Area which is shocking to me even though others might have anticipated the absence of mutual national concern making agreement so difficult. Germany did after all take delight in dismissing Greece after 2008-2009.

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  4. I agree with every point made. Again, this essay is terrific.

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  5. Good ideas - what money people do have needs to cover food, medicine, etc. which would reduce suffering and buy people time while keeping housing structures in place - both for rentees and landlords and then backstop the loans globally. In the 2009 crisis we could have allowed forbearance and lowered interest rates on all mortgages on a universal basis which would have helped people stay in their homes and reduce foreclosures (which are economically costly).

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  6. Two points, Peter:

    1) The matter of the US blocking, or at least slowing down, the IMF SDR expansion is apparently driven largely by Trump not wanting any IMF support going to Iran, or China, but the latter does not need it, so it is all about the former. So, it is bad enough that Trump is increasing sanctions against Iran and blocking medical aid to them even as they are suffering from a major SARS-Cov-2 attack. But now he is damaging global aid against a major global economic collapse out of this insane anti-Iran policy.

    2) You say not a word about state and local govt finances. When you posed the partisan issue, well, at this moment regarding the next round of aid the split is over aid to state and local govts, with McConnell blocking aid to them. I note that the 20009 Obama stimulus was one third aid to state and locsl govts, but so far after several trillion $ stim, losing track how many trillions, so far there has been zero for state and locals, and McConnell has been blatantly partisan in saying he has no interest in giving money to blue states, according to him a problem of moral hazard. Really.

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  7. Barkley:

    The $2 tn package did include $159 bn aid to states.

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  8. I am reminded that though the UK officially has a shadow government, this shadow has been of markedly little consequence these last months and indeed since the Conservatives gained control in the wake of Brown. At least with Jeremy Corbyn there was an opposition voice, but that seems to be gone now when the UK is truly struggling.

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  9. Kentucky is a net taker and NY is a net giver in terms of taxes submitted to Treasury and federal aid received. Also, the 2017 tax cut capped property tax being able to be deducted from federal taxes - all part of the plan to hurt blue states that provide more services to citizens.

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  10. Biden is apparently working at home in his basement. He is also going to be the nominee to challenge Trump this fall. He has every incentive of leading the shadow government you are calling for. Lots of experts would love to participate in ZOOM conferences with him. Now maybe he has already started doing this but I have not heard one word about it. Then again our press is less interested in checking in with Biden in his basement as they are spending hours of air time covering the clown show in the White House. We need a shadow government but we also need a better press corp.

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  11. Yes, I really wish Joe Biden were showing off a shadow government now but there is no evidence of this.

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  12. Atlantic Article on McConnell on States declaring Bankruptcy

    https://www.theatlantic.com/ideas/archive/2020/04/why-mitch-mcconnell-wants-states-go-bankrupt/610714/

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  13. Yes, Democrats could be a shadow government but obviously they have no interest in being such at present and being left to Republican government hurts us all. Even the Democratic House offers no coherent governing voice, but Nancy Pelosi likes ice-cream.

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  14. Yes! This is a great program, and why the heck DON’T we have a decent Democratic shadow government, even if it has to be led by Biden?!?! Our hopefully next administration will need to hit the ground running - and if they were pulling together the plans, that would also be a great way to generate some excitement for this lackluster candidate, the Senate races AND get some press - at least on late night TV, if nowhere else!

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  15. Given this essay, a question that worries me is whether Joe Biden can actually act as the leader of a shadow government. I only hope that Biden is more energetic and determined than so far seems to be the case to me. Also, Biden unfortunately needs to deal with "character" issues right now to then hopefully turn to effectively leading.

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