If US President Donald Trump would have his way, the new coronavirus stimulus package would include incentives to support Americans who want to go back to work. Previously approved stimulus packages provided extra money for the unemployed, and Trump and the rest of the Republican Party want it the other way.
Trump Wants Work Incentives Included in Next Stimulus Bill, Not Additional Unemployment Insurance
In an interview with the Fox Business Network yesterday, the President remarked: “We want to create a very great incentive to work. So, we’re working on that and I’m sure we’ll all come together.” He noted that the recent stimulus packages created a disincentive for people to return to work. Republicans have argued that supplemental unemployment benefits encourage workers to stay at home instead of looking for a job. The GOP prefers benefits to go to workers returning to work.
Reps: It’s About Getting Americans Back to Work
During the interview, the President was adamant that Americans are raring to get back to work.
“It was an incentive, not to go to work. You’d make more money if you don’t go to work – that’s not what the country is all about…and people didn’t want that. They wanted to go to work, but it didn’t make sense because they make more money if they didn’t.”
Trump’s remarks gave a preview to what’s in store in Congress when hearings resume later this month to deliberate on the next stimulus package. Most likely, the Republicans will oppose any efforts made by Dems to renew the enhanced unemployment insurance, a provision that provides an additional $600 to unemployed workers, and is set to expire by July 31.
Senate Majority Leader Mitch McConnell (R-Ky) termed the supplement a “bonus not to go back to work.” The Kentucky senator has already vowed that the unemployment benefit included in the previous CARES Act in March won’t be included in the next phase of the coronavirus stimulus package, which is targeted for ratification by end of the month.
But that doesn’t mean that unemployment will not be addressed. McConnell clarified that
“Unemployment is extremely important. And we need to make sure, for those who are not able to recover their jobs, unemployment is adequate…that is a different issue from whether we ought to pay people a bonus not to go back to work. And so I think that was a mistake…and we’re hearing it all over the country that it’s made it harder actually to get people back to work. But to have the basic protections of unemployment insurance is extremely important and should be continued.”
Republicans have instead favored back-to-work bonuses instead of additional unemployment benefits. Senator Rob Portman (R-OH) proposes giving Americans who return to work a $450 weekly bonus, while Representative Kevin Brady (R-TX), has proposed giving returning workers a one-time $1,200 payment.
Dems: Extend the Unemployment Insurance, but With Some Conditions
On the other side, while Democrats are pushing to extend the enhanced unemployment benefits, they did so with some form of control in place. For starters, the program will phase itself out once the state reports a lowering of unemployment rates to a certain threshold. This gives the benefit an end that is synced with a change in economic conditions, a marked improvement compared to the ongoing provision that features an arbitrary end date.
Senate Minority Leader Chuck Schumer (D-NY), who introduced the bill with Senate Finance Committee member Ron Wyden(D-Or), said cutting off the benefit can potentially mean that “millions of American families will have their legs cut out from underneath them at the worst possible time — in the middle of a pandemic when unemployment is higher than it’s been since the Great Depression.”
The Dem’s proposed legislation would extend unemployment insurance through March but would lower its amount depending on how well the economy recovers, especially with unemployment numbers. It would be cut by $100 for every percentage point the jobless rates fall below 11%, and will phase out when it slides below 6%.
So, Which Is Which?
With deliberations set to begin as soon as both Houses resume work on July 20, there is pressure to have something in place prior to July 31 expiration of CARES Act. Fortunately, there seems to be a large common ground where both Republicans and Democrats can coexist. With cases of coronavirus spiking again and in higher numbers, some of the larger states have begun holding back on their plans to reopen their economy. A continued stimulus package would help the majority of Americans to deal with this unique global phenomenon, and may yet again help boost the economy like it did the last time. As to what extent the support will turn out to be, Congress has its work cut out for its players.
Watch Trump’s talk about the new coronavirus stimulus package:
Outside of party lines, do you agree with the complete removal of additional unemployment benefits and instead reward Americans who went back to work instead? Or, do you prefer additional support for the unemployed?
DOJ Files Suit Against Google Over Anti-Competitive Behavior
After a nearly 16-month investigation, the Justice Department filed an antitrust lawsuit against Google, part of Alphabet. This is the first of likely a handful of lawsuits against one of the FAANG stocks.
The suit alleges that Google has engaged in anticompetitive conduct to preserve monopolies in search and search advertising. It is the most notable lawsuit on the grounds of anticompetitive behavior in nearly 20 years. The last one was when Microsoft had been sued by the government in 1998 accusing the software giant of unlawful monopolization.
The lawsuit alleges that Google is acting as a gatekeeper to the internet. It acts as such by creating exclusionary and interlocking business agreements that prevent competition. For example, the government says Google uses the billions of dollars it collects from advertisers to pay cell phone manufacturers to install Google as their preset, default search engine.
The DOJ lawsuit specifically points out that Google’s search application is preloaded on mobile phones running its popular Android operating system. It also points out the fact that this app can’t be deleted. The lawsuit adds that Google unlawfully prohibits competitors’ search applications from being preloaded on phones under revenue-sharing arrangements.
Keeping an Eye on Tech Companies
Large tech companies, like Alphabet’s Google, along with Facebook, Apple and Amazon, are in the crosshairs of legislators in Washington, D.C., who think that the government should have more control over how the companies operate.
In the U.S., nearly all state attorneys general are separately investigating Google. Eleven state attorneys general, all Republicans, joined the Justice Department’s case.
It’s not just Republicans who have a problem with Google’s actions. Democrats on a House antitrust subcommittee released a report this month saying all four tech giants wield monopoly power and recommending congressional action.
The company’s problems aren’t limited to US regulators, either. European Union regulators have also hit Google with three antitrust complaints and fined it about $9 billion. However, the lawsuits and fines have apparently done little to slow the company down.
Lawsuit Too Broad?
Amazingly, as news broke of the DOJ lawsuit, Google’s share price actually rose.
Fox Business’ Charlie Gasparino says it’s because investors think the lawsuit is too broad and will take years to litigate.
“When the news hit, when they read the complaint, let’s just say “underwhelmed” was the word of the day. Investors we are talking to are downplaying the impact of this suit on Google. They believe the suit, if you look at it, there’s a lot of heated language, but in terms of comparing to other anti-trust suits on tech, such as Microsoft that had really specific issues that Microsoft did to hurt a competitor… this lacks that type of specificity.”
He then added that even a worst-case scenario could be good for Google investors.
“They believe it’s too broad, they believe it’s going to take years to litigate, they believe Google has the financial resources to fight, and here’s the other interesting thing. They actually think that Google, even if you broke it up, and that’s the worst-case scenario, you could get a lot of value out of the sum of its parts,” said Gasparino.
Rickards: Get Ready For Deflation, And Here’s Where Gold Prices Are Headed
Yesterday we brought you the first part of an interview by James Rickards. In it, he gave his outlook on the stock market. He also shared his viewpoints on why the Federal Reserve can’t create inflation despite printing trillions of dollars.
Today we bring you the second part of the interview, where Rickards discusses why he thinks we are headed towards deflation and not inflation, why gold falls when the stock market falls, and where he sees gold prices headed.
Moving Toward Deflation?
He says we are headed toward deflation despite trillions of dollars in money printing. Rickards thinks it’s because we aren’t spending any of that money.
“The greatest danger in the macro-economy today is deflation, because declining labor force participation, declining productivity, most of all velocity. Velocity is the turnover of money. It doesn’t matter what the money supply is. If there’s not turnover, if there’s not lending and spending, if the people aren’t chasing the goods, you’re not going to get inflation. But velocity is a psychological phenomenon. How do you feel? Do you feel prosperous, do you feel confident, do you want to go out and buy dinner or drinks, or do you feel cautious, do you feel concerned, you saw your neighbor lose her job, you’re worried about losing your job, so you save more,” said Rickards.
He said the savings rate is still at levels well above anything we’ve seen historically here in the US.
“The evidence is people are saving more. We’re in a liquidity trap. Saving was sort of working its way up from 5% to 8%, in April it was 33%. In May it was still 25%, in June it was 17%. So savings can be a good thing in the long run, but in the short run savings comes out of consumption. If I make money I’m either going to spend it or save it. Well if I save more I spend less. So all the signs are pointed to deflation. They can say they want inflation and they can print all the money they want, it doesn’t mean they’re going to get it.”
There are two types of gold buyers according to Rickards. The “strong hands” will be around when gold runs to $15,00 per ounce.
“There are two kinds of buyers of gold or investors in gold generally. The strong hands and the weak hands. The strong hands don’t use a lot of leverage, they use cash or capital, they’re in it for the long haul, they’re not day traders, I mean I watch the tape because I’m an analyst, I do a lot of interviews about it and I write about it, but I’m not a day trader. I don’t get too euphoric if gold goes up, I don’t get depressed if it goes down. I know where it’s going in the long run, it’s going in the neighborhood of $15,000 an ounce.”
Not Out of the Ordinary
He doesn’t offer a timeframe for the massive run-up in gold prices. However, he says it isn’t uncommon for gold to sell off along the way.
“That doesn’t have to happen next year or the year after. That’s the trend. I like to remind people, if it’s going to $15,000 an ounce, which it is, it’s got to go to $3,000 – $4,000 – $5000 – $6,000 along the way. So that’s the long term trend, so I don’t worry about the wiggles. As far as the stock market is concerned, this happened in 2008, I remember the worst part of it in 2008 in September, October and November when the stock market was absolutely crashing, gold was going down. And I was getting all these calls, ‘Gold is a safe haven, how come it’s going down?'” he said.
“What happens is in a liquidity crisis, everybody sells everything, especially the weak hands. If you’re leveraged and you’re in the gold futures market and you’re long and the market is collapsing, you’ve got to sell and get out, you’ve got to cut your losses.”
“Strong Hands” Stepping In
When this happens and prices drop, Rickards says the “strong hands” step in and start buying.
“If you’re a leveraged player, you’ve got to either come up with cash for the margin, or you have to sell your position which makes it worse. So what people do is sell gold to get cash to meet the margin call on the stock losses. Or they’re on the wrong side of the gold market and they’re leveraged and they just sell to cut their losses. So it does go down, it’s highly predictable. But the strong hands are waiting. It’s like a lynx or a mountain lion hunt. They don’t stalk their prey, they just sit there and wait and then pounce. Strong hands are watching, they don’t jump in on day one, they wait until it goes down enough and then they come in and buy and it goes right back up again.”
Report: Biden’s Economic Plans Would Mean 5 Million US Jobs Lost, 10% GDP Drop
A Joe Biden presidency would destroy millions of jobs and derail the economic recovery from the coronavirus pandemic. This is according to a new report from the Hoover Institute at Stanford University.
The report says that based on the economic plans laid out by Biden, nearly 5 million Americans would lose their full-time job. Meanwhile, the country’s gross domestic product, the measure of its economic output, would drop by nearly 10% over the next decade.
These losses would trickle down to the average household. The median household income will fall by $6,500 per year by 2030, according to the report.
Derailing Economic Recovery?
The authors of the report lay out a laundry list of changes. These changes include reversing some of President Trump’s 2017 Tax Cuts And Jobs Act, a tax increase on corporations and high-income households and pass through entities, reversing much of the regulatory reform of the past three years as well as setting new environmental standards, and create or expand subsidies for health insurance and renewable energy.
When it comes to renewable energy, the report says that the proposal to cut our nation’s reliance on fossil fuels is “ambitious” and would require cutting electrical use back to levels not seen since 1979.
“These plans are ambitious. Unless people drive a lot less, the electrification of all, or even most, passenger vehicles would increase the per capita demand for electric power by about 25 percent at the same time that more than 70 percent of the baseline supply (i.e., electricity generated from fossil fuels) would be taken off line and another 11 percent (nuclear) would not expand. To put just the 25 percent in perspective: that is the amount of the cumulative increase in electricity generation per person since 1979, which is a period when nuclear and natural gas generation tripled.”
Taxing Wealthy Americans
To pay for most of these “ambitious” plans, Biden has already said he would significantly raise taxes on wealthy Americans. They, he says, include anyone who earns more than $400,000 per year, through higher taxes, an increase in the payroll tax that funds Social Security, and fewer tax deductions. He also plans on raising the corporate tax rate.
The Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania’s Wharton School, says nearly 80% of Biden’s proposed tax increases would affect the top 1% of earners in the United States. It will primarily do so through raising the top individual income tax bracket to 39.6% from 37% for those earning more than $400,000 annually.
That means an annual tax increase of nearly $300,000 for households in the top 1%, according to the Tax Policy Center, who say even middle-class families will see a tax increase under Biden’s plan.
Corporations would feel the pinch as Biden said he would raise the corporate tax rate from 21% to 28% on “day one.”
During an interview in September, Biden said, “I’d make the changes on the corporate taxes on day one. And the reason I’d make the changes to corporate taxes, it can raise $1.3 trillion if they just started paying 28% instead of 21%. What are they doing? They’re not hiring more people.”
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