Moneybeat – Calculating the COVID stimulus


MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: The U.S. House okayed a Covid economic measure last week—another $1.9 trillion of Biden stimulus on top of the $900 billion in Trump stimulus added in December—for a total of $2.8. 

It didn’t bring the market reaction supporters may have hoped, though.

And David Bahnsen, financial analyst and advisor, has some thoughts.

DAVID BAHNSEN, GUEST: I think that the market response was kind of muted. It came out Thursday night and the market had been up so much throughout the week and somewhere in that is the expectation that another stimulus was coming, more money pumped into the economy. 

What percentage of the market’s movement was related to all the expectations of stimulus? It’s hard to say. 

But it’s very rare that you would see the market go up further on the news that it was already expecting. There’s an expression in our business “buy the rumor, sell the news.” And so on Friday the markets didn’t have a big response to the stimulus itself. 

But the stimulus was certainly more aggressive than I thought it was going to be. I figured that there would be some degree of massaging it to be a little bit more reasonable and sensible. And something that would have a chance of getting through without a whole lot of controversy. My understanding is his goal is to not have to use the budget reconciliation process, which enables them to get through with only 50 votes in the Senate, that he wants to actually get this through filibuster-proof, which means picking up 10 Republican Senators and assuming he keeps all 50 Democrat Senators. So, there’s no way this bill as it is structured now is going to meet that threshold. 

But it’s the first shot across the bow and it doesn’t really just stop at stimulus. He threw in a federal $15 minimum wage, for example. And, if I’m going to be fair, President Trump had said he was open to doing, too. So, anyway, this is a big bill and there’s going to be a lot of back and forth before we see where it goes. 

EICHER: You know, I called it stimulus, but is that even the right term? Isn’t it more Covid relief than economic stimulus? I don’t want to get hung up on nomenclature, but it should point to a reality. Shouldn’t it?

BAHNSEN: Yeah, I would argue that the CARES Act, which was $2.2 trillion, the bill done in the lame duck session, which was $900 billion, and I would argue this one now all have pieces that could be fairly called stimulus and all have pieces that are more accurately referred to as relief. And then also have pieces that would be more accurately called as pork or just nonsense. And that’s sort of legislation in its purest form. 

In this case, there is a lot that I would say is in the relief category than stimulus. And I think that’s by design, though. That’s not necessarily a criticism. I think that’s what they’re going for. 

Let me be so bold as to suggest maybe the most important thing in our time today: When we did a $2.2 trillion stimulus back in March in the panic of the moment and with the total uncertainty as to how long they were going to have our entire economy shut down, and we just did another almost $1 trillion, and now we have a proposal out there for another $2 trillion. The point is, we are talking about $3-4-5-maybe 6 trillion all as if it’s interchangeable. Like a trillion here, a trillion there and pretty soon you’re talking about real money to borrow off of the famous old senator’s line about a billion. OK? 

So that is, I think, when you’re talking about one-thousand-billion dollars which is what a trillion is, and you’re talking about multiples of that, I just think we have to understand that we are in a position now where both sides of the aisle and the public—I will never let the public off the hook for this—that we are just routinely in a mode of accepting multiple trillion dollars of government spending. This is baked into the American public consciousness now and it’s not going away.

EICHER: David, we saw a big jump in new unemployment claims last week—things going in the wrong direction on jobs—and as we’ve emphasized so many times, we’re talking about the jobs of those who can least likely afford to be unemployed at this point.

I wonder what’s going on here. About a month ago, it seemed, we were talking about the near miraculous rollout of vaccines, but we’re hearing now about distribution bottlenecks. Seems like it’s all stalled out and we’re going to keep limping along economically for the foreseeable…

BAHNSEN: I don’t share your pessimism there, but I know what you mean—and, of course, you’re a news guy so I get it—but of course the tone and tenor of the news does not always reflect the reality. 

EICHER: Haha! Fair!

BAHNSEN: And you’re right, there’s sort of a negativity to their almost dysfunctional distribution in particularly California and New York. But I think you have to look at this marginally. Like, if 20 million vaccines should have gotten out and they only got out five million, that’s disappointing at their inefficiency and bureaucracy, but the fact of the matter is we do have millions of people that have gotten vaccinated and we’re about to have millions more. And it’s also very encouraging to me that what they did really well in Florida, in South Dakota, in West Virginia is now being used as a model to tell some of these other states that thought they had a better bureaucratic idea, you’re getting shown up by these smaller red states and all of a sudden you see the Cuomos and Gavin Newsoms of the world changing their policies to be more efficient in getting the vaccine out. 

I’ll be honest with you and I usually avoid being overly partisan and also because I don’t consider myself an overly partisan person, but I think a lot of the reason for negativity around the post-vaccine news was that there was this sort of desire to kind of save some of that improvement into the administration from the media. And that I understand. I don’t like it. I don’t think it’s clean and fair, but I get it. 

But then it kind of backfired on them because it was these blue states that were really having a problem and so then they had to back off of that. They couldn’t really talk about how we were having these vaccine distribution hiccups under the Trump administration because it was coming out that it was really vaccine distribution hiccups in New York and California, so all of a sudden the conversation seems to have changed to me. I do think there’s some partisan rancor behind that. What I do know is that exponentially, as more and more people are vaccinated, already we see hospitalizations and case growth on a huge percentage downward trend. California was the only state this week that had an increase. And so we are certainly going to be in a better position there and that will flow through, Nick, to economic data in due time.

EICHER: Hey, bonus question, if I can hang on to you here for a minute: Did you see this story? A colleague passed it along to me, about how an office in the Treasury Department—the Office of the Comptroller of the Currency—approved a rule the day he was leaving office that would prevent banks from blacklisting certain disfavored industries, those that, say, are going to face a difficult time when the Alexandria Ocasio-Cortez wing of the Democratic Party are no longer constrained by the Trump White House—talking about oil-and-gas companies, among others—banks can’t blacklist those companies and deny them loans. Did you see that?

BAHNSEN: Oh, sure, sure. And the gentleman that runs OCC, it’s sort of a parting shot. He’s very conservative. Here’s the story there: it’s a regulatory thing that can be undone but it’s hard sometimes to undo them. By getting this in there, it’s significant because I do believe that you might get some banks that have wanted to bank for oil and gas but have been receiving some of that AOC type pressure and this gives them cover. And, again, it can’t get undone with one pen. I mean, it’s taken the OCC—I think he’s been working on this for six months—so undoing it, there’s a process and some red tape. So, I think on the margin it’s a good thing, but it isn’t lasting.

But it’s almost trolling as much as it is regulation and I actually am somewhat amused by the story.

EICHER: Alright. David Bahnsen, financial analyst and advisor. Hope you have a great week and we’ll talk next time.

BAHNSEN: Thanks so much, Nick.


(AP Photo/Seth Wenig, File) In this Nov. 23, 2020 file photo, stone sculptures adorn the New York Stock Exchange. 

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