Let's Tone Down the Rhetoric

The rhetoric from Washington about China indicates our relations with that country will be a major topic in the fall presidential election. That is a reasonable expectation. Whether the discussion is based on reason and reality is another matter. 

Americans have long been conflicted towards China. I remember my mother attending meetings of the Lottie Moon Circle at our Baptist church. Lottie Moon had gone to China as a missionary in 1873. Responding to her pleas, women in the Southern Baptist Church began collecting funds to support missionary work in the Far East. The effort apparently continues to this day.

The attitude towards Chinese immigrants was a different story. In 1882, Congress passed the Chinese Exclusion Act, suspending immigration of Chinese workers for ten years. It was the first US legislation placing restrictions on immigration.

Prohibitions against Chinese immigrants continued into World War II. They were repealed in 1943 when China became an ally against Japan. In the aftermath of the war, relations between the US and China became ice cold when the Mao Tse-tung’s communists came to power. Chinese intervention in Korea and support for Ho Chi Minh’s forces in Vietnam intensified the freeze.

In the early 1970s President Richard Nixon initiated contact with Mao in the hope that improving US-China relations might give the US leverage in dealing with the Soviet Union and Vietnam. His gambit was generally successful, but it did not meet with universal acceptance at home.

China began opening up to foreign trade and investments in the late 1970s. It soon became the world’s fastest growing economy, averaging nearly 10% annual GDP growth through 2018. At that time China was the largest merchandise trading partner of the US, its biggest source of imports and third largest export market. China also was the largest foreign holder of US public debt.

American corporations played a major role in China’s growth, outsourced millions of jobs to take advantage of cheap Chinese labor. They also sought access to the Chinese consumer by locating manufacturing and retail activities in China. Despite the negative impact these action had on American workers, the exodus continues to be encouraged by US tax and labor policies.

  

Concern among Americans about the rise of China has been growing for some time. How to deal with the challenge of that country’s rapid economic progress and military modernization while at the same time retaining access for American business to China’s rich markets has been a subject of constant debate during the past three decades of US presidential elections. No administration has been able to develop an acceptable approach that enjoys broad public support.

In his 2016 presidential campaign Donald Trump promised to aggressively confront China, putting an end to trade advantages the latter has achieved through export subsidies, currency manipulation and lax labor and environmental standards. Once in office, the former real estate developer initiated negotiations with the Chinese while threatening a trade war if his demands were not met. This has generated acrimonious debate, but little concrete change.

Part of the problem is that Trump also harshly accused other countries, including some of our most loyal allies, of treating US companies unfairly. Although most European countries are concerned about China’s policies and ambitions, they see Trump’s belligerence as reckless and self-serving. This has been evident in the US failure to convince its European allies to avoid doing business with the Chinese tech giant, Huawei.

The trade and military disputes between the US and China are being complicated further by quarrels related to the coronavirus pandemic. China has not denied the pandemic began in Wuhan, one of its major cities, nor that there was some initial delay in revealing the extent of the health threat.

Trump was also slow to recognize the impending danger and his administration has been unable to respond in a timely manner with a consistent message. In an effort to deflect criticism of his performance, Trump, without evidence, has blamed China for the pandemic, even suggesting the Chinese acted deliberately.

In another defensive reaction, Trump is threatening to withhold funding from the World Health Organization and refuses to join the European-led joint effort for vaccine research. In stark contrast, Chinese President Xi Jinping in a speech to the WHO governing body has pledged to provide $2 billion over two years to support the fight against the pandemic.

Three and a half years of Trump’s inflammatory rhetoric and nativist policies have isolated the US from its traditional allies and has set the stage for an excessively bitter presidential campaign this fall. A contest to see who can bash China with more rancor will not serve the interests of the American people or the world at large.

China’s unfair trade practices must end and reinstating economic security for the average American has to be achieved, but both goals require that the United States maintain civil if not cordial relations with the rest of the world.

Is It Enough?

The extraordinary speed with which the US Congress has acted to address the economic fallout of the coronavirus has been a sight to behold. Usually our national legislature moves with swiftness of a loggerhead turtle stuck in a mountain of mud.

Circumstances certainly call for quick action. The lockdown required to deal with the threat of the coronavirus to public health is having a painful impact on the nation’s economy and psyche. It does not help that many Americans have not yet recovered from the financial trauma of the Great Recession a little more than a decade ago.

Unfortunately, the several federal initiatives pushed through thus far have not provided meaningful relief to those suffering most. The problem is not so much the lack of resources as it is the wrongheaded mindset of the nation’s financial and political leadership.

Trickle-down economics does not work when businesses are flourishing but it is disastrous when businesses are in the tank. And refusing to recognize the limits of the “free” market means ignoring government’s responsibility to protect the interests of all participants in our economy.

So far, the Congress, the Trump administration and the Federal Reserve have authorized an estimated $3 trillion in grants, loans and other forms of assistance to deal with the financial impact of the coronavirus. While the scope of the effort is extensive, much of it is harum scarum and reflects political horse trading more than any clear strategy for rescuing the economy.

Of significance is the fact that most public services in the US are delivered by, or at least through, state and local government entities. The areas include health care, education, public safety, transportation, infrastructure, workforce initiatives, community development, and employment security.  In implementing programs in these areas, state and local governments employ nearly 20 million people, 13 percent of the nation’s workforce.

By comparison, the federal government employs only about 2.8 million people with nearly 600,000 of those in the postal service.

Under normal circumstances aid to state and local government constitutes approximately 17% of federal budget outlays, $750 billion. These dollars represent only about one-third of anticipated budget requirements of America’s state and local governments.

It is not too difficult to imagine the financial chaos that would result if state and local governments should collapse, perhaps even go bankrupt. About 70 percent of state and local revenue comes from sales and income taxes.  Obviously, the shutdown of the economy, especially retail, restaurants and tourism, is knocking a giant hole in state and local tax collections. With wide spread layoffs reflected in 30 million applications for unemployment benefits during the past six weeks, the decline in revenue should easily exceed the 9 percent dip that occurred during the Great Recession.

Those 30 million applications for unemployment benefits are indicative of a major problem the nation faces in trying to address the economic fallout from the coronavirus. Unemployment benefits are delivered at the state level. Each state has general freedom to determine benefit amounts and the criteria for eligibility with limited oversight from the US Department of Labor.

Most states view the system of unemployment benefits as a temporary form of limited assistance for a worker between jobs. No attempt is made to provide replacement income of more than about 40 percent. And there is no consistency among the states. South Carolina, for example, paid in 2019 an average of $228 weekly with a maximum of 20 weeks, while North Carolina paid an average of $265 weekly with a maximum of 12 weeks.

Nationwide, in 2019 unemployment benefits averaged $385 weekly and most other states paid a maximum of 26 weeks.

Congress attempted to resolve some of the shortcomings of the system by providing funding for up to 39 weeks of benefits in every state and through July an additional $600 weekly on top of the benefit paid by each state. Thus, a recipient in North Carolina will likely have a weekly unemployment benefit $40 higher than a South Carolina recipient.

Of course, both US senators from South Carolina voted against the CARES Act (the Coronavirus Aid, Relief and Economic Security Act) because of the $600 bonus. Apparently not because it seems unfair to workers in South Carolina, but because nurses and other essential workers will likely refuse to return to work because of the generous unemployment benefits.     

According to the Charleston Post and Courier both senators were in attendance April 29, at a meeting with Columbia business leaders when in reference to the $600 bonus Senator Lindsey Graham declared, “I promise you over our dead bodies will this get reauthorized.”

Senator Tim Scott added, "The unemployment benefit is wreaking havoc and will continue to wreak havoc until it's over,"

Neither provided any evidence that South Carolina nurses or other essential workers were refusing to work for any reason.

The unemployment benefits system is a poor choice for trying to deal with our economic calamity. It is actually not a single system, but a clumsy and convoluted collection of systems not meant to address long term problems. Across the board direct payments to all citizens with reasonable income limits is a better way to distribute assistance fairly and quickly. The CARES Act did provide a single $1200 payment per adult and $500 per child, but this type of assistance should be available on a regular basis when the economy is suffering.

In another half-hearted effort at easing the anxiety and probable pain of American workers, the CARES Act raised the federal share of Medicare spending by 6.2 percent, an estimated $35 billion. A recent study by the Center for American Progress indicates that for every one percent increase in unemployment in a state Medicaid costs rise by roughly $2.7 billion per year. On this basis, if unemployment rises as high as 20 percent, it could cost states a combined $45 billion.

But given our employer-based healthcare system, inadequate Medicaid funding is not the only problem. The 30 million applications already submitted for unemployment benefits likely means many working Americans will soon be without access to healthcare. Not a good development when the country is trying to deal with a pandemic.

At a minimum Congress should make anyone receiving unemployment benefits eligible for Medicaid. Better yet would be a serious effort to implement some form of universal healthcare access divorced from one’s employment. The time has come to provide a genuine economic safety net for all Americans.