Trump and Biden Agree on Police Defunding

By Yuval Rosenberg

Trump and Biden Agree: Don’t Defund the Police

As "defund the police" has become a rallying cry for
protestors, with activists and some politicians looking to build on
a
wave of support for the movement, President Trump
has in recent days rejected the idea — and tried to turn it to his
political advantage as he seeks to portray himself as the candidate
of
"LAW & ORDER" in his reelection campaign against former
Vice President Joe Biden.

"There won't be defunding, there won't be dismantling of our
police and there is not going to be any disbanding of our police.
Our police have been letting us live in peace, and we want to make
sure we don’t have any bad actors in there," Trump said Monday
afternoon at a White House event with law enforcement officers.

White House Press Secretary Kayleigh McEnany told reporters
earlier in the day that "the president is appalled by the defund
the police movement," including vows from the mayors of New York
and Los Angeles to cut police budgets and reallocate the money to
social services. In Minneapolis, where the killing of George Floyd
in police custody sparked massive nationwide protests, most of the
city council has pledged to
'begin the process of ending' the police
department.

On Sunday, Trump tweeted: "Sleepy Joe Biden and the Radical Left
Democrats want to 'DEFUND THE POLICE'. I want great and well paid
LAW ENFORCEMENT. I want LAW & ORDER!"

Biden’s campaign said Monday he also opposes calls to defund the
police. "As his criminal justice proposal made clear months ago,
Vice President Biden does not believe that police should be
defunded," Biden spokesman Andrew Bates told reporters Monday.
"Biden supports the urgent need for reform — including funding for
public schools, summer programs, and mental health and substance
abuse treatment separate from funding for policing — so that
officers can focus on the job of policing."

The Trump campaign attacked Biden for not commenting on the
matter himself. "As the protesters like to say, silence is
agreement," Trump campaign communications director Tim Murtaugh

said on a conference call with reporters. "By his
silence Joe Biden is endorsing defunding the police."

The bottom line: Congressional Democrats
unveiled broad legislation to reform police
departments, but the party has stopped well short of embracing
calls for defunding. House Speaker Nancy Pelosi said Monday that
those decisions fall to local governments.

It’s Official: The Recession Began in March

The National Bureau of Economic Research announced
Monday that the U.S. economy entered a recession in March, ending
the nation’s longest expansion on record. Here’s the summary from
the report
by the Business Cycle Dating Committee at NBER:

"The committee has determined that a peak in monthly
economic activity occurred in the U.S. economy in February 2020.
The peak marks the end of the expansion that began in June 2009 and
the beginning of a recession. The expansion lasted 128 months, the
longest in the history of U.S. business cycles dating back to 1854.
The previous record was held by the business expansion that lasted
for 120 months from March 1991 to March 2001."

The announcement of the recession came relatively
soon after its onset. Usually, the committee of economists waits to
see how economic conditions develop over a longer period of time
before determining that a recession has begun, but the current
slowdown is clearly exceptional. The committee said "it concluded
that the unprecedented magnitude of the decline in employment and
production, and its broad reach across the entire economy, warrants
the designation of this episode as a recession, even if it turns
out to be briefer than earlier contractions."

May Deficit Falls From April Record, Still Second Highest
Ever

The Congressional Budget Office
said the federal budget deficit was $424 billion
in May, well below the $738 billion recorded in April — but still
the second highest monthly shortfall in history. The CBO also said
the deficit for the first eight months of the fiscal year came to
$1.9 trillion, roughly $1.2 trillion more than the deficit in the
first eight months of fiscal year 2019.

Revenues in May were down about 25% compared to the year
before, due in large part to a sharp decline in individual income
and payroll taxes. Spending, on the other hand, was up 53% compared
to last year, once calendar discrepancies were taken into
account.

The most notable changes were clearly driven by the
pandemic, with outlays for unemployment compensation rising from $2
billion in May 2019 to $93 billion in May 2020. And outlays by the
Small Business Administration rose from $98 million to $35 billion,
driven by the relief efforts for small business owners affected by
the coronavirus shutdowns.

Why Congress Won’t Raise the Gas Tax This Year

Current funding for the federal highway law is set
to expire at the end of September. As that deadline appears on the
horizon, reauthorizing key transportation spending programs will be
a major item on lawmakers’ pre-election to-do list.

Rep. Peter DeFazio (D-OR), chair of the House
Transportation and Infrastructure Committee, last week introduced a
bill that would authorize
$494 billion over five years for road, bridge,
rail, mass transit and resiliency projects. In the GOP-controlled
Senate, a five-year, $287 billion surface transportation bill
advanced out of the Environment and Public Works Committee last
summer.

As usual with infrastructure plans, how to pay for that proposed
spending remains a question, but as Roll Call’s Jessica Wehrman

reports, it appears increasingly likely that the
costs will be added to the national debt:

"The federal gas tax-fueled Highway Trust Fund, which
has not fully paid for highways, roads, bridges and transit since
2008, has borrowed $140 billion from the general revenue since then
to meet its expenses. It would need that same amount over the next
five years under a House highway bill introduced last
week.
"Another option is that the federal government finds
some sort of financing instrument, such as bonds, and takes
advantage of historically low interest rates to borrow the money
needed to fix the nation’s roads.
"Both President Donald Trump and House Transportation
and Infrastructure Chairman Peter A. DeFazio have suggested the
latter, with Trump suggesting up to $2 trillion for a massive
highway bill and the Oregon Democrat suggesting paying back the
bonds
by indexing the gas tax to
inflation."

Wehrman adds that the coronavirus recession appears to
have wiped out any chance of a gas tax increase. "But the most
popular alternative to the gas tax — a mechanism that would charge
people based on vehicle miles traveled, or VMT — is nowhere near
ready for national deployment," she writes.

So while the pandemic recession may fuel interest in
infrastructure spending as a way to boost the economic recovery,
paying for the new highway bill could be less of a priority. "The
response to the crisis is most important right now, and that
investment involves taking care of the economy at the expense of
tidying up the budget," Douglas Holtz-Eakin, a former director of
the Congressional Budget Office who is now president of the
conservative American Action Forum, told Roll Call.

Chart of the Day: Billions for Small Business

President Trump on Friday signed into law the
Paycheck Protection Flexibility Act, which eases the regulations
for small businesses that receive forgivable loans through the
Paycheck Protection Program. Although the program ran through its
first round of funding of $349 billion in a matter of days back in
April (show in blue in the chart below), the second
round of $310 billion has yet to be exhausted (in orange), with
more than $100 billion in loans still
available.

Quote of the Day: Stocks Up, Stimulus Down

"There’s an inverse relationship between the level of
the S&P 500 and willingness for policymakers to come together
to arrive at some sort of solution. If the market stays up, chances
of deals in Congress this year are likely to go down and are likely
to approach zero."

– Willie Delwiche, an investment
strategist at Baird, telling
Bloomberg Businessweek that the soaring stock
market will reduce pressure on policymakers in Washington to
provide more stimulus for the economy. A former trader Bloomberg
spoke to, Tom Essaye, even has a back-of-the-envelope rule about
the relationship between the stock market and the next potential
round of stimulus: "Every 1% the S&P 500 rallies reduces the
chances that a stimulus bill actually gets passed," he
said.

Number of the Day: 60 Million

Shutdowns to combat the novel coronavirus pandemic
prevented about
60 million infections in the United States (and
285 million in China), according to a
study published Monday by the journal Nature. Solomon
Hsiang, director of the Global Policy Laboratory at the University
of California at Berkeley, and the leader of the research team,
said the coronavirus response measures resulted in "saving more
lives in a shorter period of time than ever before."

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