How Face Masks Could Save the Economy

By Yuval Rosenberg

With PPP Ending, Lawmakers Eye Ways to Repurpose $130 Billion
Left Over

The emergency coronavirus relief program for small businesses is
set to stop accepting new applications just before midnight, having
approved about $520 billion in forgivable loans as of Monday — but
leaving more than $130 billion in funding left untapped.

Lawmakers are considering how to repurpose the remaining money
from the expiring Paycheck Protection Program to deliver more aid
to businesses. The Washington Post
reports:

"Sens. Marco Rubio (R-Fla.) and Ben Cardin (D-Md.) are leading
a group considering how best to use the remaining funds to help
small businesses as they begin to reopen. The issue is not expected
to be resolved, however, until the Senate gets to work in late July
on what Majority Leader Mitch McConnell (R-Ky.) has said will be
the final major coronavirus relief bill."

Treasury Secretary Steven Mnuchin said Tuesday that the Trump
administration supports the idea of using the money to help
businesses hit hardest by the pandemic, including restaurants and
hotels. "I’ve already had conversations with the SBA committee in
the Senate about re-purposing that $135 billion and think that
should be done, and look forward to working with both the House and
the Senate so we can pass legislation by the end of July," Mnuchin
said, according to the Post.

A draft copy of Rubio-led legislation obtained by the Post would
expand the possible uses for the money and would dedicate $25
billion to businesses with fewer than 10 employees. It would also
prevent hotel and restaurant chains from receiving more than $2
million.

Democrats, meanwhile, have proposed extending the application
deadline by six months and targeting the new funds to businesses
with 100 or fewer employees and those hurt most by the virus.

Rubio said that there may be better ways to use the money than
extending the current PPP program, which, despite a chaotic rollout
and frustration from some borrowers and lenders, has provided money
to nearly 5 million businesses and helped mitigate or reverse some
of the labor market devastation caused by the pandemic
shutdowns.

"PPP has been widely successful. There are more companies that
could benefit from it. It would be great if extending the deadline
would help them. But my sense is the greater need right now is in
companies that have received that assistance but now need new or
different kinds of assistance," he told the Post.

Why it matters: "Small businesses employ about half of
America’s nongovernment workers, and a fresh wave of deep
reductions or permanent closures would quickly cascade through the
national economy," Stacy Cowley writes at The New York Times. "The
pain would be even more acute in
hard-hit industries, like the service sector, and
communities that disproportionately rely on small
employers."

Read more at
The Washington Post or
The New York Times.

National Face Mask Mandate Could Prevent 5% GDP Hit, Goldman
Sachs Says

The widespread use of face masks is a simple and low-cost
way to slow the spread of the coronavirus, and according the Jan
Hatzius, chief economist at Goldman Sachs, a national mandate to
wear masks could have a huge positive effect on the
economy.

In a note to clients Tuesday, Hatzius and other Goldman
economists said a national mandate to wear masks would increase the
percentage of people doing so by 15 to 25 percentage points and
push the growth rate of the virus down from 1.6% to about
0.6%.

A renewed shutdown could have similar effects, but at a
great economic cost.

"These calculations imply that a face mask mandate could
potentially substitute for lockdowns that would otherwise subtract
nearly 5% from GDP," the Goldman team said. "It is important to
recognize that this estimate is quite uncertain because it is based
on a number of statistical relationships that are all measured with
error. Despite the numerical uncertainty, however, our analysis
suggests that the economic benefit from a face mask mandate and
increased face mask usage could be sizable."

Tax Deadline Won’t Be Postponed Again, Treasury and IRS
Say

The Treasury Department and Internal Revenue Service announced
late Monday that the July 15 tax-filing deadline, pushed back from
April 15 due to the coronavirus pandemic, will not be postponed
again. They said taxpayers who can’t meet the deadline can still
file for an automatic extension until October 15 as usual, though
that extension applies only to filing a return, not to paying any
taxes due.

"After consulting with various external stakeholders, we have
decided to have taxpayers request an extension if more time is
needed," Treasury Secretary Steven Mnuchin said in a statement.
"I would encourage Americans to file their taxes as soon as
possible, so those who are due refunds can receive them
quickly."

The IRS encouraged people who cannot pay in full, including
those affected by Covid-19, to pay what they can now to avoid
additional interest and penalties and explore other payment options
available, including those on the IRS website, for
the balance.

The IRS
said that, as of June 19, it had received more
than 138 million returns, down 4.4% from 2019, and had processed
nearly 127 million of those filings, down 11.4% from last year. The
number of refunds issued, more than 93 million, was down by nearly
11% while the total amount of those refunds — some $258 billion —
was down about 10%.

Quote of the Day

"Folks, this is going to be really hard work and Donald Trump
has made it much harder to foot the bill. But even before the
crisis, his irresponsible sugar-high tax cuts had already pushed us
into a trillion-dollar deficit and imagine what we could do now if
we weren’t in that circumstance. … I’m going to get rid of the bulk
of Trump’s $2 trillion tax cut and a lot of you may not like that
but I’m going to close loopholes like capital gains and stepped up
basis."

– Joe Biden, the presumptive Democratic
presidential nominee, in
remarks to potential donors at a virtual
fundraising event Monday

Unemployment Payments Top $100 Billion in June

With one day in the month to go, the U.S. Treasury
Department has paid out $108.5 billion in unemployment benefits so
far in June — the most so far during the coronavirus crisis,
according to
Bloomberg News.

Payments have risen every month, from $4.2 billion in
March to $48.4 billion in April and $93.7 billion in May. Even so,
payments are still falling short of the estimated total cost of
claims, according to an analysis by Bloomberg, due to an enormous
backlog that is still being cleared up by state unemployment
offices, some dating back to the beginning of the
crisis.

The $600 per week federal boost to unemployment benefits
makes up a substantial chunk of the payments, and if Congress
allows that temporary enhancement to expire at the end of July, the
Treasury’s monthly outlay for could start shrinking. If the benefit
is renewed, however, the monthly tally could continue to grow into
the fall.

Clarification: Yesterday’s newsletter
said that the government price of a dose of Gilead Sciences’
Covid-19 treatment remdesivir would be $390 a vial, or $2,340 for a
five-day course of treatment. But that price will only apply for
some U.S. agencies, such as the Department of Veterans Affairs, but
not to programs including Medicare and Medicaid that don’t directly
purchase drugs, according to
The Wall Street Journal.


RIP, Carl Reiner.

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Military Contractors Hide the True Cost of War: Report

Since the 9/11 terror attacks, the Pentagon has relied on
private contractors to handle a huge array of tasks, ranging from
laundry and dining services to transportation and security at
military bases overseas. Conservative think tanks and some
lawmakers have long encouraged the arrangement, touting the
efficiency and cost-savings theoretically associated with private
enterprise, but critics have charged that military contractors are
models of waste and bloat.

A new study from the Costs of War project at Brown
University comes down firmly in the latter camp, arguing that
contractors in what it calls the "camo economy" have led to a surge
in spending while systematically hiding the true costs of the
nation’s war-fighting efforts.

According to the report, more than half of last year’s
defense budget was spent on contractors. The $370 billion total in
2019 rivals the peak level seen at the height of the "Global War on
Terror" in 2008, when the Pentagon spent about $380 billion. Annual
spending on contractors is more than twice as high as it was in
2001, before the 9/11 attacks.

Those contracts pay for services and personnel
that cost more than they would if the Department of Defense simply
did them itself, the report claims, due in large part to a lack of
competition. Nearly half of all Pentagon contracts were classified
as "non-competitive" in 2019, the report says, and even some
supposedly competitive contracts were written on a "cost-type"
basis, which provide no incentives to keep costs low.

"Between 2008 and 2019, the Department of Defense (DoD)
spent over $1.2 trillion on such cost-type contracts, none of which
were subject to the cost-reducing pressures of private markets,"
the report says. "Other contracts include lifetime service
agreements and sole-supplier contracts, which effectively create
monopolies."

The use of contractors also helps hide the full human cost
of the war. There were 35,000 U.S. troops in the Middle East in
2019, but also 52,000 contractors — and together those figures
produce a higher total than is oftentimes discussed in the media.
Similarly, about 7,000 U.S. soldiers have died in Afghanistan since
2001, but 8,000 contractors have died as well, more than doubling
the gruesome tally. "By hiding the full human cost, military
contracting makes war more politically acceptable and less publicly
opposed," the report says.

For more details, see the Watson Institute report
here, and an analysis by The Washington Post

here.

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