Rolling US Economy Into The Shitbin Thread

i feel like the underlying premise you have is that the underlying fundamentals of our economy are strong, so we can just return to BAU when testing is more widely available and more people go back to work. i am working from the lefty assumption that no, it was a house of cards, and this kind of thing can knock the whole house over.

i just remember months of months of people warning that we were heading into a recession soon, before coronavirus was a thing. not just because it had been a while since the last recession and it seemed like we were "due", but because of underlying issues. the inverted yield curve, for one.

https://www.vox.com/policy-and-politics/2019/3/27/18250823/recession-prepare-when-inverted-yield-curve

i think it's going to be hard to sort out what was caused by closing down so many businesses and those results (unemployment, debt + default) from what were systemic problems and while i think the left will be very keen to argue that the problems were from pre-existing systemic issuee, i think they will struggle to make that case convincingly bc of this entanglement. it's such an unprecedented event i think it'll be difficult to demonstrate what problems are not the fault of the pandemic and examples i've already seen to the contrary tend to make the case for autocracy much more than socialism (and lots of countries with more socialized medicare for example are not covering themselves with glory here etc when all you have is a hammer...)

my argument is that "this kind of thing" can knock your house over no matter what it is built out of and while i agree with your goals generally i think it's hard to make the case here

the uniqueness of this event makes using it to conclude anything about about the foundations of our economy seem a little misguided even to me, the conclusory posts guy

mordy why did it take me until this exact second to realize that our usernames are built on almost the same principle, but yours with a first name instead of a last name

lol i'm not sure but i do go by mordy irl

I use this as my username in as many contexts as possible which means some people do end up calling me it irl

I don't think you need to subscribe to the belief that american capitalism was a house of cards to believe that a pandemic that's gonna disrupt commerce across the world for the rest of the year will inflict significant, lasting economic pain beyond the temporary shutdown

Some good stuff here:

https://www.politico.com/news/magazine/2020/04/02/coronavirus-economy-reopen-deaths-balance-analysis-159248

at best we're going to walk back out into our cities and see a graveyard of vital community businesses that won't all come back no matter how much small business loan funding there is

fwiw i think in some ways it's an excellent opportunity for massive leftist projects in the US both temporary and permanent (and some temporary measures like UBI might eventually become permanent) depending on the scale of the crisis but i imagine this is just the beginning of the unemployment crisis as both time passes (and so ppl's circumstances become more dire) and grows (as more regions and businesses are impacted)

i just don't buy "hey if only we were already socialist we wouldn't have a problem of everyone losing their jobs" even socialist countries need economies.

interesting to note mortality rate went down during great recession and great depression

my hope for the future is that we can center conversations around the economy less on how much we produce (GDP growth, stock index performance) and more on what we produce (health care, housing, nutrition, employment for all)

like the rona disrupts what we produce, both frivolous and necessary goods/services, so no economic orientation can possibly be immune to its effects. but an economy predicated on meeting everyone's needs could weather this better than our system which makes these goods out of reach when personal income is gone.

it's definitely a bit dishonest to peg all the struggles we're going through on Trump/capitalism but at the same time we built a nation where health care is a commodity and our leaders tell us to not trust the experts or the media, so what could've been a 4-week ordeal is gonna extend into the fall. it's like the virus is Tim Tebow and we're all the Pittsburgh Steelers, playing Cover 0 and just begging him to throw deep, and when he finally hits a wide open receiver it's all over

i hope something like that grows out of this current situation - i think coronavirus could create a change in consciousness that allows us to better and more compassionately structure our society. it would take nothing less than human enlightenment imho in the pre covid-19 world such a realignment seemed impossible. xp

one could easily imagine obama handling this crisis a million times better than trump even before we get to capitalism vs socialsim.

fp'd you frogbs

Any "hot takes" on whether these payroll protection programs and government-funded leave programs et al. will keep people employed? Whether these are biased in some way or another?

sarahell, how do you feel about the 401k/ira early withdrawal that's in the bill?

i missed that part what is it

from Barron's, i guess this is a decent summary:

In addition to allowing retirees options to defer required minimum distributions, the so-called Cares Act will allow eligible individuals to withdraw up to $100,000 from their retirement accounts, in total, without the 10% early-withdrawal penalty as long as they pay back the distributions within three years. The relief package also eases some of the rules surrounding 401(k) loans.

To qualify for the provisions, individuals need to fall into one of two main categories. You, your spouse or a dependent is diagnosed with Covid-19, the disease caused by the new coronavirus. Alternatively, you qualify if you have experienced adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care or closures related to the coronavirus pandemic.

i mean the idea that you have to pay back as much as 100K (OVER THREE YEARS!?!?!) to a 401K in times of dire need is kinda insane to me but what do I know I'm advocating for violent revolution

yeah, i saw some people thinking this would be a "real gamechanger" and I was like ?????????????????

especially since there is a prerequisite of having a 401k in the first place

i mean most of the reason I contribute to an IRA for tax reasons; my galaxy brain says that contributing to an IRA is betting on yourself to Not Die before 66 (or whatever it is now). I wish to live long enough to see the statistical evidence that the past 4 years have shortened humans' live expectancy by, like, ten years on average but

*proceeds to make "this expression" while gesturing thoughtfully to thousands of dead people*

my pt is that it's weird to be shocked about historically high unemployment numbers when you shut down a large % of the businesses in your country. it's not shocking, it's per plan.

Not shocked at all, but they shut down the businesses, they didn't force those businesses to lay off workers. I don't know what to tell people that don't believe executive compensation, stock buybacks, and general need to run businesses as ruthlessly efficient as possible to pump the stock price aren't factors in those businesses having insufficient reserves to weather a shutdown for even three weeks.

many of the closed businesses were not publicly traded like think about every business in your neighborhood they're almost all closed (may vary depending on where you live/coming soon to a neighborhood near you)

A lot of excessive business travel is going to permanently disappear.

I know that will cause all kinds of rough ripples for workers in several industries, but workplace observation has suggested to me that 2/3 of biz travel is bullshit. Schmoozing for schmoozers.

i mean the idea that you have to pay back as much as 100K (OVER THREE YEARS!?!?!) to a 401K in times of dire need is kinda insane to me but what do I know I'm advocating for violent revolution

― Its big ball chunky time (Jimmy The Mod Awaits The Return Of His Beloved), Friday, April 3, 2020 12:40 PM bookmarkflaglink

You don't have to pay it back. It's a taxable withdrawal. The IRS is allowing people to pay back withdrawals (which is not normally allowed) in 3 years, and in exchange, the 10% penalty for being under age 59.5 will be waived.

Most actively working customers under age 59.5 don't have in-service withdrawals available unless they've contributed post-tax monies or rolled money into the plan, as their pre-tax contributions and earnings are restricted before turning 59.5 to prevent them treating it like a savings account. There ARE hardship withdrawals already available in 401(k) plans, but most plans follow the Safe Harbor standard, which mean you can only get the money out for six specific reasons, none of which involve illness/COVID.

The IRS, as they have done for previous disasters, have created a special hardship withdrawal for this situation that makes the money accessible for COVID-related hardship. Without it, this money wouldn't have been accessible to most active customers under 59.5 unless they quit their jobs. People over age 59.5 usually have most if not their entire balance available as before-tax monies are no longer restricted at that age.

Also, nobody has to take 100,000 dollars. Most people probably don't even have that balance available (I sure don't). Most people would probably take far less

The 401(k) loan change is a bigger deal as the IRS formula that determines availability is a two part formula of:

A) 50% of your vested balance OR
B) $50,000 - your highest outstanding loan balance in the last 12 months.

So effectively, you can never get more than 50,000 out for a loan. This rule changes that to maximize the limit to 100k, so swap out 50,000 for 100,000 in that formula.

This would also free up more money for people who had already taken out their max amount available (50,000). If their plan allows for more than one loan, this would give them instant access to another 50,000 that they could repay over 5 years with payroll deductions.

And if they get terminated before they repay it? No negative impact on credit. It gets treated as a withdrawal and subject to taxes the next year. And that money simply doesn't go back into their balance.

I do see this as a positive. No, nobody should have to raid their retirement, but if you're young like me and can make it back up later, it can help bail you out of a hole, and you can even gross-up the payment to proactively put aside money to pay any tax liability.

On a side note - not that anybody is doing it here, but I'm sick of people assuming 401(k)s are this bougie rich person thing. The majority of people in 401ks aren't rich and often have small balances. When i handled 401k withdrawal processing, i used to take call after call from people who had to use their 401k to prevent losing their home.

So I had to snipe at some friends the other day when I posted this news and they all mocked "lol 401ks who the fuck had those, who cares", and i had to point out that I did, and in fact if there was a way for me to be devious and take some money out, i could eliminate two very specific debts that are crippling me at the moment which would help me take care of other family members without hurting my own future.

sarahell, how do you feel about the 401k/ira early withdrawal that's in the bill?

I think it's actually a great humane thing. I remember doing taxes for people post 9/11 and post-recession, and they had to cash out retirement plans when they lost their jobs or had serious reductions in income, and then to have to tell them, guess what, you get a 10% tax penalty for needing money to pay for basic living expenses ... that really sucked. It's up there with having to tell people who got paid as 1099 contractors and were low-income people, that actually, they owe $3000 - $5000 in self-employment tax, even though they only made $20k and they live in one of the most expensive places in the world, and also, their employer should have been paying them as an employee, and they could file a bunch of forms and try to get that fixed, but in the meantime, they owe a shit-ton of taxes.

I'm sick of people assuming 401(k)s are this bougie rich person thing. The majority of people in 401ks aren't rich and often have small balances. When i handled 401k withdrawal processing, i used to take call after call from people who had to use their 401k to prevent losing their home.

co-sine!

how would you make it better? (the early withdrawal in the bill)

Not shocked at all, but they shut down the businesses, they didn't force those businesses to lay off workers. I don't know what to tell people that don't believe executive compensation, stock buybacks, and general need to run businesses as ruthlessly efficient as possible to pump the stock price aren't factors in those businesses having insufficient reserves to weather a shutdown for even three weeks.

This is a weird thing to say here? Idk most of the affected workers I know work for small businesses and non-profits. Meanwhile, a lot of the big retail chains (for example) were still open (and their workers still employed) when the small businesses had closed, such that our state government had to make even stronger rules about essential businesses to get them to close their stores.

one could easily imagine obama handling this crisis a million times better than trump even before we get to capitalism vs socialsim.

― Mordy, Friday, April 3, 2020 12:10 PM (two hours ago) bookmarkflaglink

obama would’ve been more competent with executive stuff but Obama with republican congress would probably not have passed any stimulus and it would be Great Depression x10

It maybe shouldn't be a surprise, but it's a completely unprecedented jump, and we have no idea how it will play out over time.

― Mario Meatwagon (Moodles), Friday, April 3, 2020 11:15 AM (three hours ago) bookmarkflaglink

it’s unprecedented nationally, but not at subnational levels for large natural disasters. compares similarly to Louisiana post Katrina. look at the chart here https://www.bls.gov/opub/ted/2015/mobile/hurricane-katrina-a-look-back-at-employment-and-unemployment.htm

especially since there is a prerequisite of having a 401k in the first place

― silby, Friday, April 3, 2020 9:44 AM (one hour ago)

You aren't a parent, are you? (I'm not either, but ...)... Another fatuous "leftist" gripe about retirement plans and jobs that have them tends to be unrealistic about the economic and uh, personal responsibilities of people with kids. Like, being 35 years old without health insurance and benefits could be fine, but once you factor a kid into the equation? So many of my friends went from under-employed hipsters without benefits and insurance to "full-time with retirement and family health plans" once they became parents.

I mean I'm not, but I do have substantial savings in various defined-contribution plans (403b technically for my current employer).

I'm pretty sure poor parents exist though!

if I had a kid I would have even less money tho lol

if you have kids and savings you are the monopoly man to me

Canada has p generous refundable credits, you’d probably come out ahead jim

Someone added the GameCube intro to my unemployment graph & it’s significantly better now. pic.twitter.com/c35hS74sok

— Dorsa Amir (@DorsaAmir) April 3, 2020

omfg

now do it with the marimba one

Worth noting in comparisons to Katrina, that property owners in NOLA were practically swimming in insurance payouts for the first 2-3 years thereafter. The country through the insurance and Federal grants, subsidized a local remodeling and real-estate boom, in which shotgun shacks got new wiring, flooring, plaster and paint, and were converted to Air B&Bs, even though the underlying tourist driven economy wasn't much improved. Contractors did really well. Early RE investors did really well. Renters that didn't land permanently in Dallas or Houston, all were screwed by a near doubling of housing costs.

This model of "recovery" doesn't really apply when the whole country is suffering at once, and when 30% of workers at restaurants, hotels, taxi service, massage spas etc see no recovery for a year... One can throw money at a city at get a real estate boom, but throwing money doesn't change new patterns of social behavior.

it’s certainly true that it’s harder to insure a nation-wide shock than a regional one. but luckily US can borrow for free right now. the relevant constraint seems more congress’ willingness to spend (so far it’s been compliant) and institutional difficulty of getting cash out everywhere quickly (this one is more binding). the biggest factor that will contribute to a slow recovery imo is the virus lasting a really long time

i don’t think real estate is going to be super important to the recovery from this; there’s no destruction of physical housing stock as in Katrina and construction seems to be continuing apace (at least where i live)

the point of the analogy to katrina is that the labour market recovered quickly; it shows that it’s not the case that the length of the recovery is necessarily proportional to the size of the shock, as seems to be the case with “normal” recessions

Capital gains cut! Therse people are grotesque parodies. https://t.co/ZSaSXQe6ui

— Doug Henwood (@DougHenwood) April 6, 2020