If You're Unemployed, Trump and the GOP Just Aren't That Into You
The current stimulus negotiations epitomize the GOP worldview
In previous posts, I voiced my concern that, without a significant follow-up to the CARES Act, mass evictions and layoffs could push the U.S. economy off the proverbial cliff. So when the Democrat-led House passed the $3 trillion HEROES Act in mid-May, I breathed a sigh of relief.
The timing of the Democrat’s bill would give Senate Republicans and the White House plenty of time to negotiate a CARES Act 2.0 with Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer.
There was one thing missing from my calculations — I didn’t fully appreciate the GOP’s apparent worldview.
Since last March, I’ve had the month of August earmarked on my calendar. Because of the July expiration of both the eviction moratorium and the $600 a week increase in unemployment insurance (UI) benefits contained in the CARES Act, I knew critical decisions lay before Congress. I also knew inaction by Congress was a recipe for economic disaster.
The renter/landlord fiscal cliff
According to the National Multifamily Housing Council’s (NMHC), survey of professionally managed rental properties, as of August 2020, 79.3% of market-rate rental households made full or partial payments versus 81.2% in April 2019. That represents a year-over-year decrease in rentals of 223,000-households.
What jumps out from the NMHC survey, which covers over 11 million units, is this comment from David Schwartz, NMHC Chair:
“Over the past few months, apartment residents have largely been able to meet their housing obligations. In no small part, this is due to the enhanced unemployment benefits enacted under the CARES Act and significant steps by apartment owners and operators to help their residents. These unemployment benefits that have proven so important to so many households have now lapsed, meaning greater financial distress for millions and the potential worsening of America’s housing affordability crisis.”
While the eviction process in many states is draconian, what often is lost is that individuals and small businesses operate roughly half of the nation’s 43 million rental units. Many of these owners make just enough in rental revenues to cover mortgages and other rental property expenses.
It’s not rocket science: without an extension of the additional UI benefits, millions of unemployed will be unable to pay rent. If a flood of renters misses their August rent, landlords — especially those in the 23 states without eviction protections — could throw defaulting tenants onto the streets.
With the Congress on vacation until after Labor Day, it could be close to October before the unemployed see any form of financial relief.
Just imagine the domino effect of millions of unemployed renters suddenly skipping their rental payments. Due to the high levels of unemployed, independent landlords struggle to find suitable tenants. Unable to cover the mortgages on their rental properties, the slew of landlord defaults set off a wave of bank foreclosures.
Sound familiar? It should — this is how a housing crisis begins. And because of the Senate’s inaction, we’re almost there.
Cui bono (to whom is the benefit)?
With a presidential election on the horizon, an improving economy is one of the few potential positives for Republicans. That is what makes the Senate’s lackadaisical approach to additional stimulus all the more puzzling. Millions of homeless, jobless Americans don’t drive a V-shaped recovery or votes. So who in the world benefits from another housing crisis?
Real estate investment trusts (REITs), private equity firms, and Wall Street, that’s who.
Consider what happened after the last housing crisis. From 2011 to 2017, the largest global investors bought over 200,000 homes in the U.S., spending over $30 billion. In Atlanta, Real Estate Investment Trusts (REITs) and hedge funds bought almost 90% of homes sold from January 2011 to June 2012. By February of last year, institutional investors owned one-fifth of all single-family rentals in the Atlanta area.
Until late 2019, Blackrock, the world’s largest asset manager, owned 40% of Invitation Homes (INVH), capitalizing on the glut of foreclosures following the housing crisis. American Homes 4 Rent (AMH), a REIT founded by billionaire B. Wayne Hughes, currently owns 52,052 homes across the country. AMH owns nearly 10% percent of all single-family homes in Atlanta.
The looming eviction/foreclosure crisis presents yet another opportunity for Wall Street to increase its share of the single-family rental market.
TRUE STORY: Near the end of the Financial Crisis, my family and I relocated to North Carolina. While we tried to figure out our next move, we stored most of our belongings at Public Storage, a very nice facility just outside of town. Eventually, we move into a rental home in a small town just outside of Raleigh. But as we searched for the right property, we noticed a pattern. Almost none of the rentals were owned by individuals. One company, American Homes 4 Rent, seemed to own almost every single-family rental in the area, including the one we ultimately rented. We didn’t know it at the time, but the same billionaire, B. Wayne Hughes, founded the place where we stored our furniture (Public Storage) and the home we rented.
The GOP worldview: $200 for you, trillions for the rich
The last several months have shined a light on the way the GOP views folks that work for a paycheck, compared to those with massive wealth — regardless of whether you voted for them. Take a look at the current state of play. There are between 15–20 million people unemployed. Among the newly unemployed, the hardest hit has been low-wage service industry workers.
The $600 a week UI bump included in the CARES Act isn’t a random number. The extra benefit equates to a forty-hour workweek at $15.00 an hour. By contrast, the GOP’s offer of $200 a week works out to forty hours at $5.00 an hour. The GOP’s assertion that the unemployed are layabouts receiving benefits they don’t deserve ignores the fact that for many, the jobs they lost will never return.
Let that sink in for a minute. We’re in the middle of a pandemic, massive unemployment, and the worst GDP in two-hundred years. But despite the dire situation, the GOP’s chief concerns are liability protections for businesses and making sure the unemployed don’t receive a few extra bucks.
Meanwhile, the Fed showers corporate America with trillions, and billionaires grow even wealthier.
I’m old enough to remember the Great Recession over a decade ago. At the time, I worked on Wall Street, so I saw the destruction up close. The image that sticks in my mind is that of Hank Paulson, the former Treasury Secretary, on bended knee, faux-begging Nancy Pelosi, then-Speaker of the House, for billions to save Wall Street investment banks.
With less than ninety days left before the election, this is a strange campaign strategy. With the President’s poll numbers, you’d think the GOP would look to drop money on folks from helicopters.
But they aren’t. You have to wonder why.
Perhaps the best way to understand the GOP worldview is to let them explain it to you themselves. For instance, here’s what South Carolina Senator Lindsey Graham’s thinks about extending UI benefits:
“July the 31st is when this expires and I promise you, over our dead bodies, this will get reauthorized”
A few days ago, Treasury Secretary Steven Mnuchin explained that, unlike corporations, the millions of unemployed are malingerers and freeloaders who don’t deserve the government’s monetary support:
“It just wouldn’t be fair to use taxpayer dollars to pay more people to sit home than they would working and get a job.”
And finally, as White House economic adviser Larry Kudlow explains, the Democratic plan is really just an expensive, far-left wish list:
“They are asking too much money, $3.5 trillion, we have already spent over $3 trillion. So much of the Democratic asks are really liberal left wish lists — voting rights and aid to aliens and so forth. That’s not our game, and the president can’t accept that kind of deal.”
The American poet and civil rights activist Maya Angelou once said we should believe people when they tell you who they are. It’s high time we take her advice when dealing with Republican leadership.
