Episode 41: Enjoy the Silence
Did you miss me? Last week was a relatively slow news cycle, so I took some time off to find salty air, play golf, and enjoy the silence. But all good things come to an end, so let’s get to it.
POLITICS
It’s been a tough few months for the 63-year-old New York Governor Andrew Cuomo. He is under fire for (1) mandating that more than 9,000 recovering coronavirus patients in New York state return to nursing homes and (2) underreporting nursing home deaths, and (3) attempting to cover it up. The New York Attorney General Letitia James confirmed that nursing home deaths were underreported by 50%. (Deaths in nursing homes and other long-term care facilities have accounted for about a third of the nation’s total COVID deaths.) And Democratic Assemblyman Ron T. Kim of Queens came forward with accusations that the Governor had called him and threatened to “destroy” him — urging him to retract negative comments he had made after the nursing home story broke. Still, Cuomo has not apologized for his actions and accuses Republicans of playing politics. The US attorney’s office and the Justice Department’s Civil Rights Division are leading the investigation. Governor Cuomo’s administration hired veteran white-collar criminal defense lawyer Elkan Abramowitz to represent the Executive Chamber in the nursing home investigation. This is the second time that Mr. Cuomo has turned to Mr. Albramowitz as his lawyer in a federal probe. In 2014, Abramowitz represented Cuomo in an investigation of whether the Governor misbehaved in steering the work of an anti-corruption commission that was shut down as part of a state budget deal that year. (In that probe, the review found “insufficient evidence to prove a federal crime.”)
The second bombshell hit Cuomo last month when Lindsey Boylan, a former Cuomo aide, made a sexual harassment claim against him. Boylan wrote a blog post on Medium about her experience working with Cuomo and detailed his many sexual advances. This week a second and third woman, Charlotte Bennett, 25, and Anna Ruch, 33, have come forward and made similar claims. Cuomo denied the allegations but said his “interactions might have been insensitive or too personal.” Adding that his comments may have been “misinterpreted as unwanted flirtation.” The three-term Governor requested an independent review of the allegations against him, and NY Attorney General Letitia James (D) said her department would take it from here.
Cuomo gained national prominence for his daily COVID press briefings. He even won an Emmy and worked to cultivate a reputation as a competent and compassionate leader. However, this branding clashes with reports from staffers about Cuomo’s abrasive management style. Several sources cited a culture of bullying, intimidation, and verbal attacks that would bring staffers to tears with threats to fire them or end their careers. This story makes it all the more confusing how Cuomo could ink a book deal to discuss leadership lessons from the pandemic.
COVID
The numbers look promising for our battle with COVID. The seven-day moving average of COVID infections, hospitalizations, and deaths are down dramatically since the start of the year. We have three effective vaccines in the market and now average two million vaccination shots per day (a 49% increase over the week prior), and 82 million Americans or 24% of the US population have received at least one dose of the vaccine. Here is a link to track vaccination percentages in your state. Mississippi and Texas are even easing safety measures and lifting the public mask-wearing mandate. California Governor Gavin Newsom reached a deal with state legislators to reopen some public schools by the end of March. Vaccination of teachers and school staff will not be required as part of the agreement, though teachers are now eligible to be vaccinated in Los Angeles County. LAUSD is the second-largest school district in the US behind New York City. There are more than 6 million public school students in California. Still, CDC Director Rochelle Walensky warned that the battle is not over, and with Spring Break around the corner, everyone should maintain health and safety precautions.
One disappointing data point is communities of color, which have borne the brunt of the COVID pandemic in the US, have also received a smaller share of available vaccines. Black Americans' vaccination rate is half that of white people, and the gap for Hispanics is even more prominent. Black and Hispanic Americans are less likely than their white counterparts to have internet access reliable enough to make online appointments, have work schedules flexible enough to take any available opening, and have access to dependable transportation to vaccine sites. Plus, a lack of access to information about the vaccine through trusted providers can also lead to uncertainty and an unwillingness to get a shot.
ECONOMY
The House approved a massive $1.9 trillion virus relief bill that included a controversial minimum wage hike to $15 per hour that would impact nearly 2 million Americans. (Minimum wage has been $7.25 per hour since 2009, although 29 states have a minimum wage above the federal minimum level.) All Republicans and four House Democrats voted against the bill. The dissenters argue the bill is unnecessarily large, poorly targeted, and filled with liberal policies unrelated to the pandemic. Still, this piece of legislation is one of the most popular bills in decades. (Polls suggest that 70% of Americans support the plan, including a plurality of Republican voters.) The major components of the bill break down as follows with only two provisions—$50 billion for small-businesses and $160 billion for vaccine development and distribution—garnering bipartisan support in the lower chamber:
$420 billion / direct payments to most households of $1,400 per person
$350 billion / support state and local governments who suffered a loss in revenue from shut down measures
$240 billion / an expansion of jobless benefits (an extra $400 per week in unemployment-insurance payments through August)
$160 billion / vaccine development, distribution, and related needs
$130 billion / help schools and colleges open (to reduce class sizes to accommodate social distancing, improve ventilation, hire more janitors and provide more PPE)
$130 billion / an expansion of tax credits for parents and low-income workers
$65 billion / health insurance subsidies
$50 billion / small-business assistance
$40 billion / housing assistance
The Senate reworked several of the bill's controversial provisions to ensure their members support the legislation and passed an amended version of the COVID relief bill this morning. The Democrats are utilizing the "budget reconciliation" process to pass this bill, enabling them to skirt Republican support entirely. Typically, such legislation needs 60 votes to pass a resolution, but with budget reconciliation, the proposal can pass with 50 senators and Vice President Kamala Harris casting the deciding vote.
The Senate made the following changes in its version of the COVID relief bill:
They killed the increase in the minimum wage after a nonpartisan report found that the move could cost 1.4 million jobs. After all, the real minimum wage is $0.
Direct payments of $1,400 will go to individuals making less than $75,000, and payments would phase out at $80,000 for individuals and $1600,000 for married couples. The House version offered direct payments for people earning up to $100,000 per year. Children and adult dependents would be eligible for the $1,400. Those adult dependents, including disabled adults and college students, weren't eligible for the first two rounds of checks.
Enhanced federal unemployment benefits of $300 are set to expire on March 14th. The House proposed raising these benefits to $400 through August, and the Senate plan keeps the federal unemployment benefits at $300 but extended the duration of payments through September. Also, the first $10,200 would not be taxable for 2020, although it’s not clear how this will work given tax season is already here and some returns filed.
They pulled a Bay Area Rapid Transit in Silicon Valley (aka known as Pelosi's subway) and a bridge in upstate New York.
The Senate removed a House proposal that would have frozen the growth in annual limits on contributions to retirement accounts after 2030 but added tight limits on companies' deductions for executive compensation starting in 2027.
Most student-loan forgiveness in the bill would be free from income taxes, creating an exception to the standard rule that canceled debt is income.
The next step is the House will vote on the Senate version of the plan, and once both chambers have approved identical versions of the proposal, President Biden will sign and make it law.
Republicans in both chambers are disappointed with the bill's size and claim it's a massive waste of money. They point out that $1 trillion of the previous COVID relief is unspent. Plus, with a quarter of the country vaccinated and states starting to ease restrictions, the economy may be ripe for growth and more stimulus not needed. One case in point is the surprising good health of state budgets. For day-to-day operations, states raise money by collecting different kinds of taxes: sales taxes, income taxes, property taxes, and taxes on particular transactions like energy production or gasoline sales. (For public works, they issue bonds.) Most state tax collections plunged last spring when shutdown orders started, businesses closed, and millions laid off. That prompted many states to issue doomsday forecasts, lay off workers, and turn to Washington for billions of dollars in aid to replace the revenue they were expecting to lose. Many feared a replay of the Great Recession, when state revenues fell 8 percent and took more than five years to recover, exacerbating the overall downturn.
As it turns out, new data shows that many of the dire forecasts didn't occur a year after the pandemic. One big reason: $600-a-week federal supplements allowed people to keep spending—and states to keep collecting tax revenue—even when they were jobless, along with the usual state unemployment benefits. In fact, by some measures, the states ended up collecting nearly as much revenue in 2020 as they did in 2019. A J.P. Morgan survey called 2020 "virtually flat" with 2019, based on the 47 states that report their tax revenues every month. Louise Shenier, a Brookings Institution economist whose research showed that overall, the states struggled far less during the pandemic than in previous recessions.
If we expand the lens to a macro level and look at the US stimulus compared to other countries as a share of GDP, it paints an eye-opening picture. According to Moody Analytics, the US currently trails only Japan, Australia, and the UK in COVID relief spending as a percentage of GDP. The massive $2.4 trillion CARES Act in the spring was followed by $900 billion in COVID relief in December. Those programs allowed consumer spending to continue, even as unemployment surged to levels not seen since the 1930s. During The Great Recession last decade, Congress sent supplements of just $25 a week. This time, Washington sent supplements of $600 a week. In some cases, individuals working in low-wage sectors like retail and restaurants, experienced higher purchasing power while unemployed than working. In Illinois, for example, per capita, personal income rose as the pandemic kicked in from $59,896 to $66,224. The Federal Reserve helped indirectly by making credit widely available at near-zero interest rates, pushing investors to leave the bond markets' safety and buy stocks which benefited states states from taxes on capital gains.
The bottom line is Biden's proposed $1.9 trillion package would make the US the most aggressive country in terms of fiscal stimulus by a wide margin. If you look at most states' relative health, the forecasted drop in revenue didn't occur. Lastly, the US economy added 166,000 jobs in January and 3790,000 in February bringing the unemployment rate down to 6.2%, after losing 306,000 jobs in December. The vast majority of the jobs created last month are in the leisure and hospitality sectors, foreshadowing an improved economic outlook for those most in need. Still, there are 8.5 million fewer people holding jobs compared with last year; and the unemployment rate varies dramatically by race: white Americans (5.6%), Blacks (9.9%), and Latinos (8.5%).
MARKETS
The stock market had a volatile week, ending with modest gains. The S&P posted its best day since last June early in the week as investors welcomed news of a third vaccine, reassurance from Fed Chairman Jerome Powell that interest rates would remain low, and the promise of the upcoming stimulus package. However, bond yields have been steadily rising this year, and the 10-year US Treasury hit 1.547% yesterday, marking the highest level since February of last year and stocks did not like the signal. The jump in yields reflects inflation concerns and a possible hike in interest rates later this year, despite Chairman Powell’s assurance otherwise. The consumer price index, a measure of annual inflation, was most recently measured at 1.4% for the 12 months ending in January. Inflation is near a decade low and well below the 2% level the Federal Reserve targets as ideal. The usual conditions for rising inflation—tight job markets and public expectations of rising prices—are glaringly absent. But in the longer term, some economists and investors see a shifting political climate more conducive to inflation rising well past 2%.
Meanwhile, the housing market continues to roar. The number of available homes has fallen steeply in metros across the country. Low interest rates and a pandemic desire for more space are driving demand. In fact, with interest rates hovering around 3%, many individuals decided it is an excellent time to own two homes. Over the past decade, the number of single-family homes in the rental market grew by more than seven million. But the other part of the housing story is more complicated. How many people want to sell a home during a pandemic? A majority of homeowners in America are baby boomers, a group at risk from the coronavirus. Many of them are reluctant to open their house to strangers to walk through it. And who would want to leave their home and move to an assisted living facility or nursing home right now? Who would commit to their “dream home” when it’s unclear what remote work and the economy will hold in the near term? The other factor is four million homeowners with government-backed loans were in mortgage forbearance during the pandemic, and thanks to government protection, about 2.6 million are still in danger. Many of these homes would have come on the market, either through foreclosure or a forced sale.
OTHER NEWS
We are officially in tax season. Millions of Americans are finding it hard to pay their taxes after discovering that the unemployment benefits they’ve been living on the past year are taxable (the current COVID relief bill may change that policy). According to one estimate, only 40% of the 40 million people who received unemployment benefits in 2020 withheld taxes. Unemployment benefits were not taxable from their inception in 1935 until 1986. As of December 2020, more than 10 million Americans were still unemployed, and only half of the 22 million jobs lost during the pandemic recovered. Employment isn’t expected to return to pre-pandemic levels until 2024.
A study in the UK from Oxford University with over 475,000 Britons discovered that eating meat frequently increases someone’s risk of developing heart disease, diabetes, pneumonia, and other serious illnesses. Intake of red and processed meat is already known to heighten the risk of being diagnosed with bowel cancer. Still, these findings are the first to assess whether meat consumption can be linked to any of the 25 non-cancerous illnesses that most commonly lead to people being admitted to hospital. Further, the study found that consuming red meat, processed meat, and poultry such as chicken and turkey more than three times a week was linked to a greater risk of nine various illnesses.
Prince Harry and wife Meghan Markle sat down with Oprah Winfrey in an interview scheduled to air on CBS on Sunday, March 7. The broadcast will be Harry and Meghan’s first lengthy interview together since announcing they were leaving the royal family in 2020. Harry and Meghan are neighbors of Winfrey in Montecito, California.
I. Below are the articles I found interesting the past week:
Try these 6 virtual team building ideas instead
The most pressing people questions facing companies today
Why inclusive leaders are good for businesses and how to become one
7 ways to influence other people
The unlikely place young workers fight mental-health taboos
Anyone who’s anyone has a SPAC right now
II. Stats that made me go WOW!
- Warren Buffet is 90 years old and still active in Berkshire Hathaway. He published his annual letter to shareholders.
- A group of armed men abducted 279 girls from their boarding school in Nigeria. Fortunately, all of the girls were returned unharmed. The Nigerian government denies paying a ransom, and it’s unclear the conditions for the children’s return. The frequency of mass kidnappings at boarding schools in northwestern Nigeria is rising because abduction has become a growth industry amid the country’s economic crisis.
- A 2013 study by the Wildlife Society estimated that wind turbines killed 573,000 birds a year in the US, including 83,000 raptors.
- Elizabeth Warren proposed a new “wealth tax.” Based on that plan’s provisions, Jeff Bezos would pay $5.7 billion in taxes in 2020. The Ultra-Millionaire Tax Act would levy an annual 3% tax on anyone with a net worth exceeding $1 billion and a 2% tax on people with a net worth between $50 million - $1 billion. According to the polls, Warren’s proposal is popular, with more than three out of five Americans supporting some form of wealth tax.
- Check out the new interior of the Tesla-Model S.
III. Name that Tune!
As I write this email, I am listening to “Enjoy the Silence” by Depeche Mode.
Depeche Mode is an English electronic band formed in 1980. Depeche Mode released their debut album, Speak & Spell, in 1981, bringing the band onto the British new wave scene. The group’s international acclaim coincided with the album Violator’s release in 1990, which featured the song Enjoy the Silence. Charlize Theron inducted Depeche Mode into the Rock & Roll Hall of Fame as part of the 2020 class. If it’s good enough for Charlize, it’s good enough for me.
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