Your non-partisan source for the 2016 US Presidential Election. Just the facts. Who's really ahead?
Reply Part 1: submitted by
I want to be an optimist about this situation, but in light of these last 3 months it’s really hard for me to see any positive outcome for the right.
Same here.. the future as I see it looks pretty bleak as of lately.
Felix Rex aka Black Pigeon Speaks has an incredible video on why Trump is likely going to be the last Republican to ever sit in the Oval Office. In the video he states that mass immigration from third world nations has dramatically shifted demographics in key red states.
I've taken a notice to this as well. On the bright side, the Rust Belt states, Oregon, New Hampshire & Maine have been shifting Red lately in large part due to an exodus of either urban city dwellers to other states or political realignment due to both parties shifting positions. Either way, I don't see how the Rust Belt + Oregon + a few Northeastern states being Red States can win Republicans the White House in the future with larger states like Texas, Florida, Georgia and Arizona being Blue States in the future. Unless Illinois also turns Red, then there's a slight chance.
It happened to California, which was solidly red since it’s inception, and then flipped blue in the last 30 years because of the importing of migrants.
Well, California wasn't solidly Red since its inception. In fact, it was actually a reliable Democratic state for most of the 19th Century with a few times swinging to Republicans. It become solidly Red in the 1920s and again with Eisenhower. But it hasn't gone Red since due to immigration.
If I'm not mistaken, Hispanics now make up the majority of the Golden State's population.
He pointed out what’s happening to Texas, where border counties are now blue strongholds again because of immigration. In this election cycle, Texas has a slim but attainable chance of flipping blue.
As someone who lived in Texas for quite a while, I'll admit that I'm shocked that Texas has remained a Red state for as long as it has. Harris County, once a Red county has now turned into a Blue stronghold.. Texas will most likely flip Blue in 2028 or 2032 and will be in the solid Blue column at that point as well.
Culturally, conservatives have always been... conservative. They’d rather not fight. They play defense, if they play anything at all.
This is something that I've been railing about for years now. Conservatives keep losing the culture wars because they don't fight back at all, although they'll state otherwise and try to point they have been fighting, even though the evidence showing contrary is so overwhelming. If they do fight back, they only do so when its too late to win. Instead of trying to regain ground and restore what was lost, they gradually surrender battles and save what culture is left. Soon, they'll find the culture all but lost to the Progressives..
Same goes with the electoral college, rather than stay, fight back and try to flip Solid Blue States like Trump did in 2016. Rather than trying to flip California, Illinois, Washington State, Connecticut, Delaware, etc, they simply write them all off and the Conservatives living in those states pack their stuff up and leave. That said, I won't be surprised if many on the Right end up fleeing the country should the Democrats regain control of the Senate and White House this year and continue to hold them throughout this decade. Because they don't have the same fighting spirit their ancestors did ages ago during both the Civil War and Revolutionary War before that. Instead, far too many capitulate and run.
In 2016, we won the battle, but not the war. Trump’s victory infuriated the left. It energized their voter ranks and they pushed harder on the whole “America is a big bad evil place and Donald Trump is proof of it” message. Think of the women’s march, science march, etc any and all “social justice” marches or protests that happened from Inauguration Day through 2018. These emboldened socialist uprisings in major cities, and gave rise to the campaigns for AOC, Illhan Omar and many more. The right was complacent and didn’t concern itself with the future of elections. Since Trump won, how could we lose in the future? Trump didn’t help himself at all either, with every sloppily worded tweet he just encouraged the left even more. The Trump voter base was hibernating. We didn’t fight back when he needed it. It was a stupid move. We sat on our laurels and didn’t fight back when the left came for revenge. And they won 2018.
I remember how amazing the Trump's victory was in 2016. It's a shame that the Conservative Movement blew so much opportunity afterwards though. All of the Conservative thought leaders got caught up in the day to day news and scandals that surrounded the Obama Administration spying on Trump _(which is definitely a big thing, but still it shouldn't have taken away focus from the issues)_and all the while not holding the President or Congress accountable as they spent and passed bloated omnibus bills filled with mainly Democrat priorities, increasing the debt more than Obama did when he was in office.
The base became so overconfident to where as you said, they became blinded by their own victory beforehand. Just like back in 2006 and history repeated itself in 2018..
Now armed with self proclaimed socialists in seats ranging from city councils (see Seattle) to the House of Representatives, the Democrats embraced this new radical authority, since their racial diversity, relative youthfulness, and sprightly energy motivated social justice oriented millennials and gen z’ers to vote for the first time. And now they have war chests full of donations and fundraising money to blockade future elections. And all of that in itself is pretty scary.
Millennials and Gen Z are the two most Leftist generations of all time. Early Gen Xers didn't do a proper job raising Millennials nor did Later Gen Xers do well with Gen Z. The Boomers are guilty of this too, they raised the Old Millennials (born 1981-1988) rather poorly too. The lack of discipline, gratitude and humility of the new generations, it all shows with these riots and the marches from last decade. Racial demographics increasingly moving in favor of the Democrats is a major problem too. Asian Americans used to be staunchly Republican until the mid 2000s before becoming staunchly Democrat. I posted an article from National Review about this not too long ago. With the amount of money raised by the Democrats, they're bound to win more elections in the future than lose..
We let the left win. We messed up, hard. We had the chance to squish these communists once and for all, instead we let them multiply as a result of our own arrogance and laziness.
I fear you are correct. There may be a light at the end of the tunnel, but its closing ever so rapidly.
Fast forward to 2020. Now don’t get me wrong, had the coronavirus not existed, we still would’ve had a solid chance at this upcoming election. The thing is, despite letting the left fester under our noses, Trump had a solid record to run on. 3 years of economic social and political successes gave him perfect ammunition to use against the left, who’s platform basically consisted of nothin more than “cheeto face bad”, peach mints, and CNN nothingburgers.
But the coronavirus pandemic did happen. And as you properly pointed out, the economic gains got deleted in a matter of weeks. Unemployment skyrocketed. And now we’re back to the 1960s with race riots and protests that are still going on after nearly 3 weeks.
Indeed. This year went from being a great one to the most disastrous yet in the span of less than 3 months.
Trump’s election prospects, in my opinion, have gone up in smoke. Now what’s fresh on everyone’s minds is how things aren’t back to normal yet, how millions of people are still unemployed, how 1/5 of all businesses might close, how Trump sank this country into debt by spending our annual GDP 2x over in the span of 7 weeks, how socialists have destroyed and taken over cities amidst these race riots.
When America needed Trump the most, he vanished. That’s why his poll numbers plummeted. And it’s impactful. It paints him as incompetent. And this time I don’t think the numbers are lying.
You're absolutely correct. As it stands due to the factors you mentioned, Trump has lost a substantial portion of his voter base as many of the incompetent decision making by his advisors, namely his son-in-law Jared Kushner are showing more than ever before. The riots were merely the culmination of it all and Kushner stopping Trump from taking action against the riots earlier was catastrophic for him, and it shows in his approval numbers: Real Clear Politics Average: President Trump's Job Approval Rating
As it stands, Trump's approval has at its lowest since November of last year and is continuing to drop. Soon, it could be back to what it was in 2017 and early 2018...
He's now increasingly losing in the national polls against Biden and in the Presidential betting odds: Real Clear Politics: General Election: Trump vs. Biden Real Clear Politics: Latest Betting Odds: Trump vs. Biden PredictIt.org: Presidential Betting Odds: Trump vs. Biden Continued in part 2 of reply
from Kotasuoa on As of 2020: Is the Right in America and the West on the brink of defeat? Or can they still recover?
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As anyone who hasn’t spent the last month under a rock knows, the COVID-19 coronavirus is a big deal to the global economy, and governments have taken a number of potentially disruptive measures to contain it. The aim of this post is to look somewhat closely at the likely impact to the economy of this famously unstable country, and to briefly weigh the policy actions of the Alberto Fernández administration against their costs.
A little context
Argentina and economic collapse, name a more iconic duo. In the past decade, the inflation rate went from the twenties to the fifties, and 2019 had the highest recorded figure in almost thirty years: 53.8%. The country has not grown for two consecutive years in an entire decade, and official figures for most relevant variables, including unemployment and production, are unreliable (to put it kindly) since the official statistics agency was intervened by politicians and pretty much faked its data for ten years.
In 2015, the reign of a faction of Peronism (the dominant political ideology/party in Argentina, an economically left, nationalistic, autarchic, anti-globalization movement) known as Kirchnerism, with more ties to the hard left and more socially progressive than the rest of the party, came to a close after 12 years of dominance: their prefered Presidential candidate, Daniel Scioli (an unpopular, unexciting, uncharismatic Governor who lost an arm in a boat racing accident) narrowly lost a runoff to the center-right Mauricio Macri, the mayor of the country’s capital. Macri ran on a platform of change (his coalition of centrist parties was literally named Cambiemos
, or Let’s Change) and promised to lower taxes, reduce regulations, open the economy, and lead Argentina into a new era of market-based prosperity. This did not pan out: after a rocky first year, where the lifting of currency controls and sky high raises in public utilities led to a 40% inflation rate, nearly 15 point above the previous year’s, 2017 looked bright: GDP grew, wages increased, inflation returned to its prior levels and seemed to be going down, and the government scored a double-digit win in the midterms.
2018 was even more promising, until May: following a series of policy and communications missteps by the government, investors became more bullish on the nation’s ability to repay its significant dollar-denominated debt; when the Fed raised rates in May, capitals bled out of the country and the peso began depreciating for months, more than doubling from 19 pesos per dollars to over 40 by the end of the year; the economy took a beating, with GDP collapsing and completely erasing the previous year’s gains. 2019 was tougher: Macri became, obviously, increasingly unpopular - but still stood a chance because his likeliest rival, the divisive and corrupt former President and sitting Senator Cristina Fernández de Kirchner, appeared to be an even less palatable candidate - and voters going to moderate Peronist economist Roberto Lavagna looked more like Macri than Kirchner supporters. In an unexpected, risky gambit, Kirchner picked her former Chief of Staff, the little known and more moderate Alberto Fernández (no relation, it’s a common surname) to run for President, with her being his running mate. This bet paid off: Fernández united the entire Peronist party (no easy task, since Kirchner wasn’t particularly popular with Peronist Governors) and surpassed all expectations: while polling had him in dead heat against Macri, the high number of undecided voters made the race extremely volatile. After two hours of delays, the results of the national primaries (basically a trial election) came in: Fernández had beat Macri by nearly 20 points, 49 to 32, and was, by all intents and purposes, the next President. The markets did not take this well, since the winning candidate was notoriously vague and tight lipped in his positions: in a single day, stocks and bonds plummeted by 55%, and the peso depreciated another 33% - to 63 pesos. Macri performed better in the October elections, getting 40% to Fernández’s 48% due to higher turnout, but still lost. 2019 was another bad year: GDP shrank by 2.2%, unemployment soared to 9.7% (it later came down to 8.9%), and poverty rose from 25.4% (a historic low) in 2017 to 35.4% in the first semester; the only positive figures are the fiscal deficit, which went from 4% in 2015 to 0.5% in 2019, and the trade balance, which reversed sign and was an astounding 19 billion surplus; the current account deficit was reduced from a staggering 31 billion in 2017 to 3.4 billion in 2019, the lowest since 2012 and mostly caused by the positive trade and service balances.
The Fernandez administration, meanwhile, surprised in its moderation: efforts have been made to somewhat maintain fiscal balance, while also increasing welfare payments without committing “populist excesses”, to somewhat speak. The fiscal balance has been weak, though, with Economy Minister Martín Guzmán only vowing a surplus in 2023 and returning to the much dreaded “gradualism” of the Macri era. Fernández seemed mostly interested in one issue: restructuring the country’s substantial debt (nearly 90% of GDP), which included a record breaking program by the IMF and the products of a previous restructuring, in 2005, after the country defaulted in 2002 (it would partially default again in 2014) - Guzmán himself is an academic focusing on the issue, and a disciple of the “heterodox” Nobel Laureate Joseph Stiglitz at Columbia.
The healthcare system
Argentina’s healthcare system is complex, heterogenous, and very poorly supervised - public health is not mentioned in the Constitution, putting it under the purview of provinces, except for some compromises between jurisdictions to make it run smooth.
Considering the demand side of healthcare, the age structure of Argentina is not particularly concerning: only 15% of the population is over 60, and, on average, 88.5% of those over 60% have some kind of health insurance. Speaking of, 60% have any kind of insurance, according to census data - higher with age. Although 35.4% of the country lives in poverty, this number plummets to around 10% in older groups - providing a better safety net for the most vulnerable groups (children, by comparison, have a 52.5% rate). The country is only worryingly densely populated around the nation’s capital, the City of Buenos Aires, whose metro area comprises 13 million people and an expanded definition is inhabited by almost 20.
On the provider side, the country’s hospitals are mostly run by the provinces, except a handful in the orbit of the national government. According to the government
, the country spent 9.8% of GDP on healthcare - 6.6% by the public sector, and 2.8% by private companies. The country seems to have a low number of physicians, hospital beds, and nurses
- yet the larger provinces with a higher number of cases seem better prepared. Still, the glaring inequalities in the country make it clear that being ill in the wealthy City of Buenos Aires or the oil producing, sparsely populated Santa Cruz would be highly preferable to Chaco or Misiones. Another notable issue is the disparity between systems: private insurers (“prepagas”) offer extremely high quality care, as does PAMI, Argentina’s equivalent to Medicare (it is, in fact, a state-run public insurer for the elderly). The problem comes with the public system, which is much higher quality in richer provinces, especially in the less populated Patagonia.
The country, despite not being at such apparent risk, has taken measures extremely early: a full quarantine was announced roughly 20 days after the first confirmed case. The main situation is the country has only really tested those who either traveled abroad recently or were in close contact to those who did - meaning that official statistics of 500 infected, 8 dead aren’t particularly meaningful, and the number of tests administered isn’t publicly available.
Employment, poverty, and consumption
The country being under a quarantine poses a significant risk: 35% of the labor force works in the informal sector, and another 15% is self-employed. This means that, under a lockdown, nearly half of the population wouldn’t receive any income. The Catholic University of Argentina's Observatory for Social Debt
(sworn enemies of mine, if you’ve read my previous post on poverty) estimates that 32% of people don’t receive any kind of formal salary, and that just two thirds of those families don’t even collect welfare checks - so 10% of homes will be deprived of all forms of income during a lockdown. The government has tried to mitigate this: bonuses for welfare recipients and the poorest retirees were announced, a $10.000 bonus for the unemployed,and some self-employed people was enacted, and the steps have been taken to ensure that people don’t lose access to basic necessities: a temporary ban on eviction and loss of utilities, a freeze on housing credits and rent, and price controls. The Social Development Minister, Daniel Arroyo, recently declared that 11 million people are receiving nutritional assistance
, 3 million more than before - and 3.5 million of whom are children.
The consulting firm IDESA
paints an even bleaker picture: they claim 45% of all Argentinians live off of informality, meaning the quarantine, on this basis alone, could deal a crippling blow to nearly a majority of families. Others have gone further: a recent report claims
that 5.5 million people are at “very high” risk of losing their jobs based on their employment status (self employed of informal) and at slightly lower risk depending on the sector they work in, even if they are registered. The government responded to this by banning firings and suspensions by decree
, which will obviously negatively affect job creation (which is at historic lows anyway, according to Ministry of Labor data
Consumption has also been negatively impacted, since the incomes of those newly unemployed will obviously decrease; some retailers have experienced decreases of 50% in sales, and many have estimated that people simply won’t be able to afford their living expenses or their credit card bills (which were recently postponed until after the quarantine is over).
Economic activity and output Economists
estimate that each day of the quarantine reduces GDP by 1 to 1.4 billion, although there is a massive caveat - their projections are all based on national holidays and workers’ strikes, which are quite different because they are both scheduled in some advance, aren’t particularly long (the longest national holiday lasts about 3 days), and national holidays in particular have much higher “entertainment” (cinemas, theaters, restaurants, vacations, etc.) spending than usual.
The aim of government policies so far seems to be to mitigate the loss of income on poor families, while not spending too much - the public sector has an extremely limited margin of action, given that current commitments make up 0.6% of GDP with revenue in free fall due to lower activity (VAT, income tax, and export taxes have been particularly deteriorated lately). The demand shock to some sectors will be highly negative: tourism, entertainment, non-basic goods, etc. As you can see here
,the largest sectors of the economy (Industry, construction, and retail) will be hardest hit.
Starting with construction
, things are not looking good: work has ground to a halt, while it has already had its worst performance in decades. The sector also has a very high demand for labor, some of the highest rates of labor informality, and is the third largest sector of employment (360k workers in December) which makes it a ticking time bomb of lost income that has to be addressed as soon as possible - and the government has announced new credits for construction, and a 100 billion public works plan. The sector has already registered its lowest employment levels ever
this year, and in an omen for things to come, the massive multinational company Techint has already laid off 1500 workers
based on estimates that their profits in April will be 0.
Regarding industry, after it has the worst indicators for production in since 2002, only the food and pharmaceutical industries seem to be trending upwards - and they only account for a third of industrial workers, which make up themselves a fifth of all workers.Industrial Union figures claim that just 20% of manufacturers are currently active
- and that the entire sector is having difficulties paying salaries or acquiring components. Car manufacturers have shut down production until April, and expect to sell fewer than 200 thousand units this year; and the electronics sector has followed suit. While industry does not have the same level of informality construction does, some issues may arise. The main complication will be supply chains, since many key components for industrial production are imported - and most major manufacturers (notably China) are dealing with the aftermath of their own coronavirus responses. And lower projections for growth in Brazil could especially hurt the automotive industry, where 50% of units sold are destined for the Latin American country
, and whose growth has a large impact on Argentina’s manufacturing sector (note: even if the article is old, it still very clearly illustrates the close relations between the countries).
Retail is the biggest problem: after a 30% surge in sales in the days leading up to the lockdown
(mostly in large chain supermarkets and wholesalers), sales collapsed
as people became more frightened to leave their homes: restaurants have reported a 55% drop in sales, bakeries an 80% decrease, and 70% of small shops have already shut down
until people are back in the street, since their sales decreased by 50% as well. Retailers in most sectors express concern, and most restaurants, bars, and “proximity businesses” (drugstores, corner shops, and small convenience stores known as “Chinese supermarkets” because their owners are generally Asian immigrants) have seen their income go from a steady stream to a small trickle, mostly due to online shopping and home deliveries - amd 20% of these smaller stores have closed their doors for the duration of the quarantine
. Small business owners
have already expressed their concern with the situation, with most expecting steep losses in revenue and some even reducing their staff. The sector is the second largest employer in the economy, with nearly 20% of the workforce as well, and a retail recession, so to speak, could collapse into a vicious circle
where a crash in demand is reflected in sales, which forces firms to downsize, leading to even more drops in revenue, which starts the cycle all over again.
Regarding other sectors: hotels, tourism, transportation, etc: have seen their income fall by billions, and combined employ as many workers as the construction construction. Agriculture and other primary activities are probably mostly affected by second order factors, such as lower international demand and lower prices - which puts them in a secondary position for aid; their main issue at the moment is the paralysis in activity affecting docks and trucking due to the lockdown. “Personal services”, the tech sectors, and other highly skilled workers can probably move home and still receive full compensation; some firms, such as “Latin America’s Amazon” Mercadolibre or companies that specialize in consulting or telecommunications, could even thrive in this context. .
All in all, the economy looks like it will take a big hit from the lockdown: experts have estimated
that each day in March had a 30% reduction in activity (which could be estimated by the observed drops in the demand for electricity, fuel, and transportation), and some go even further and assume a 45% daily drop in April, due to higher baselines because of seasonal factors. Goldman Sachs predicts
GDP would drop by 5.4% in 2020, the largest decrease in 18 years (it was 10.9% in 2002) and more than the previous for years combined.
Trade and the external sector
To begin with, Argentina is basically cut off from financial markets at this point: country risk (the premium the country must pay to borrow) skyrocketed to 4500 points at a maximum, before settling in the high 3000’s, and the country seems to be on the verge of its 9th debt default- restructuring offers are basically dead now, with Guzmán and Fernández previously intending to negotiate during March and April. There is no clear consensus on the specific consequences of a debt default, although this publication by the IMF
seems to imply it both causes tremendous damage to a nation’s reputation and cuts off growth by weakening the banking sector (which has taken a pummeling in the last year), even if defaulting itself does not cause degrowth. Since most companies are expected to have difficulties paying salaries due to low liquidity, and most people are also expected to not pay some of their obligations, a financial crash could send shockwaves into an already weak economy. In the longer run, a weak financial sector (like the one Argentina most definitely has) can constrain the access to credit necessary for investment - which is a prerequisite for sustained growth, and which already is at its lowest share of GDP in decades. The government remains adamant that its official position is not to default, but the chances of an offer that both sides are content with are slim - the IMF itself has recently weighed in and supported large haircuts for the sovereign debts of emerging economies.
Secondly, trade: most of Argentina’s leading trading partners
(Brazil, the EU, the US, China, South Korea) have been negatively affected by coronavirus - China’s GDP is probably going to plummet in the second quarter, and exports to Asian markets have already decreased by 30%. China alone is responsible for almost a third of all industrial exports, which will surely affect global supply chains negatively, as well as reducing imports. Argentina has mostly been a commodity exporter (they made up 40 of the 65 billion dollars in exports during 2019) and commodity prices have plunged during March - soybean, wheat and corn prices will affect the trade balance most harshly, and oil (which is key to national investment in the Southern provinces) has nearly halved in price, making the U$S 15 billion investments that were planned probably unprofitable. The agricultural sector in particular may be heading to a crisis of its own soon, since restrictions on labor and movement, issues with transportation, and blockages to roads and docks have negatively impacted production and sales - and April is the beginning of the most productive part of the year. Regarding Brazil, Argentina’s largest trading partner, relations have been tense due to the personal and political inminity between presidents Fernández and Bolsonaro (who at one point threatened to leave the Mercosur trade bloc) - and growth and industrial production projections for the neighbouring giant have steeply declined lately, which doesn’t bode well for Argentina at all: those indicators, due to the large entanglements between the two nations, are some of the strongest predictors of Argentinian growth (and vice versa: the Brazilian stagnation and manufacturing recession of these last few years have negatively impacted on its partner, which has also entered a recession of its own to the detriment of Brazil itself).
Another major issue for the government is the peso becoming “overvalued”: due to the high volatility in international capital markets (almost 60 billion fled out of developing countries
/arc-anglerfish-arc2-prod-infobae.s3.amazonaws.com/public/IG6CNPW4IFD6VM3QCC5RY5VWXQ.jpg)), most emerging currencies have been battered, rapidly depreciating with regard to the US dollar
. The Argentinian peso became one of the strongest currencies of such category (honestly surprising news) because the high rates of inflation mean that any devaluation will be offset by higher national prices
; as a result, any gains in competitivity done after the massive devaluations of 2019 have already been lost
, since the real exchange rate is, in fact, lower than it was in August. As a result, the country will lose many of its trade advantages over its competitors, which will negatively impact the trade balance (fewer exports + more imports, despite more rigorous controls) and possibly create difficulties in acquiring the hard currency
in such high demand in the economy.
Deficits, debt, and the money printers
Argentina’s government has been quick to take action on the healthcare front, declaring a quarantine not even a month before the first cases were confirmed, and extending it for nearly a full month. Their political resolve in handling the pandemic was widely praised, with leaders across the political spectrum working together and Alberto Fernández himself soaring to 90% approval, with 95% of the population approving of his actions.
On the economic front, things have moved way more slowly. The government has mostly taken actions on the demand side, as was previously detailed, by increasing transfers to individuals on the basis of need and with a means-tested mechanism to ensure that nobody “with too much” gets aid. This logic may be questionable, but it is widely accepted that aiding those most in need is correct; so far, these programs have cost about 0.6% of GDP, doubling the public sector’s deficit (from 0.5% in 2019) amid slumping revenue
, due to the ongoing recession (lowering income from VAT and, to a lower extent, payrolls and income) and the collapse in foreign trade (hurting export and import taxes). This will surely create difficulties all over the country, since the government will lose its margin of action concerning any future developments; provincial and municipal governments, extremely dependent on sales taxes, administrative charges, and central government remittances, will take an even larger hit (especially some, such as Buenos Aires, Chubut, and La Rioja, which are having serious difficulties with their external debt).
On the supply side, on the other hand, the government has been extremely slow in offering any real support to struggling businesses. 80% of small businesses don't think they could stay in business if the lockdown continues for an entire month
, and 70% of companies are planning on cutting costs
. Only some sectors (such as tourism and entertainment) received tax cuts, albeit in homeopathic proportions, and some plans to help the construction sector, such as the Procrear credits and a $100 billion infrastructure plan, will take their time. Companies have shown concerns regarding how to pay their employees’ salaries, since the collapse in sales has surely impaired their liquidity - and the Central Bank took measures to inject up to $280 billion into the economy, which has led to much lower rates in short-term borrowing.
The government has also recently announced two new programs: government assistance of up to a minimum wage of salaries for companies with under 100 employees, a doubling of unemployment subsidies, and a 95% postponement in payroll taxes for smaller companies (up to 60 employees). This seems to make sense, until you consider that the largest companies have been hit just as hard by the recession in the past year
, and that companies with over 100 employees have bled jobs for the last 12 months; this is without even getting into the sector-by-sector measures that almost all those affected (from construction, to cinemas, and small retailers) have already demanded. The fact that this expansion to spending seems to mostly come from into aggregate demand has not put experts at ease
: this will not increase revenue at a time of crisis, but it could also be insufficient to protect firms from bankruptcy.
One of the biggest problems concerning an enlarged deficit is that almost all avenues of financing it are unavailable: reducing the deficit itself is impossible, as has been specified, and Argentina (as previously explained) is teetering on the verge of default, so it’s not like the financial sector is dying to lend. So the only remaining alternative is seigniorage: in March, the Central Bank assisted the Treasury to the tune of $125 billion, and has printed nearly $400 billion in this regard since December. Even if, yes, money printer go brr
(for example, former Central Bank President and inflation hawk Guido Sandleris has defended the expansion
as necessary, with some caveats, during a conference) many economists have recently rung alarm bells: the government's massive expansion of the monetary base (some say 62% in all of 2020, and it has recently reached the record high of 2 trillion pesos
) could become a factor for inflation to still go up, from the 54.8% 20-year record in 2019 to the 60’s or even 70’s (since the exchange rate is under steep controls and the monetary base contracted massively in the previous two years, nobody serious is forecasting hyperinflation yet). The inflationary tax being a way to raise revenue in this dire context could be acceptable in the short term - the Central Bank gave $125 billion for the government, while overall emission was at nearly half a trillion
and was mostly justified with measures to keep firms liquid and not allow the chain of payments to break - or force companies to not pay their taxes to stay solvent. And in another positive development for inflation doves, the demand of money has risen recently
- since people and companies are having trouble paying their bills, their employees, or even buying groceries. This makes it unlikely the new pesos will go to the currency market (a leading preoccupation of policy makers), since that could put pressure for a devaluation and boost inflationary expectations - which generate inflation of their own.
Concerning debt, the government has taken all available steps to create confidence - despite being at ideological odds with the organism, it was recently announced that they would accept a U$S 3.5 billion dollar SDR that was previously refused
, added to smaller loans of a couple hundred billion by the IDB and the World Bank to finance the new spending caused by the crisis. The IMF itself has expressed support for emerging markets giving large “haircuts” to their sovereign debts, which Minister Guzmán seems to have taken at heart: he looks set to offer big cuts to interests and principal, a grace period, and maybe even unorthodox instruments like a GDP based bonus
. Bonds recovered slightly, and country risk went slightly down; the problematic aspect could be that part of the recovery in bonds could be by “vulture funds” trying to gobble up obligations for cheap to later sue the country and get the full amount from a more friendly government (as Paul Singer famously did in 2019). While Guzmán’s good intentions were appreciated, bondholders did not accept the offer - and countered with a proposal for a 6 month break in payments and negotiations
out of mistrust of the government and the options it presented.
Summing up, 2020 is shaping up to be a tough year for Argentina - or even tougher than expected. All indicators seemed to point at the economy being somewhat on the path to a recovery, with a milder recession, less inflation, and a public sector with a small deficit and a friendly (as possible, at least) debt restructuring. Coronavirus came as bad news (where didn’t it, though) at the worst possible moment.
Despite the obvious political differences of most readers with the Fernández administration, it is clear that his handling of the healthcare side of the issue received wide acclaim, even if Latin America’s standards for it are depressingly low
. On the economic front, Fernández acted within the bounds of the mainstream and still focused his efforts on the poorest segments of society. In the immediate context, it could seem like a positive - nevertheless, it’s clear that all actors in the economy will be heavily affected by the crisis, and not providing aid to all of them would be inadequate. The government has also undertaken some deeply populist measures that will have no meaningful effect: a list of maximum prices, enforced by AFIP (the tax collection agency) inspectors which has mostly resulted in crackdowns for the small businesses that can’t actually afford to sell at those values.
The authorities could provide the necessary stimulus to the economy, putting those least affected on the back burner until the worst of the crisis has passed; unfortunately, taking coronavirus as an opportunity to enact even stronger controls on market mechanisms out of ideological purity would do a huge disservice to the country at a crucial time.
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