A hot question right now is what legal powers, if any, the federal government has to halt evictions of tenants not paying rent. Such a moratorium started in March 2020, in response to massive job losses due to COVID, and was expiring at the end of last month. The Supreme Court had already warned that President Joe Biden lacks the powers to extend this Centers for Disease Control and Prevention action by executive order. Congress needed to act.
That prompted much furor. The White House first announced that the Court was right — Biden lacked legal authority to extend a ban. The progressive wing of Democratic Party howled in protest, so House Speaker Nancy Pelosi appealed to the White House. When consulted, constitutional scholar Lawrence Tribe found a legal basis if the CDC tailored a new ban narrowly to disease control. The CDC issued two-month substitute certain to be challenged in court.
Legality must fall to those experts. Historians and economists, however, do have useful insights into why or how such moratoriums might benefit or harm society as a whole.
Our Constitution is concise, with little detail about the economic duties of federal government. Clauses limit taxes and spending and mention a post office and patents. There isn’t much else, including no mention of health.
The point is that many federal government actions that we think proper and beneficial are based only on the Preamble’s “promote the general welfare” clause. Nothing openly expresses federal rights to mandate masks, vaccinations or closing of public places. Farm subsidies, interstate highways, space exploration, land grant colleges have no mention either, much less Social Security or Medicare.
Remember history: Our governments long have acted to stem epidemics, even as British colonies, including quarantining the ill and their families, limiting public meetings including worship and, yes, mandating vaccinations. Government orders were extreme during the 1918-1920 flu epidemic.
That started late in a World War during which the federal government had trampled on civil rights to an extreme degree. So public assembly bans generally were obeyed. People not masking were publicly harassed as “mask slackers.” Police killed one in San Francisco.
Remember too that federal economic actions for foreign policy, defense, or macroeconomic stability were common, albeit often protested. Thomas Jefferson’s Embargo Act of 1807 killed the jobs of tens of thousands of seamen and port workers and bankrupted shipowners and merchants.
A new, unbacked paper currency in the Civil War quickly depreciated, effectively confiscating wealth from lenders. During World War I, Woodrow Wilson closed the New York Stock Exchange before German troops invaded Belgium and years before the U.S. declared war. It did reopen five months later.
In both World Wars, the federal government voided innumerable private business contracts. Wilson nationalized all railroads. Franklin Roosevelt banned selling automobiles and refrigerators, among other things, to civilians. Shipping owners were ordered to send vessels across dangerous waters, albeit with generous compensation for lost ships.
Roosevelt’s New Deal also imposed myriad mandates on private businesses and froze banking. And 50 years ago this week, Richard Nixon’s executive orders for the “Nixon shock” unilaterally ended a treaty on international payments and froze U.S. wages and prices for 90 days, which became more than 1,000 days for some products, including gasoline.
So there is a long history of government overturning existing rules for private business in times of emergency, whether health, military or economic, with someone being hurt.
However, key questions are which level of governments and under what authority? Jefferson and Abraham Lincoln got legislation through Congress. Many of Wilson’s actions, during both the war and the flu, were executive orders accompanied by unprecedented quasi-dictatorial control of private actions and speech. Masking and business closing orders, however, largely came from local governments.
FDR used both executive orders and legislation during the Depression and then during war. Nixon’s “shock” was via executive orders, the supposed illegality of which shocked obstetrician Ron Paul into entering politics as a Libertarian. Later Gerald Ford would freeze exports of soybeans to limit rising domestic prices. Jimmy Carter suspended new sales of ag products to the USSR, though existing orders were all filled.
So, turning to the present, there are several precedents for government to pause evictions during a pandemic. There also are several reasons for such action, some social, others economic.
First would be to limit the relocation of many thousands of people, possibly forcing them into homelessness or to shelters or to bunk with friends or relatives. This would make the virus spread more quickly, increase total cases, and perhaps add more indigent people into an overtaxed, undercompensated health care system.
Secondly, the ban would limit further collapse of consumer spending when a recession loomed. If financially pressed households could delay paying rent for months, they would still spend on food and other necessities.
Finally, it was to offset an equity problem. Pandemic layoffs appeared arbitrary, but they were driven by external factors such as social and business lockdowns. Hourly wage employees, especially low-paid ones, lost jobs at far greater rates than white-collar workers, many of whom saw no pay interruptions. The net worth of corporate stock owners climbed as the Federal Reserve further stoked the money supply. It seems unfair that those most able to weather a pandemic-recession bore the least burden. Those least able got hit hard.
But there’s another side to consider. Many advocates ignore the plight of property owners. These people must pay mortgages, insurance, taxes and other overhead. Many are small businesses, much less wealthy than many long-subsidized farmers. Moreover, everyone knows that many rent arrears never will be repaid. Yes, the 2020 legislation instituting the moratorium also set up a program to help property owners through federal relief funds. But, as Biden’s press representative Jen Psaki acknowledged, little of this has been disbursed — another source of discontent for Democrats in Congress. (Minnesota lawmakers, meanwhile, have agreed to extend the moratorium for any renter who has merely applied for assistance).
Yet as a result of COVID, many thousands of hospitality, recreation and other businesses also suffered mandated shutdowns that pummeled owners’ equity, forcing bankruptcies.
Going forward, econ theory argues that quasi-confiscatory measures like this establish precedents that will, at least marginally, lower the expected profitability of investing in residential renting, reducing supply and raising future rental rates.
An underlying problem with any government response to an emergency is that it takes time to devise programs that are both efficient and fair. But the urgency of an emergency suggests that time is not an alternative to action.
Ideally, help to renters and landlords should be means tested, as SNAP food benefits or Supplemental Security Income are. However, Medicare recipients now get benefits around three times the actual value of what their age cohort paid in and there is no means testing for this gigantic income redistribution from the young. Nor are there means tests for farm programs.
Presidents act when lawmakers do not. The House and Senate verge on impotence right now at least in terms of any issue that is politicized. Historians, including those who pore over “excess mortality” — the number of deaths above normal — eventually will render verdicts on how all this turns out.
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
Real World Economics: Eviction moratoriums chock full of knotty issues - TwinCities.com-Pioneer Press
Read More
No comments:
Post a Comment