The Morning Dispatch: Bad News for the Economy

Happy Friday! The next time we’ll be in your inbox, it’ll be August. Wild.

Quick Hits: Today’s Top Stories

• The United States confirmed 67,317 new cases of COVID-19 yesterday, with 8.2 percent of the 819,270 tests reported coming back positive. An additional 1,347 deaths were attributed to the virus on Thursday, bringing the pandemic’s American death toll to 152,055.

• The U.S. economy shrunk a record amount—an annualized rate of 32.9 percent—in the second quarter, per data released by the Commerce Department on Thursday.

• The CARES Act’s supplemental unemployment benefits of $600 per week will expire today for millions of Americans after the Senate adjourned for the week without reaching consensus on the next stimulus bill.

• Michael Flynn’s criminal case will continue. The U.S. Court of Appeals for the D.C. Circuit announced that the case will now be heard by all of the judges on the court to determine whether to allow the Department of Justice to dismiss the prosecution without further review.

• Herman Cain—business activist, Federal Reserve Bank of Kansas City Chairman, conservative activist, and 2012 Republican presidential candidate—died on Thursday at the age of 74, several weeks after he contracted COVID-19.

• The NBA officially returned to action in its Orlando, Florida bubble last night, 141 days after the season was first suspended due to the coronavirus. 

A Historic Contraction in GDP

The Commerce Department announced on Thursday that gross domestic product (GDP) fell 9.5 percent during the second quarter of 2020. That’s a 32.9 percent annual plunge, the biggest quarterly drop since at least 1947—by a lot.

This dramatic contraction in GDP—though historic—came as no surprise to most economists. “The Congressional Budget Office (CBO) had estimated a drop this size several months ago with the projection of a partial rebound in the third and fourth quarter,” said Brian Riedl, senior fellow at the Manhattan Institute. “I think what matters now is whether or not we get that rebound.” 

Consumer spending makes up about 70 percent of the American economy, and it fell at an annualized rate of 35 percent in Q2. But thanks in large part to key CARES Act provisions, this decline was due more to Americans not having places to spend their money than not having money to spend. Disposable personal income increased nationwide in the second quarter by $1.53 trillion, or 42.1 percent. Those figures were $157.8 billion and 3.9 percent in Q1. Americans’ personal savings rate was 25.7 percent in Q2, compared to just 9.5 percent in Q1.

Faith in a V-shaped recovery, however, is waning, despite this pent-up demand. In June, we saw sustained optimism from economists as unemployment continued to decline and states trudged forward with their reopening strategies. But July—and the surge in new coronavirus cases that came with it—has upended those predictions. “It looks like the data are pointing to a slowing in the pace of the recovery,” Federal Reserve Chairman Jerome Powell said Wednesday. After declining for 15 straight weeks since their late-March peak, initial unemployment claims have begun rising again, increasing week-over-week each of the past two weeks. 

Small businesses are also in a bind. “By now, economists had assumed that businesses across the country would begin reopening, hiring,” Riedl said. Many states rolled out ambitious reopening strategies in May and June, only to scale them back once new coronavirus cases spiked. “The danger is that the longer these closings go, the greater likelihood of businesses shuttering forever,” Riedl continued. A new Yelp study found permanent closures now account for 55 percent of all closed businesses since March 1.

This harrowing news came literally a day before the CARES Act’s extra $600-per-week in unemployment benefits—which played a large part in sustaining the aforementioned increased savings rate—is set to expire. The GOP earlier this week rolled out its $1 trillion HEALS Act—which would reduce the $600 weekly boost to $200 through September, at which point benefits would transition to 70 percent of wages—but the bill hasn’t gone anywhere. The Senate adjourned for the week yesterday with no deal in place.

Unemployment insurance is not going away entirely, of course, but reverting back to previous levels set by the states. “The benefits will continue,” Riedl said, “but for a lot of families, this is only going to replenish closer to 30 to 50 percent of their wages. … Families that had done pretty well making up their income during the pandemic are going to start to see a lot of nervous weeks.”

Still, the White House remains optimistic. “Despite this massive contraction,” the Council of Economic Advisers wrote in a statement on Thursday, “the resiliency of the U.S. economy and the swift fiscal response of the Federal Government can aid in a strong recovery.”

‘November 3 is Election Day’

The Commerce Department released its report at 8:30 a.m. ET. Sixteen minutes later, at 8:46 a.m., this president tweeted this:

Squirrel! (Readers who listened to yesterday’s Advisory Opinions will get this reference.)

As we’ve discussed in this newsletter before, the president and his surrogates’s claims that mail-in voting would be an unmitigated disaster are largely unsubstantiated, but there are documented cases of mail-in ballots being completed incorrectly or sent to the wrong address, and therefore not counted. It took New York more than a month to finish tallying votes in its June 23 primary, and thousands of ballots were invalidated. But the president’s call for delaying the November election is a new one, and it provoked an unusually swift denunciation from Republican leaders in both chambers of Congress.

“Never in the history of the country, through wars, depressions and the Civil War, have we ever not had a federally scheduled election on time,” said Senate Majority Leader Mitch McConnell in an interview with a Kentucky television station. “We’ll find a way to do that again this November 3.”

“We are not moving the date of the election,” tweeted Rep. Liz Cheney, the No. 3 Republican in the House. “The resistance to this idea among Republicans is overwhelming. We must take all necessary steps to prevent election fraud—including stopping Democrat ballot harvesting—but we will not be delaying the election.”

McConnell and Cheney were far from the only Republicans to speak out. Your Morning Dispatchers surveyed all 53 Republican senators’s reactions to Trump’s trial balloon, reaching out to each office for comment and compiling a list of the statements they made to other outlets throughout the day.

As of our count last night, 42 GOP senators* had made some statement denouncing the idea of a delayed election and/or assuring that the election would go as planned. Sen. Ben Sasse’s pushback was among the most forceful, telling The Dispatch “the President should not sow distrust” in our electoral process. Others, like Sen. James Lankford, were spare but blunt. “November 3rd is election day,” an emailed statement read (in its entirety).

Still, those five words from Lankford were more than 11 of his colleagues could muster. Sen. Richard Burr, for example, declined to comment when reached by The Dispatch. “I’ll get back to you,” Sen. Rand Paul told NBC News when asked about Trump’s remarks.

(The senators for whom we could not get or find a comment include: Richard Burr, Steve Daines, Mike Enzi, Jim Inhofe, John Kennedy, Mike Lee, Kelly Loeffler, Rand Paul, David Perdue, Pat Roberts, and Richard Shelby.)

Democrats had no such qualms about condemning the comments en masse. House Speaker Nancy Pelosi responded to the president’s tweet by posting the section of the Constitution that explicitly gives Congress the power to determine the time and date of national elections.

In this case, Pelosi is exactly right. Presidential elections “are determined by law to be set for the Tuesday after the first Monday in November,” says Rachel Kleinfeld, an associate at the Carnegie Endowment for International Peace. “Only an act of Congress—majorities of both the Republican Senate and Democratic House—could alter that law or delegate that choice by statute to the Executive. Moreover, even if they did change the law, the Constitution states that a President can serve only a four year term before a new term must begin at noon on inauguration day.”

Given the uniform Democratic opposition and strong Republican opposition to Trump’s suggestion, the likelihood of his being able to enlist congressional support in some scheme to delay the election is very low. “Trump simply cannot do anything to make this delay occur,” Kleinfeld says.

Throughout the tumultuous centuries of American history, there has never been a delayed presidential election. There have been occasional delays to local and state elections and primaries—New York passed a one-time piece of legislation to delay a primary following the 9/11 terrorist attacks, several states pushed their primaries back this year due to the pandemic—but there is a long precedent of American commitment to the peaceful transition of power, even in the most chaotic of times. In 2004, when security officials were concerned about a potential terrorist attack on Election Day, George W. Bush’s National Security Adviser Condoleezza Rice was forceful. “We’ve had elections in this country when we were at war, even when we were in civil war, and we should have the elections on time,” she said. “That’s the view of the president. That’s the view of the administration.”

What is more likely—and is already visible in much of the president’s rhetoric—is a concerted attempt to sow seeds of doubt regarding the upcoming election’s results. Although “Trump cannot legally delay an election,” Kleinfeld says, “he can, however, make one so flawed that few would trust the outcome—and that appears to be what he is doing.”

But even then, Trump would not remain in office any longer than his scheduled four-year term. “If elections were seen as so illegitimate as not to be trusted and the presidency remained contested through January 20,” Kleinfeld said, “then on Inauguration Day, the Speaker of the House, Nancy Pelosi, would assume Trump’s presidency.” (If all federal elections—not just the presidential one—were delayed, Pelosi would also be out of both power and the line of succession, leaving Sen. Chuck Grassley—President Pro Tempore of the Senate—as next in line.)

Worth Your Time

• Washington Post columnist Henry Olsen—longtime Trump explainer, sometime Trump booster, and a consistent critic of Trump critics—is not happy with the president’s decision to float a change to the November election. In April, Olsen rebuked Joe Biden for even suggesting that Trump might want to delay the election. Now, with the president’s public confirmation of Biden’s concerns, Olsen offers a scathing denunciation of Trump. “President Trump’s tweet Thursday morning suggesting that the November election should be delayed is more than reckless and irresponsible. It is the single most anti-democratic statement any sitting president has ever made. It should be immediately, forcefully and vocally repudiated by every conservative and Republican.” It wasn’t, as noted above—with many congressional Republicans unwilling to offer anything more than “no comment.”

• For Steven Calabresi—a longtime Republican voter and co-founder of the Federalist Society—Trump’s push to delay the 2020 election crossed an uncrossable line. Calabresi, who supported the president through the Mueller probe and the impeachment trial, took to the New York Times opinion page to argue that Trump’s tweet yesterday constituted an impeachable offense. “President Trump needs to be told by every Republican in Congress that he cannot postpone the federal election,” he writes. “Doing so would be illegal, unconstitutional and without precedent in American history. Anyone who says otherwise should never be elected to Congress again.”

Presented Without Comment

Also Presented Without Comment

Toeing the Company Line

• The D.C. Circuit has decided to hear the Michael Flynn debacle en banc. As Sarah reminds us on today’s episode of the Advisory Opinions podcast, “Michael Flynn seems to be getting some extra justice that a lot of criminal defendants would be really happy to get.” Beyond some mail-in ballot election punditry, our podcast hosts also touch on the Supreme Court conference leaks to CNN legal analyst Joan Biskupic, the latest updates with DACA, and some discussion on the importance of the bar exam.

• David’s latest French Press (🔒) explains forward deployments, and why the withdrawal of 12,000 American troops from Germany would be a grave mistake. Amid increasing military aggression from Xi Jinping and Vladimir Putin, maintaining a forceful American presence in Europe is more important than ever, he writes. “Renewed great power military conflict would represent a world-historic failure, and it’s worth spending money—and maintaining forward deployments—to continue the long peace.”

• As we wait with bated breath for Joe Biden to announce his running mate, yesterday’s bonus edition of The Sweep (🔒) features a back-and-forth between Sarah and Steve about the selection of a vice presidential candidate, and how the press has historically tried to get the pre-announcement scoop. “So many of the things that one would have done as a reporter to try to ferret out who was going to be picked you can’t do anymore,” Steve says. “Because everyone’s sequestered or quarantined, there aren’t likely to be as many flights to track, there aren’t going to be the kind of staff-related tells that you might be able to get if you were reporting on this very closely as someone covering the campaigns.”

• A.B. Stoddard joined Jonah on The Remnant once again for some of their customary rank punditry and a discussion of the Trump administration’s coronavirus response. Be sure to tune in here!

Let Us Know

How (not who) are you planning to vote in November? Have you already registered?

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Sarah Isgur (@whignewtons), Charlotte Lawson (@charlotteUVA), Audrey Fahlberg (@FahlOutBerg), Nate Hochman (@njhochman), and Steve Hayes (@stephenfhayes).

Photograph by Mario Tama/Getty Images.

Update, July 31, 2020: Several Senate offices, including Sen. Rob Portman’s, have gotten back to us with comments repudiating any delay of the election since we published this morning’s newsletter. We will continue to update our tally throughout the day.