Simon Johnson's Blog

A Few Quick Announcements

By James

As I wrote a couple of years ago, I don’t post here anymore. I just have a couple of updates for people who subscribe and may be interested in my work.

I upgraded my personal website to the 21st century.I have a new book! The Fear of Too Much Justice: Race, Poverty, and the Persistence of Inequality in the Criminal Courts is coming out on June 20 from the New Press. My co-author is Stephen Bright, a legendary death penalty lawyer (with a 4–0 record in Supreme Court cases), longtime director of the Southern Center for Human Rights, and one of my professors at Yale Law School. You can read more at the book website or you can pre-order it via the New Press site (or directly from your favorite retail monopolist, of course). I used to tweet about everything I wrote, but I may stop doing that as Twitter continues its descent into oblivion. So the best way to keep track of what I write is probably to subscribe to my Medium page here. If you don’t want to give Medium your information, you can get an RSS feed of my stories, or you could bookmark the page itself. Or you could follow me on Facebook. I will try to put a quick post there if I write something that is published someplace else.

Letter to Treasury Secretary Janet Yellen: In Support of a Price Cap on Russian Oil Exports

The Honorable Janet L. Yellen

U.S. Department of Treasury

1500 Pennsylvania Ave., NW

Washington, D.C. 20220

                                                                                                        October 11, 2022

Dear Secretary Yellen:

We are a group of economists with expertise in oil markets, international trade, and political economy, writing to express our support for the proposed price cap on Russian seaborne oil exports .

As envisaged by the G7, the price cap would set a maximum price that Russian oil could be traded in conjunction with G7 services. This price, set in dollars, would be substantially below the world price, yet above the marginal cost of production in Russia. To use US, UK, EU, and allied financial services (such as insurance, credit, and payments), market participants will need to attest that all qualifying purchases are at or below this threshold.

Given the importance of participating countries for global finance and for shipping, compliance with this cap will create pressure for a lower price on Russian oil moved by tanker. While we do not expect all trades will be performed under the price cap, its existence should materially increase the bargaining power of private and public sector entities that buy Russian oil.

The price cap maintains economic incentives for Russia to produce current volumes. In April 2020, when the price of the Brent benchmark was close to $20, Russia continued to supply oil to world markets, because that price was above the cost of production in many or most existing Russian oil fields. Russian has little or no available onshore storage, and since shutting down and restarting oil fields is expensive and risky, it was more profitable for Russia to continue producing in the presence of low prices. The price of Brent now is around $96 per barrel, but Russia receives significantly less due to the “Urals discount”. This discount is caused by the perceived stigma of buying Russian products for some customers; they decline to bid for Russian oil, which reduces effective demand and lowers the price that the remaining customers need to pay.

The oil price cap proposal would effectively institutionalize the Urals discount and consequently further lower the dollar value of the Russian government’s primary revenue stream.

Under its Sixth Package of Sanctions, the European Union has already adopted a complete ban on using European financial services to transport Russian crude and petroleum products to any destination, along with a complete embargo on EU imports of Russian oil. These measures are due to go into effect on December 5th.

If the EU implements these measures without a price cap, we would expect the supply of oil to the world market to decline – and benchmark oil prices (e.g., Brent) to rise.

The US and its allies are likely better off with a price cap on Russian oil, and we are encouraged that the EU is making progress on including the price cap in its next round of sanctions. If the world price of oil rises and the cap is effective, Russia will not receive any windfall. And the cap stands a good chance of lowering Russian revenue even if formal participation is limited – by strengthening the negotiating position for anyone willing to buy Russian oil.

According to the IEA, Russian oil exports were 7.6 million barrels per day in August, down only slightly (390 kb/d) from pre-war levels. With revenue from coal and natural gas exports likely to decline and not rebound soon, the Russian government needs substantial oil revenue (in dollars) to pay its bills and keep the ruble from collapsing. The price cap as proposed gives the Russian government the incentive to continue to supply the world market but reduces the revenue available to fund their brutal war in Ukraine.

For these reasons, we support the implementation of the price cap and are hopeful that you and your international colleagues will make progress implementing it soon.

Yours sincerely,

Simon Johnson, Sloan School of Management, MIT

Daniel Berkowitz, Department of Economics, University of Pittsburgh

Severin Borenstein, Haas School of Business, University of California, Berkeley

Steve Cicala, Department of Economics, Tufts University

Kimberly Clausing, UCLA School of Law

Anastassia Fedyk, Haas School of Business, University of California, Berkeley

Jason Furman, Department of Economics and John F. Kennedy School of Government, Harvard University

Luis Garicano, Visiting Professor of Economics, Columbia Business School

Yuriy Gorodnichenko, Department of Economics, University of California, Berkeley

Ryan Kellogg, Harris School of Public Policy, University of Chicago

Christopher Knittel, Sloan School of Management, MIT

Lukasz Rachel, Department of Economics, University College London

Kenneth Rogoff, Department of Economics, Harvard University

Carl Shapiro, Haas School of Business, University of California, Berkeley

Robert S. Pindyck, Sloan School of Management, MIT

Rick Van der Ploeg, Department of Economics, University of Oxford

Assessment: Stacey Abrams’ Budget Plan

By Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, MIT Sloan School of Management

The plan is based on sound economic and fiscal assumptions and allows for the implementation of policy initiatives without tax increases.

This note provides my assessment of the financial viability of Stacey Abrams’ budget plan for the state of Georgia through fiscal 2028. This assessment was carried out at the request of the Stacey Abrams campaign for Georgia’s governor.

Stacey Abrams’ budget plan is fiscally prudent. The plan is based on sound economic and fiscal assumptions and allows for the implementation of Abrams’ proposed policy initiatives without the need for tax increases.

The most important assumption underlying the budget plan is the projected growth in tax revenues, which in turn depends on the state’s economic outlook. Between fiscal 2023 and fiscal 2028, Abrams expects state tax revenues to grow by 4.6% per annum, in nominal terms. This projection incorporates changes in the state’s tax code resulting from the implementation of House Bill 1437 during the budget horizon. Following its initial implementation in 2024, the tax cuts by House Bill 1437 are triggered only after specified budget benchmarks are achieved, which is not expected until fiscal 2028.

The anticipated growth in tax revenues between fiscal 2023 and fiscal 2028 is consistent with the 4.9% per annum growth in Georgia’s tax revenues over the past quarter century and 7.4% per annum growth over the past decade (see Table 1 below; all figures are in current dollars). This is consistent with reasonable expectations for the continued robust growth of Georgia’s economy. For example, in a recent economic forecast, Dr. Rajeev Dhawan, Director of the Georgia State University Economic Forecasting Center, expects personal income growth of close to 6% per annum through calendar year 2024, and gross state product growth of about the same during the period.

It is important to note that the national and Georgia economies are not expected to suffer a severe recession during the budget horizon, although the economy’s growth is expected to materially weaken through calendar year 2023. However, the impact of the weaker economy on nominal tax revenue growth is mitigated in part by the expected high inflation during the next two years. Inflation is projected to steadily moderate, but it is unlikely to be quickly fall back in line with the Federal Reserve’s inflation target of 2% (measured by the national core consumer expenditure deflator).

Abrams’ policy initiatives would be incorporated into the budget by fiscal 2027. The costliest proposal is to increase salaries for teachers and law enforcement. For teachers, the cost is spread over four years, with the first $2,750 increase in annual pay occurring in fiscal 2024. By fiscal 2027, the entire proposed $11,000 annual salary increase would be in place. The budget cost for these higher salaries increases from just over $400 million in fiscal 2024 to $1.6 billion when fully implemented in fiscal 2027. Law enforcement salaries increase by $6,000 in fiscal 2024 and again in fiscal 2025 at a budget cost of $155 million by fiscal 2025. The cost of Abrams’ proposed expansion of Medicaid coverage is also significant, estimated at $297 million in FY 2024 and growing between $16 million and $18 million yearly after that.

Given the expected tax revenue growth in Abrams’ budget plan and the amount of the state’s current undesignated reserves, the costs of Abrams’ policy initiatives are adequately funded through the budget horizon. In other words, the state will have enough revenue to cover her policy initiatives while also maintaining an adequate reserve with no tax increases.

In addition, there is a substantial cushion provided by currently available reserves. According to the State Accounting Office FY 2022 Report on Revenues and Reserves, the state ended Fiscal Year 2022 with a General Fund balance of $11.82 billion, of which $5.24 billion constitutes the revenue shortfall reserve, which is constitutionally capped at 15% of prior year revenues. This leaves $6.58 billion in undesignated reserves, which are available for appropriation. The Abrams budget plan assumes that the undesignated reserve will fund the gas tax suspension through December 2022 (costing $1.6 billion), that the Abrams proposed tax rebate is implemented ($1 billion), and that the Abrams FY 2024 budget initiatives are funded ($1 billion).

The undesignated reserve will then total roughly $3 billion, allowing for $900 million to fully fund Abram’s budget initiatives in FY 2025 through FY 2027. In FY 2028 the budget will no longer be supplemented with undesignated reserve revenues.

While there is significant uncertainty in any economic and budget projection, the Abrams budget plan for Georgia is appropriately prudent and does not rest on overly optimistic revenue assumptions. The Abrams budget plan strikes a reasonable balance between fiscal prudence and expanding the state’s support for a range of initiatives, without raising taxes.

Table 1: Historical Revenue Growth   FY 1998$ 11,718,182,319 FY 2011$  16,558,647,5288.8%FY 1999$ 12,696,109,7968.3%FY 2012$  17,269,975,4744.3%FY 2000$ 13,781,937,4928.6%FY 2013$  18,295,858,5895.9%FY 2001$ 14,688,987,8036.6%FY 2014$  19,167,806,6434.8%FY 2002$ 14,005,479,208-4.7%FY 2015$  20,434,743,0336.6%FY 2003$ 13,624,846,657-2.7%FY 2016$  22,237,392,5998.8%FY 2004$ 14,584,644,7417.0%FY 2017$  23,268,421,5124.6%FY 2005$ 15,813,996,6678.4%FY 2018$  24,319,869,2764.5%FY 2006$ 17,338,759,5889.6%FY 2019$  25,571,064,7025.1%FY 2007$ 18,840,441,6398.7%FY 2020$  25,478,916,446-0.4%FY 2008$ 18,727,812,623-0.6%FY 2021$  28,591,830,27212.2%FY 2009$ 16,766,661,804-10.5%FY 2022$  34,934,855,31322.2%FY 2010$ 15,215,790,786-9.2%   

Imposing Sanctions on Russian Energy Exports

March 3, 2022: By Oleg Ustenko, economic advisor to the president of Ukraine, and Simon Johnson, MIT. Contact: sjohnson@mit.edu. This post is taken from a one page memo, currently circulating.

Sanctions imposed in response to Russia’s invasion of Ukraine are not degrading Russian energy production capacity or putting enough pressure on Russian financial markets.

On the contrary, the price of Brent crude has risen from $80 at the end of 2021 to $90 pre-invasion and reached $113 per barrel today.

The discount on Urals crude relative to Brent has widened since the invasion, but the net price to Russian exporters has still increased by $5-10 per barrel.

IEA reports daily Russian oil export volume is steady at 5 million barrels per day, so oil revenues are up $50-100 million PER DAY since February 24th.

Russian gas exports to Europe have not been impacted: “the export value of Russian piped gas to the EU alone amounts to USD 400 million per day”.

Total Russian energy exports are generating $1.1 billion per day according to the IEA. This has increased, not decreased, since the invasion began.

The Russian current account surplus in January 2022 was $19 billion, about 50% higher than usual for that month.

The latest sanctions created a positive terms of trade shock for Russia, with a rise in the price of its exports relative to its imports. The only way to put real pressure on Russian public finances is to buy a lot less oil and gas from Russia. Even better: stop all purchases from and payments to Russia.

Recommendations

The US should impose full sanctions, including secondary sanctions, on all Russian oil and gas exports. As a major exporter of refined products made from Russian oil, Belarus also needs to be sanctioned fully.IEA estimates that oil production around the world can be boosted quickly. Additional world supply can add at least 3 million barrels a day if other producers are persuaded to support the US lead. To the extent Russia can sell on grey markets, this will be at a steep discount. World oil supply will remain about the same, but with significantly less revenue for the Russian government to use in destroying Ukraine and threatening the world.These measures will encourage the EU to significantly reduce its use of Russian gas, both immediately and through 2022. Energy conservation and development of alternative supplies should also be pursued as a top priority, as suggested by the IEA and Bruegel (two papers). Reducing gas purchases from Russia is essential for global security and any resumption of regional stability.

Quick Housekeeping Note

By James Kwak

I’ve been asked if you can sign up for email notifications when I write stories on Medium. Apparently you can, but the option is a bit buried. (One of the nice things about Medium is the clean interface. One downside of that clean interface is that sometimes you have to go looking for things.)

If you’re on my main page (jamesykwak.medium.com), you have to click on About at the top.

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Then you get to this page, and at the bottom there’s a link to an email subscription form.

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I hope that helps.

Moving On

By James Kwak

I’ve decided not to post on The Baseline Scenario anymore. I’ve thought about this on and off during the several years that the site has been mostly dormant, but I never pulled the trigger, mainly because this blog still has thousands of email subscribers and an unknown number of followers on Facebook. But I obviously haven’t been into blogging for a long time now, and it feels weird to continue using a platform whose peak was in 2010 and 2011 (when we were regularly listed, with reason, as one of the most important finance and economics blogs on the Internet). As you’ve probably noticed, Facebook, Twitter, and the consolidation of media platforms (the Times, the Atlantic, Slate, Vox, etc.) has killed off most independent blogging. In addition, while Simon and I rarely disagree on anything, we tend to care and write about different things, as evidenced by our latest books—his on investing in science and technology to create better jobs, mine on partisan politics and expanding the welfare state. Both of us also write about issues that have strayed far from the original focus that drew in our core readers—primarily, the financial crisis and financial regulation. For example, the book I’m working on now is about injustice in the criminal legal system.

I owe this blog a lot. Without the blog, there would have been no “Quiet Coup” and hence no 13 Bankers, which got me fifteen minutes of fame, an academic job, and a new career that has lasted a decade so far. There would not have been the day that Larry Summers sent an email to the National Economic Council staff saying that The Baseline Scenario was required reading. I would not have met some good friends, some of whom have gone on to be far more influential than I ever was.

The blog itself will stay up indefinitely, taking up space on the Internet. Simon may choose to post here in the future, so don’t cancel your email subscription if you have one.

I will continue to write, occasionally at least. The primary place I will post things is Medium; you can find me at https://jamesykwak.medium.com/. For a while I’ve been posting articles in both locations, there and here. I just posted an article about this year’s presidential election that you can read on Medium. I’d be flattered if you decided to follow me there. I also have a Twitter account, of course; I spend little time on Twitter (because it’s awful), but links to things that I write get posted there. I have no plans to use Facebook (because it’s also awful).

Good bye, and thank you for reading.

Leverage

By James Kwak

One of Congress’s top priorities this week and next is to pass some kind of funding bill that will keep the federal government operating past December 11. There are basically two ways this could happen. Option A is that Congress could pass a continuing resolution that maintains funding at current levels until, say, the end of January—that is, when we’ll have a new Congress and a new administration. Option B is to pass an omnibus fiscal year 2021 spending bill that determines discretionary spending levels through September of next year when the federal government’s fiscal year ends.

[image error] Photo by 1778011 from Pixabay

The Democratic leadership apparently is pushing for Option B because—well, probably because they think it’s the responsible thing to do and will make them look good with that tiny but all-important segment of voters who know the difference between a continuing resolution and a proper appropriations bill. But, in doing so, they could be throwing away one of the few levers that Democrats will have to actually accomplish anything during the next congressional term.

The point is that government funding measures are must-pass bills. No one likes a government shutdown, and historically Democrats have been able to pin most of the blame for them on Republicans, dating back to 1995, when Bill Clinton successfully portrayed Newt Gingrich as a zealot who was out to slash Medicare (which he was). If Jon Ossoff and Raphael Warnock come through in Georgia on January 5, Democrats will have majorities in both houses of Congress for the first time since 2010—but such razor-thin minorities that Joe Manchin is already rubbing his hands with glee at the prospect of becoming the most important person on Capitol Hill.

In this context, an omnibus budget reconciliation bill could represent one of the Biden administration’s few real chances to pass anything through Congress. Bills passed through reconciliation are not subject to the Senate filibuster (which isn’t going away, regardless of what you think about it), which means they only need a bare majority. The need to avert a government shutdown creates the pressure to bring people (the so-called moderates) to the table to come to a deal. Now, Joe Manchin isn’t suddenly going to become a sponsor of the Green New Deal because the Democrats have a majority in the Senate—he’s going to extract everything he can in exchange for his vote. But there is still a lot that Democrats could accomplish in an omnibus spending bill: money for the DOJ Civil Rights Division, money for the EPA, money for election protection, money for low-income housing, and so on. This is an opportunity to dictate discretionary spending priorities a full eight months earlier than we would otherwise be able to do. And would you rather negotiate with Manchin or with Mitch McConnell?

And yet the Democratic leadership in Congress seems inclined to give up the potential chance to write their own appropriations bill in January in exchange for a bill that they have to negotiate with McConnell and . . . Donald J. Trump. (The vague new COVID-19 stimulus bill that people are talking about is currently being positioned as a separate piece of legislation—which makes sense because it’s toxic to most Republicans.) It’s almost as if they don’t want the opportunity to govern. Sure, Ossoff and Warnock could lose in January, but we would still be in a stronger position than we are now, with Biden in the White House.

During the next two years, we are going to have precious few chances to pass any kind of meaningful legislation. Why are we throwing one of them away?

The COVID-19 Economy: What Can We Do?

By James Kwak

Today, the Washington Post’s Outlook section published my article on the future of the American economy in the wake of the pandemic. They invited me to write it because of my earlier blog post on “Winners and Losers.” (Hey, despite all appearances, maybe blogs are still worth writing.)

[image error]Photo by skeeze

The article is pretty gloomy. The short summary is that the COVID-19 pandemic will accelerate and reinforce the two primary economic trends of our time: consolidation and inequality. At this moment, I believe that more strongly than when I originally drafted the article two months ago. It seems to me that, as a society, we are caught between two unacceptable outcomes: either we reopen elementary schools (at least) so that parents can go to work, adding fuel to the epidemiological fire that is already burning throughout much of the country; or we keep schools closed and millions of predominantly low-income workers lose their jobs because they have to take care of their children. Choosing between your job and your children is not something that should happen in a supposedly rich society, yet there we are.

A few friends have asked me what I think the solution is. Here are the last three paragraphs of my first draft, which ended up on the cutting room floor:

“Things don’t have to turn out this way. Perhaps the experience of this pandemic—a disjointed health care system, poor people forced by poverty to fight on the front lines of a war, an unemployment rate that could reach 25 percent—could inspire a new New Deal, or a rethinking of the kind of society we want to live in.

“The prospects for a resurgence of social solidarity seem dim, however. Remember, the political legacy of the financial crisis—an example of the dangers of greed and deregulation if there ever was one—was the Tea Party and, arguably, President Donald Trump. It is more likely that the deficits that the federal government has incurred to mitigate the economic damage so far will be used to justify austerity in the not-too-distant future. Robert Rubin—President Clinton’s treasury secretary, and to all appearances still the holder of a veto over Democratic economic policy—already could not resist using pandemic spending to call for action to reduce the national debt in the long term. Republicans will be far less nuanced. Deficits will be the trump card played—by moderate Democrats if necessary—to block universal pre-K, free college, expanded Social Security benefits, or Medicare for All.

“This is the future we are headed for. But there are no immutable laws of economics. We could choose to break up large companies, enable workers to unionize, mandate paid sick leave, and tax rich people to provide capital to young entrepreneurs. If we fail to make a choice, however, COVID-19 will cast a long shadow over our economic future.”

(You see, even when proposing solutions, I can still be gloomy.)

I think the policy solutions are obvious. We need to commit to an all-out-effort to contain the coronavirus—which can be done, as most developed countries, as well as New England, have proven. In the meantime, we have to provide unlimited emergency support, in the form of cash and health care, to people who cannot work, as well as bonuses to the essential workers who keep the rest of us alive. We pay for it by issuing bonds at negative real interest rates—10-year Treasuries are yielding 0.65%, which is about half the market-implied inflation rate—and we pay back those bonds later by raising taxes on rich people and corporations. We need stronger antitrust policies to break up large corporations. We need capital grants—paid for by inheritance taxes—such as those proposed by Thomas Piketty in his new book, to enable people to start small businesses to replace the ones that will be wiped out this year.

That is not a complete solution to all the problems we faced on January 1, 2020. But it will help hold the line against the changes being wrought by a virus.

The problem, of course, is the politics—not just President Trump and the Republicans, but a Democratic Party controlled by its conservative wing, defined primarily by its insistence on fiscal responsibility, and terrified of doing anything that anyone might call socialist. Perhaps this crisis will push Joe Biden to embrace the progressive agenda of Bernie Sanders and Elizabeth Warren. Perhaps not. That, of course, is the subject of another book.

COVID-19: Winners and Losers

By James Kwak

I think it’s highly likely that the dust will clear eventually and that our economy will come back to life at some point in the next two or three years. I know there are certain disaster scenarios that can’t be ruled out, but I think they are unlikely. I’m not going to guess when things will return to a semblance of normal. Really, no one knows.

[image error]Photo by Free-Photos from Pixabay

The question for now is: what will that economy look like?

A few things, I think, are clear. The economy will not grow back up to its trend line prior to the pandemic. This, for example, from the Center on Budget and Policy Priorities, is what happened after the financial crisis and Great Recession:

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Not only did actual GDP fall, but the trend line of potential GDP fell as well, costing the economy trillions of dollars of output. Behind that loss of potential GDP is an enormous human cost. Recessions cause permanent damage to people who lose their jobs and to recent graduates who can’t find jobs.

There will also be a certain amount of psychological scarring that will affect the economy for at least a generation. People buying safety stocks of dried beans and toilet paper may give the consumer goods sector a one-time boost. But those with enough income will save more, depressing demand, and people will also be much more reluctant to start small businesses.

Amazon will be a big winner, of course. A large proportion of the population, particularly among the affluent, already reflexively shopped for everything at Amazon. (I used to, but now I try to find things elsewhere first, basically for political reasons.) The pandemic is pushing more people to try to fulfill all of their consumer needs online, and they aren’t going to stop when the coast clears.

More generally, big chains will expand their domination over the economy. Tens of thousands of small businesses will vanish, never to return, wiped out by weeks or months of zero revenues. Large corporations will have the capital to swoop in and steal their customer base. Family-owned restaurants will be replaced by national chains. Sporting goods stores will be replaced by Dicks. Electronics shops, if there are any left, will be replaced by Best Buy. Bookstores … well, there aren’t many of those left, anyway.

The other winners will be private equity funds with the nerve to buy assets on the cheap. After the financial crisis, investment funds bought up single-family homes in foreclosure, becoming some of the nation’s largest landlords. This time, the bargains will be found in small businesses desperate for capital and commercial real estate hammered by defaulting tenants.

The business sector will become more concentrated. Inequality will increase. The fundamental trends that have reshaped the American economy over my lifetime will accelerate. The survival of capitalism depends on a large enough proportion of the population having a stake in its survival. For how much longer?

COVID-19: Inequality

By James Kwak

By some measures, in the short term, COVID-19 will surely reduce inequality of wealth, and probably inequality of income as well. As a purely mechanical matter, the rich have a lot more money to lose when the stock market crashes and most sectors of the economy grind to a halt.

[image error]Photo by Free-Photos from Pixabay

At the same time, however, this pandemic is throwing into stark relief how unequal the lives of Americans are today. Most of the upper-middle class and rich seem to fall into one of two categories. Those without children in the house trade suggestions on how to fill their time: virtual happy hours, virtual yoga, free streaming opera, binge TV-watching, etc. Those with children in the house trade suggestions on how to keep said children occupied so that we can get anything done or have any time to ourselves: educational apps and websites, home science experiments, live streaming from zoos and aquariums, etc.

There are exceptions, of course. Doctors generally make comfortable livings, and many of them are currently facing difficult working conditions and high risk of infection to save as many lives as possible. But the most difficult thing many rich people have to endure is figuring out how to get a Peapod or Instacart delivery slot, or finding a good recipe for canned tuna.

On the other side of the great income divide, things are very different. Tens of millions of people suddenly lost their jobs and barely have enough cash to buy groceries, let alone stock up on gourmet canned tuna. Remember, 17 percent of adults already couldn’t pay at least one of their bills even before COVID-19 hit. Economic insecurity is so widespread that a large portion of the population is just one shock away from being unable to make ends meet. Well, that shock just hit.

Then there are the people who still have jobs, whom all of us are relying on: people who work in warehouses, distribution centers, delivery services, grocery stores, pharmacies, and hospitals. Many of them go to work, keep our society functioning, and face an elevated risk of infection because they can’t afford to lose their jobs. Amazon warehouses, of course, are so efficient that there isn’t time to wash your hands. And Amazon workers don’t get paid sick leave—unless they test positive for COVID-19 (then they get two weeks), which is virtually impossible given the lack of testing in this country. But Jeff Bezos doesn’t even need to call out the National Guard to force his employees to go to work. As one warehouse employee said, “A lot of people are going to be there for longer. People will take as much OT as they can get, because we’re all poor.”

The vague parallels between COVID-19 and September 11 have been drawn a million times already. Then the heroes were first responders who risked their lives to save people. They were also underpaid, but at least many of them knowingly took jobs that involved risk. The people on the front lines today are doctors and nurses, of course, but also millions of low-wage workers (including many in hospitals) who have been drafted into this war and are kept there by poverty and economic insecurity.

Is this the society we want?