Who will pay for all of these bailout bills? Journalists should press political candidates to find out.

Plus, what makes a federal deficit dangerous, a lease clause that hurts already threatened malls, the impact artists have on the economy, and more

April 28, 2020

Covering COVID-19 is a daily Poynter briefing about journalism and coronavirus, written by senior faculty Al Tompkins. Sign up here to have it delivered to your inbox every weekday morning.

Look, it is an election year. It is time to start pressing for some on-the-record answers from people who want to run our governments in a very difficult time.

I am not saying they were a bad idea, but Congress quickly passed and President Donald Trump signed $3.5 trillion in stimulus bills, including the latest one Friday. The spending will add an estimated $2.4 trillion to the national budget deficit. In 2020, you will have the seemingly strange reality of candidates running as deficit hawks while arguing that a big deficit is the way out of the economic crisis.

Here is the mind-numbing math, which is based on current spending, from the Committee for a Responsible Federal Budget, which tracks federal budgets and spending. You can add any new spending bills to these figures, and there almost certainly will be more.

Last year, the budget deficit totaled $984 billion. Under current law, we project the deficit will be nearly four times as large this year, exceeding $3.8 trillion. Our projections show the deficit will total $2.1 trillion in 2021 and roughly $1.3 trillion per year after that, through 2025. As a share of the economy, we project the deficit will total 18.7% of GDP in 2020, 9.7% in 2021, and roughly 5.6% per year thereafter.

The stimulus packages might not be such a big deal if they did not come on top of that existing almost trillion-dollar debt that we accrued when the economy was robust.

All of this may manifest itself eventually in higher interest rates, tough spending decisions or changes in tax policy. Almost certainly the federal government will borrow it by issuing U.S. Treasury bonds. In uncertain financial times, investors generally consider bonds to be a safe harbor.

The Nation said that you don’t hear “deficit hawks” clamoring about the increase in the deficit as you did in the 2008 recession. In short, here is why: In the 1980s, Treasury bonds had to compete with private investment instruments that paid a much higher interest rate (around 10%). Now, five-year bonds pay less than one-half of a percent, so the cost of the government borrowing even enormous amounts is comparatively low.

In other words, this is not your father’s deficit.

When is a deficit dangerous?

The U.S. government has run a deficit many times in our history. Generally, it is a way to keep things going when times are tough. It is not unlike you borrowing money when you want to buy a house or a car. Borrowing is not always a terrible idea, unless you do not have the income to pay the loan back. Federal spending works the same way.

Economists measure an economy’s financial health using gross domestic product, or GDP. That is the value of a country’s goods and services.

Stay with me, because by the end of 2020, we could cross into some dangerous budgetary territory.

Here is a chart that gives you the context of various events, from world wars to recessions and recoveries, that sent the deficit-to-GDP ratios soaring and declining. When the deficit-to-GDP ratio rises, the people who buy U.S. Treasury bonds start demanding higher interest rates to offset the risk that the government might default on the loans. It works roughly the same way as when you borrow for a car. If you have great credit, you get a lower interest rate. Bad credit produces higher interest rates.

U.S. News and World Report noted:

Many analysts also agree the U.S. is entering dangerous budgetary territory. The immensity of America’s debt is expected to eclipse the magnitude of its economy by the end of the year.

There aren’t immediate, commonly agreed upon consequences for debt totals eclipsing the size of a nation’s economy. But it’s generally accepted that the path the U.S. is on is an unsustainable one — and, in some sense, it was an avoidable one, despite the ongoing coronavirus pandemic.

The Committee for a Responsible Federal Budget assembled a page to track all of the stimulus and emergency spending. The committee usually takes a dim view of deficit spending, but this time compared the stimulus bills to World War II-era spending, both expensive and necessary.

Here is a website that puts these staggering numbers on charts to make the data readable. You will see the correlation between budget deficits and national debt. Deficits are when you spend more than you take in. Debts are the accumulation of all of that deficit spending. Deficits predict the size of the debt.

As you look at deficit figures, be careful to ask what is included in any number. For example, you will occasionally see a calculation that puts the deficit at $23 trillion. But that calculation includes about $6 trillion owed to the Social Security fund, just as an example. It is what the government promises to various federal agencies.

The federal government, unlike state and local governments, must only pay its bills over time, not by a certain end of budget year date. Before 1931, the U.S. government mostly ran at a surplus but occasionally didn’t.

Journalists, get candidates on the record. Then hang on to what they say to hold them accountable a year or two from now. When will we pay down the deficit, and how will that happen?

Closed stores threaten already endangered malls

The Buffalo News’ retail reporter, Samantha Christmann, reported that our collective shift to online shopping during this pandemic comes at a price. Shopping malls in her community are in dire straits.

Even retail mainstays have been hit hard. Earlier this month, Buffalo Niagara’s biggest and healthiest traditional enclosed mall, the Walden Galleria, had its $247.5 million commercial mortgage sent to special servicing with an expectation of “imminent monetary default,” according to Trepp, a real estate research firm.

CNBC reported:

Mall and shopping center owners are likely going to be hearing from tenants that are pulling out of leases with co-tenancy clauses, as department stores and other anchor tenants shut for good. …

UBS is expecting there will be 100,000 stores permanently shut between now and the end of 2025.

Meantime, online sales as a percentage of total retail sales in the U.S. are expected to grow to 25% from 15% over that same timeframe, UBS analyst Michael Lasser said.

With another wave of department store closures inevitably looming, and some chains potentially filing for bankruptcy, landlords’ phones will likely be ringing — with retailers on the other line demanding rent reductions or outright saying, “I’m leaving your mall.”

The Gap Inc., one of the more ubiquitous mall brands, said some of its stores will not reopen after COVID-19. Gap reported in a Securities and Exchange Commission filing late last week that it stopped paying $155 million a month in rent on North American stores.

RetailDrive, an insider’s business website, reported:

Consumers may be reluctant to return to previous shopping habits, according to a Morning Consult study, which surveyed 2,200 U.S. adults between April 7 and April 9 and found that 24% of consumers said they wouldn’t feel comfortable shopping in a mall for more than six months, 16% said they would feel comfortable in the next three months and only 4% said they would in the next month.

The International Council of Shopping Centers CEO Tom McGee said the shopping center industry brings in some $400 billion in state and local taxes.

Co-tenancy clauses: How stores might get out of their mall leases

Big-name stores (think Gap, American Eagle or Victoria’s Secret) located in shopping centers or malls often have a clause in their lease called a “co-tenancy clause,” which says if other stores nearby pull out, they can too, or at least get a big break in rent. CNBC explained:

The clauses will say something along the lines of: If less than 80% of space is occupied at this property at any given time, or if a major, anchor tenant like a department store or a grocery store goes dark here, the tenant is allowed a break in rent. Or the tenant is given the ability to terminate a lease early. The clauses are meant to protect tenants when circumstances happen that are outside of their control.

Tom Mullaney, head of restructuring services at commercial real estate services firm JLL, said all of his retail clients are watching their co-tenancy clauses “like hawks.”

“As majors close and do not reopen, my clients are pulling out their leases,” Mullaney said. “The whole purpose of a mall is to generate large amounts of foot traffic.” If you lose an anchor or two, the purpose is lost, he said, and retailers will have an opportunity to speak up.

The well-known brands are the ones most likely to have a co-tenancy clause because malls figure those brands will increase overall foot traffic. Once an anchor store pulls out of a mall, there is a ripple effect of attempted renegotiations, which is why mall owners hotly negotiate the clause at the time of the lease.

Two-thirds of artists said they are out of work since COVID-19

The survey is still ongoing, but an advocacy group called Americans for the Arts said their study of 10,000 artists of various sorts — from performers to wedding photographers to designers — said they have lost money since the pandemic began.

The National Endowment for the Arts said that arts in all of its forms mean $760 billion to the national economy. Considering that statistic, arts supporters argue that the federal stimulus plan should have allocated a lot more than the $250 million that Congress approved in March, NPR reported.

Girl Scout cookie sales crumbled

Girl Scouts were in the midst of their annual cookie sales when the pandemic moved into America. Girl Scouts in Alaska applied for a small business loan to cover 144,000 boxes of Samoas, Tagalongs and Thin Mints.

The Indianapolis Star reported:

Deana Potterf, Girl Scouts of Central Indiana chief communications officer, estimates 30,000 to 50,000 boxes of cookies have been left unsold across 45 central Indiana counties. At $5 each, that amounts to $150,000 to $250,000 worth of cookies.

Girl Scouts of Central Indiana will cover the costs of the cookies and send the remaining boxes to local food pantries, health care workers and first responders, Potterf said. But Schwab knows that this can’t happen without some cuts.

The Girl Scouts said that unless the organization can find a way to offset the costs of those cookies, it will have to cancel some programs and cut scholarships.

In Oklahoma, the state’s first lady, Sarah Stitt, backed a project called Cookies for Courage that enabled people to buy cases of cookies to send to first responders and health care workers.

You can still buy or donate Girl Scout cookies online. Local Girl Scout councils have different sales dates, so lots of them are still selling the cookies.

What Google searches tell us about what the public wants to know about COVID-19

I use Google Trends pretty routinely to find out what people want to know. Fairly often, those search results guide me toward topics that are worth reporting. After all, journalists are in the business of finding answers to people’s questions.

For example, this is what people searched for Monday.

(Screenshot, Google Trends, April 27, 2020)

But the most asked questions on Google from users in the U.S. are still the most basic questions.

(Screenshot, Google Trends, April 27, 2020)

Google Trends, Schema and Axios looked at 51,000 of the most searched queries about the coronavirus from the U.S. that started with the words “what is,” “what are” and “how to” from Jan. 20 through April 24.

(Screenshot, SearchingCovid19.com)

The results are such a reminder that journalists have to answer basic questions that you probably feel that you have answered a hundred times already. In January, people were asking “what is coronavirus?” In mid-February, people started searching Google for “how to prepare” for the virus. On April 3, the day that the Centers for Disease Control and Prevention recommended we all wear face masks, people in the U.S. poured onto Google to find out how to make a mask.

Notice how in the last week, searches having to do with “the government’s response” sharply increased.

(Screenshot, SearchingCovid19.com)

The word “homemade” is hot right now in Google searches. People want to know how to make all kinds of things. The top queries in the U.S. on Monday:

(Screenshot, Google Trends, April 27, 2020)

Maybe we can see how people are feeling in all of this data. Look at these big trend movers across America. People want to know how to cut their hair. They want companionship, whether it is from a puppy or getting married.

(Screenshot, Google Trends, April 27, 2020)

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Al Tompkins is senior faculty at Poynter. He can be reached at atompkins@poynter.org or on Twitter, @atompkins.