Michael Dwyer/AP Photo
Unsanitized-051820
An unemployment office in Massachusetts. Accessing benefits has been a struggle for millions of laid-off workers.
First Response
It’s been about a month since the IRS started sending out $1,200 CARES Act payments, at which point the Treasury Department knew for two weeks that banks could steal the money and use it to offset existing debt. No rules have been written to prevent that money from banks or private debt collectors. The Federal Trade Commission is working to stop nursing homes from forcing residents on Medicaid to illegally sign over their CARES Act payments. This just operates as a reality that poor people have to navigate and hope for the best.
But many Americans are being sustained by the other big CARES Act benefit for the vulnerable: the enhanced unemployment, which was expanded to cover traditionally ineligible laid-off and even part-time workers and supplemented with an extra $600 a week. There’s been a lot of grumbling about this from conservatives that it rewards not working (which in fact is what we want during a deadly pandemic when we’re trying to keep people at home). But it’s the main reason why rents are getting paid, why people aren’t starving, why life hasn’t completely fallen into disrepair.
But that’s the aggregate. Inside that are many exceptions, struggles, and hardships. The biggest is navigating underfunded state unemployment insurance systems that are working through a historic backlog. A recent analysis from One Fair Wage finds that 44 percent of unemployment applicants still have not been paid. The $600 boost ends at the end of July, so those waiting for claims processing have missed out on a big chunk of it, and are struggling to survive. The big lines for food banks come from this population.
One big problem is ramping up Pandemic Unemployment Assistance (PUA), the alternative system that allows gig workers and tipped workers and others to access unemployment. Because it’s a new system that states have had to phase in from scratch, it has created inevitable problems. Nineteen states haven’t launched their PUA systems or didn’t until last week, leaving people running on fumes for nearly two months. Other systems malfunctioned; the Illinois PUA setup accidentally exposed personal information.
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Even if up and running, it can be difficult for workers to demonstrate their income so that can be translated into their unemployment share. Automated systems typically reject workers with not enough hours, and PUA had to be designed to go around that restriction. In Iowa, an automated letter generator has been sending denials to PUA-eligible unemployed workers for weeks, without a follow-up communication, and hoping workers just know to ignore it. The state workforce agency has blamed that on its antiquated system. “The whole idea of ‘I would love to help you but the computer doesn’t allow me to do it’ is unacceptable,” said Alex Kornya, litigation director with Iowa Legal Aid.
An even more unacceptable issue is garnishment of unemployment. Unlike the $1,200 payments, unemployment is supposed to be completely protected from creditors. But the protections are not automatic; people have to be aware of it and how to assert it in court. “Because of reduced court function, you have to set a hearing,” Kornya said. And the resulting legal fight can tie up the money for months, at a time when it’s desperately needed. Iowa, for example, freezes funds for 120 days in a dispute. Kornya said he’s heard of cases where the individual agrees to whatever the creditor wants just to unlock a portion of the payment, to which the creditor is 100 percent not entitled.
Some states have issued garnishment moratoria (Washington, Illinois). In Iowa, the governor appeared to have halted garnishments on April 24, but later reinterpreted her own proclamation under pressure from financial interests, saying it was not meant to cover “continuing” garnishments. “We thought we had solved the problem, but now we haven’t,” said Kornya. And regardless, the moratorium ends May 27, just a week or so away.
So the poor have it coming at them from all sides. Creditors and predators are after the one-time payments. They endure numerous indignities to get boosted unemployment and only a little over half of them have been successful so far. And then they have to beat back creditors trying to illegally grab that money. Meanwhile bills keep coming due while they fight to bring in money.
This should be unacceptable to any minimally compassionate person.
Odds and Sods
In case you missed it, I was on the Majority Report with Sam Seder on Friday, mostly about the Heroes Act and the Biden campaign. Listen here.
At the Prospect today we have Alex Sammon on the post-pandemic House seat loss for the Democrats in California. And Jeffrey Sachs has a masterful review of two books on John Maynard Keynes, who we should definitely look to for guidance during this economic crisis.
As usual all of our coronavirus coverage is at prospect.org/coronavirus. And email me with tips, comments, and experiences.
Questions About the Bailout
The Congressional Oversight Commission, assembled to monitor the Federal Reserve-led corporate bailout, doesn’t have a chair yet but it managed to release its first congressionally-mandated report today. It’s refreshing really to see any attention on the actual part of the CARES Act that’s going to reshape American economic life, instead of who’s getting TEN MILLION DOLLARS in PPP loans that might be unworthy.
The report does a decent job of summarizing the economic crisis, what the Fed is empowered to do, and how they’ve carried out this mandate so far, asking questions about those results. The Fed just started spending some of its $4.5 trillion war chest last week, so there isn’t a lot of data yet. Yet the announcements have already moved markets, as the report explains.
I’m going to have a long piece soon on what they’ve done which I won’t spoil, but pay attention to all the changes the Fed has made on its as-yet dormant credit facilities, after by its own acknowledgement taking input from “lenders, borrowers, and other stakeholders.” That describes a lobbying effort, and the Fed has responded accordingly, most famously in giving more flexibility in its Main Street Lending Program that was obviously targeted to assists the oil and gas sector.
There are other little tweaks too, like eliminating the attestation that borrowers had “exigent circumstances” due to the crisis that triggered the need for a Fed loan, or the change in businesses eligible from a limit of 10,000 employees to 15,000. Each one of these tweaks, we can safely say, emanated from a request somewhere in the business community. The Fed is responsive, as long as you want cheap money from them.
To summarize the questions in the report: Who is this bailout for? What will the Fed do to ensure equitable delivery to more than just large corporations? Why have all these changes to the various programs been made? Will more people be employed because of this? And when are all these trillions going to flow, and what will we learn about that lending?
Today I Learned
- China is worried about a second wave, while we brace for the resumption of the first one. (CNN)
- Defense workers are considered “essential,” because we have to keep those weapons shipments going to foreign countries. (The Intercept)
- Auto plants are reopening but suppliers that subsist on thin margins need a $20 billion bailout. (CNBC)
- Who exactly will show up to the Democratic National Convention? Full disclosure; the Prospect had credentials and lodging in place, and we pulled out. (New York Times)
- Policymakers drafting ideas to untangle overseas supply chains, especially from China. One option: paying companies to reshore. (Reuters)
- The crisis is at its peak in Brazil, with hospitals in São Paulo on the brink of collapse. (BBC)
- For comic relief, here’s an AI-generated Biggie Smalls rapping Gilbert & Sullivan. (Boing Boing)
