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Trump and McConnell want to slash enhanced unemployment, a major source of money in the economy right now.
First Response
First-time jobless claims fell to 2.4 million last week, off two-thirds from the pandemic peak (the previous two weeks were revised down by almost 400,000, too). The bad news is that’s still more than three times as much as any week during the Great Recession. It’s impossible to know how much of this is a backlog of people finally getting their claim through and how much is fresh job loss, but we’re now up to about 38.6 million people losing the jobs they had before the crisis, and that can have a snowball effect on consumer demand.
The reason it hasn’t is because it’s been effectively government policy to push people onto unemployment and then to supply them with an enhanced weekly check. At the low end workers are taking in more than their old salary, depending on the state. And despite major dysfunction with the unemployment insurance system (as Kalena Thomhave detailed for our print edition), the money is finally starting to flow.
Through May 19, the unemployment system has delivered over $60 billion, more than double the rate through this point in April. That translates into 25 million payments per week on average (though many could be retroactive to the date of claim). And Pandemic Unemployment Assistance—the new program for the self-employed, gig workers, and students—has doubled in size between April 25 and May 2, as states finally come online with it. “These increased payouts are testament to the tenacity of jobless workers and the dedication of state employees seeking to deliver help through an overburdened and outdated system,” the Century Foundation’s Andrew Stettner said in a statement.
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There’s still plenty of suffering out there. Households with half of all Americans have lost income since March, the Census Bureau found. Millions failed to make their credit card and car payments. Mortgage delinquencies saw their biggest one-month jump ever and now 1 in 16 mortgages are delinquent. Food insecurity projections are unspeakably high.
But much of the immediate, and not potential, pain is coming at the above-poverty level, where people who once could afford a mortgage or a car payment now cannot. Money from the increased unemployment payout is keeping the working poor, and the economy, barely afloat (note the increase in one-time durable goods like bikes and TVs). But that’s coming to an end, if you believe the Republican leadership.
Over the past 48 hours, Mitch McConnell and Donald Trump have publicly and privately, respectively, opposed extending enhanced unemployment past the July 31 deadline. That would immediately cut a significant chunk of income from tens of millions of people within two months. And then you’d get a spiraling effect, as people would cut back on basic necessities in addition to everything else. That’s a recipe for a depression, without any replacement.
The argument is two-fold. One, these lucky duckies shouldn’t get too much free spending cash without working; of course, the point was to discourage work so people wouldn’t die at the peak of a crisis. Also, one good way to stop disincentives to work is to pay people more; labor share of income was unconscionably low before the pandemic.
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The second argument is that we’re reopening the country, and unemployment is now superfluous. Tell that to the public, who are fearful of leaving home. The reason Georgia and other “reopened” states are not seeing a resurgence in cases (to the extent they’re not messing with the numbers, about which more later) is that the public isn’t joining in the optimism of the policymakers; trips are up from the peak but still well below pre-pandemic rates.
I know Steve Mnuchin wants to cut people off from benefits if they’re called back to work, but no demand means no rehiring. No rehiring means that the enhanced unemployment deadline rolling off would immediately slash money in the economy. All the refundable tax credits for skills training in the world cannot fix that.
Outside of the McConnell/Trump bluster, some ideas are kicking around among Republicans to reduce the enhancement from $600 a week to maybe $400, or provide an up-front lump-sum payment. There’s also an argument that government payroll support, which has Republican buy-in from Sens. Cory Gardner (R-CO) and Josh Hawley (R-MO), would be a superior option. (With so many workplaces out of business or on the road there, that opportunity could be lost at this point.)
Since Trump and the Republicans are eager to project that recovery is just around the corner and squirm out of providing help to anyone not in a business suit, I suspect we will take this all the way to that July 31 deadline before knowing how tens of millions of jobless will fare. It’s shockingly irresponsible but also how Congress operates.
Odds and Sods
Our feature today at the Prospect is from Alexander Sammon, and it’s about the Small Business Administration. We put this backwater agency with a history of bad IT and slow service in charge of saving millions of small businesses, and we should not really be that surprised by the results. The thing is, as Alex shows, the SBA at its founding was envisioned as a key anti-monopoly tool to ensure smaller firms could get financing and technical assistance. The story of its decline into corruption provides a window into how it’s working today. Great story, check it out.
All of our coronavirus coverage can be found at prospect.org/coronavirus. And email me with tips, comments, and experiences.
Juking the Stats
The numbers we actually have for the U.S. show a slowing in deaths, an increase in tests and a leveling off of new cases (relative to tests, an out and out reduction). We know that the numbers we have, however, are wrong. We’ve been undercounting deaths throughout the pandemic, and cases are only known to the extent that testing can cover the population. While testing has finally broken through to routine levels near 400,000 a day, there are a few problems even with that.
First, the CDC has said that data from the states is routinely delayed and incomplete, distorting the picture even more. More important, even the CDC data on testing is wrong. The agency has conflated antibody and viral testing into one number, which artificially depresses the percentage of new cases relative to tests (an antibody test isn’t checking for new positives but whether someone already had COVID-19). As testing numbers are attached to softening lockdowns, it means that policy is being driven by bad data.
This is made worse by the fact that some of the states that have been the most aggressive about reopening, like Texas and Georgia, are among those blending their testing data. Georgia has been a mess on data disclosure: the state manipulated a graph to fake a decline and has juggled different ways of counting deaths. Florida fired a researcher, allegedly for refusing orders to change the count. Some data, like hospitalizations, is easier to quantify (though that could be hampered by lack of affordability causing people to die at home). But we’re all just the proverbial blind man feeling and elephant in terms of trying to understand the precise nature of the outbreak. That’s only going to keep people from coming out of their homes; it’s in the interest of states wanting to boost the economy to maintain accurate and comprehensive data.
The worst part of all of this is that yesterday saw the most positive coronavirus tests of any single day since this began. Cases are falling across the industrialized world but now peaking in the developing world, which has far fewer resources to handle it. This is the nightmare scenario; wealthy countries pat themselves on the back for handling the pandemic while the rest of the world burns, without any help.
Today I Learned
- An enormous mistake by student loan servicer Great Lakes put a default on 5 million borrower accounts, when they took government-approved deferrals. (Politico)
- A Columbia University study finds 36,000 unnecessary deaths in the U.S. from not locking down sooner. (New York Times)
- The emissions decline from lockdowns gets us around where we have to be to stave off the climate crisis. We’re not going to lock down forever, so this is a problem. (Washington Post)
- Seems like nobody really wants the Apple/Google contact tracing apps. (Vox)
- Canada’s emergency loans come with actual conditions that protect workers. (Reuters)
- The sad reality of “getting back to normal” in America means the return of mass shootings. (CNN)
- Oh, and infrastructure failures. (MLive)
- One of the world’s fanciest restaurants, Noma in Copenhagen, is now a burger joint. (Bloomberg)
