A stalling economy amid expiring assistance to increasingly vulnerable people is an awful recipe for totally avoidable economic suffering, including rising hunger and evictions. But it’s also the predictable outcome of a much bigger problem: The virus has exposed how ill-suited the Republican model is to the demands and needs of today’s economy and, therefore, of most of the people in that economy, at least outside of the top few percent.
At the heart of the current relief debate is a microcosm of the larger pathology. The issue is what to do about the $600 per week unemployment insurance plus-up that expires on Friday. This generous benefit was in the Cares Act from March. As part of the Heroes Act which passed in the House in mid-May, Democrats extended the enhanced benefits through January of next year. Senate leadership under McConnell has come up with a last-minute, probably un-implementable plan to cut the $600 down to $200 for two months and then have state unemployment offices hit 70 percent wage replacement rates for all recipients (most states’ unemployment systems lack the necessary information to hit that target).
That’s bad economics, both micro and macro. In the macroeconomics sense, it’s taking about $10 billion per week out of a weakening economy. Economist Mark Zandi estimates that, relative to sticking with the $600 increase, this will raise unemployment by a bit more than half a point and cost a million jobs. For jobless households trying to get by, my colleagues at the Center of Budget and Policy Priorities recently documented how the weakening economy is contributing to growing hardships among vulnerable families, disproportionately families of color — the same groups who have been most susceptible to covid-19 infections and death:
“About 26 million adults — 10.8 percent of all adults in the country — reported that their household sometimes or often didn’t have enough to eat in the last seven days … The rates were more than twice as high for Black and Latino respondents (20 and 19 percent, respectively) as for white respondents (7 percent) … An estimated 13.1 million adults who live in rental housing — 1 in 5 adult renters — were behind on rent for the week ending July 7. Here, too, the rates were much higher for Black (30 percent) and Latino (23 percent) renters than white (13 percent) renters.”
Republicans, however, want these folks to be motived by the benefit cuts to get out there and find jobs. But that’s where the 11.1 percent unemployment rate, along with the fact that employment is significantly slowed in July compared to May and June, come in. Job seekers thrust into the labor market are contestants in an unforgiving game of musical chairs, with far more players than seats right now. And those in the bottom half of the income scale have virtually no savings to fall back on.
The reason this is such a challenge for contemporary Republicans is that there’s no place in their governing model for dealing with any sort of market failures, or for that matter, shocks of any kind. But contemporary American governance requires coherent plans with amply funded systems in place for dealing with pandemics, recessions, massive storms (those 100-year floods that now happen yearly), bursting credit bubbles, stubborn inequalities, systemic racial injustice and violence and simply the maintenance of democracy (e.g., functional, inclusive voting).
Much like today’s Republicans are proposing an economic plan that ignores the reality of high unemployment and retrenching commerce, in every one of these cases, their party has long been in denial. The pandemic will take care of itself, global warming is a hoax, Wall Street self-regulates, inequality is meritorious, there are good people on both sides of racial attacks. Forget the recession, everybody just “find something new” and get back to work.
Instead, their agenda has largely focused on cutting taxes for their donor base and deregulating the finance and extractive industries. In some cases, they’ve argued these policies will fix the actual problems we face. For example, and despite evidence to the contrary, they argued corporate tax cuts would reduce inequality by giving a huge boost to workers’ paychecks.
Of course, that didn’t happen. Instead, their wasteful, $2 trillion (over 10 years) tax cut meant we entered this recession with a public debt-to-GDP ratio more than twice that of every other recession in the last 50 years. Now, those same Republicans who put the tax cut on the deficit are saying we’re too broke to add nutritional support to the next relief plan, unless it’s a 100 percent write-off for business lunches (I wish I were kidding about that, but I’m not).
The pandemic has exposed this pervasive failure to govern, of which the likely expiration of increased unemployment benefits is but the most recent piece of evidence. Don’t get me wrong: I’m not arguing that there’s a silver lining to the crisis. Much of what we’re seeing would have been eventually been exposed without the pandemic, too. But it wouldn’t have been so clearly exposed and — more to the point, it might not have occurred at such a politically strategic moment in the life of our nation.