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The Finance 202: Business comes around on unemployment insurance as pandemic endures

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with Brent D. Griffiths

There's a surprising new consensus as lawmakers scramble to reach a deal on an emergency economic relief plan: A proposal to offer $300 per week in enhanced federal unemployment benefits is drawing broad bipartisan support. And it's backed by business groups and left-leaning economists alike. 

“You don’t want people to think they have to rush back to work because unemployment insurance is not able to provide enough income,” Glenn Spencer, the executive vice president of employment policy at the U.S. Chamber of Commerce, tells me. “Some of the jobs that people would be able to get back to in a normal recession aren’t going to be there. So it’s going to take workers longer to adjust to the economy that we’ve got.”

The big-business group is actively lobbying lawmakers to support extending the weekly benefit to those out of work. 

Lobbyists for other major business groups say they also support renewing the federal lifeline.  The $748 billion proposal from a bipartisan group of lawmakers, centered on items with broad support, would include 16 weeks of benefits at that level. It also provides 16 weeks of base unemployment benefits and coverage for gig workers and independent contractors, my colleagues report

The support from big business marks a striking change in tone. 

Over the summer, some major employers criticized the extra $600 weekly payout extended by the Cares Act. They argued the benefit provided a disincentive for the unemployed to return to work, as many collecting it were earning more than they had on the job.

“I felt like some of the rhetoric around it was a bit much,” another top business lobbyist tells me. “We saw a bit of an overreaction from the business community in terms of the impact it was having.” Now, he says, “there’s a more universal acknowledgment that more needs to be done to help these workers.” The Business Roundtable is also embracing the $300 weekly benefit as part of a larger compromise package. 

For businesses that rely on people making purchases or payments — from retailers to credit card companies and mortgage lenders — self-interest helps explain their evolving attitude on the matter: Putting more money into the pockets of millions of jobless people gives them the means to keep spending and paying off debt.

Research from University of Chicago economists Peter Ganong and Pascal Noel has found spending by those out of work drops by 12 percent when they exhaust their unemployment insurance, while it drops by less than 1 percent when they are receiving the benefit:

“Many businesses have come to realize they are dependent on unemployment benefits, just as families are,” Ganong tells me. “That’s an important realization that the business community has come to, and it has helped to build a consensus” around extending the benefits.

Businesses’ experiences with hiring this year also changed the debate around the temporary safety-net program. 

While some reported difficulty finding workers as they reopened in the summer, a number of studies showed no meaningful link between people receiving the benefits and declining to return to work.

Perhaps more significantly, the expiration of the benefits in the fall didn’t yield a hiring boom. 

One lobbyist told me companies determined then that other factors were more important in keeping people from coming back. Chief among them were fear of the health risks involved and the need to stay home to provide child care to out-of-school kids.

Of those who have found work, “many have landed in jobs where their earnings are intermittent and can be easily interrupted if there are new shutdowns,” said Gary Burtless, an economist at the Brookings Institution.

And unlike in a typical recession, which may impact some parts of the country more heavily than others, “in a pandemic, it’s everywhere,” Spencer said. “You can’t move 100 miles away and find something different. The pandemic is going to be there, too.”

Many left-leaning economists would prefer Congress renew the federal unemployment benefit at $600 a week. But Heidi Shierholz, a senior economist and the director of policy at the Economic Policy Institute, says $300 weekly payments are “infinitely better than nothing. … There’s no question it would lift a huge number of people out of poverty.”

Latest on the federal pandemic response

Relief talks are showing momentum.

A bipartisan group of lawmakers released a pair of bills: “The two bills they said would provide the nation with emergency economic relief as senior congressional officials sounded more hopeful about the odds of approving new relief than they have in weeks,” Jeff Stein, Mike DeBonis and Seung Min Kim report.

“The bipartisan group unveiled one $748 billion package that includes new unemployment benefits, small business aid and other programs that received broad bipartisan support. The second bill includes the two provisions most divisive among lawmakers — liability protections for firms and roughly $160 billion in aid for state and local governments — with the expectation that both could be excluded from a final deal to secure passage of the most popular provisions. This second bill could end up falling out of the final deal if lawmakers don’t rally around it amid broad opposition among Democrats to approving the liability shield.”

  • Some Democrats are signaling they are okay leaving out state aid: House Majority Leader Steny H. Hoyer (D-Md.) suggested as much on Sunday. “On Monday, Sen. Richard J. Durbin (D-Ill.), the second-ranking Democrat in the Senate, said he supported the $748 billion package that leaves out state and local aid.”
  • Conservatives are mounting opposition: Sen. Rick Scott (R-Fla.) wrote an op-ed for the National Review this weekend urging Republican lawmakers not to accept funding for state and local governments, which he called rewarding “Democrats’ fiscal management with more taxpayer money.” But Sen. Rob Portman (R-Ohio) appeared to push back on some of the opposition, saying: “The economy is not getting better in most of our states.”

Coronavirus fallout

Sandra Lindsay, a critical care nurse at Long Island Jewish Medical Center, was among the first Americans to receive the coronavirus vaccine on Dec. 14. (Video: Reuters)
First vaccines outside of trials administered in the U.S.

The end is finally in sight: “The injection to Sandra Lindsay’s arm at Long Island Jewish Medical Center made her the first American to receive the coronavirus vaccine outside a clinical trial. The small dose of mRNA represented a giant leap in efforts to beat back the virus, a moonshot worth of hope amid a pandemic that has infected more than 16 million and killed more than 300,000 nationwide,” Ben Guarino, Ariana Eunjung Cha, Josh Wood and Griff Witte report.

“The immunization campaign will rapidly expand in the days ahead, with some states beginning to include nursing homes. Federal officials leading the effort to manufacture and distribute the vaccines said Monday that they expect 20 million people to get the first of two required doses by the end of the year.”

More from the U.S.:
  • More than 16,501,000 cases have been reported. More than 300,000 have died.
  • California accuses Amazon of hampering warehouse probe: “California Attorney General Xavier Becerra has pressed Amazon since May to provide information about the number of warehouse workers who have contracted the virus as well as information about steps the company has taken to protect those employees, according to the lawsuit … But the state has received only cursory replies, the lawsuit alleges,” Jay Greene reports. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)
  • Maine senator suggests streaming companies should temporarily lift paywalls: “Wouldn’t more people stay safely ensconced in their own homes over the holidays if they had access to free Hulu, HBO Max and Netflix? That’s the argument being put forward by Sen. Angus King (I-Maine), who on Monday urged six major streaming services to consider making shows and movies available to nonsubscribers as a ‘public service,’” Antonia Noori Farzan reports.
From the corporate front:
  • Steel orders jump: “Steelmakers idled about one-third of domestic production capacity for flat-rolled steel this spring when their customers canceled orders and closed plants to slow the pandemic's spread. Since many factories reopened a month or two later, steel demand for cars, appliances and machinery has rebounded, thanks in part to rising purchases from homebound consumers,” the WSJ’s Bob Tita and Ben Foldy report.
  • Google CEO nixes permanent remote work: “Google is delaying employees’ return to offices to September 1, and will expect employees to report to work in-person for at least three days a week thereafter, according to an email from CEO Sundar Pichai,” CNBC’s Jennifer Elias reports.

Market movers

Stocks fall slightly amid worries of more shutdowns.

The historic arrival of a vaccine failed to provide a shot in the arm for stocks: “The 30-stock Dow closed lower by 184.82 points, or 0.6 percent, at 29,861.55. At its session high, the Dow was up more than 200 points and hit an all-time high. The S&P 500 declined by 0.4 percent to 3,647.49, posting its first four-day losing streak since Sept. 21. The Nasdaq Composite outperformed, rising 0.5 percent to 12,440.04,” CNBC’s Fred Imbert and Maggie Fitzgerald report.

“Shares of companies that would benefit from the economy reopening lagged companies that thrived early on in the pandemic. United Airlines dropped 3.4 percent. Amazon, meanwhile, popped 1.3 percent.”

The transition

Barr is out.

One of Trump's most loyal allies calls it quits. “William P. Barr is stepping down as attorney general, ending a controversial tenure in which critics say he repeatedly used the Justice Department to aid [Trump’s] allies, only to have Trump turn on him when he did not announce investigations of political foes and disputed White House claims of widespread election fraud,” Matt Zapotosky, Josh Dawsey and Devlin Barrett report

Barr’s letter indicated that his last day would be Dec. 23. Trump wrote on Twitter that Barr would be replaced on an acting basis by the Justice Department’s No. 2 official, Jeffrey A. Rosen, and that Rosen would be replaced by his own top deputy, Richard Donoghue.”

Experts say Biden will have to navigate ethics challenges.

Both he and a number of his staffers have potential conflicts of interest: “After Trump’s years of mixing family with governing and an election that highlighted the business dealings of Biden’s son Hunter, the president-elect has promised to keep his family from being hired into his administration, to prohibit family entanglements with ‘any foreign operation’ and to go even further,” Michael Scherer reports.

“That pledge has now been handed over to lawyers for the presidential transition who are drafting new rules for the Biden White House that are likely to be more restrictive than the rules that governed the Obama administration. Biden has made clear that he wants a clean break from Trump, who employed his family and spent public funds at family businesses.”

  • Biden's own potential issues: “His son Hunter is facing a federal investigation over taxes paid on a business venture in China, which also included Biden’s brother, James Biden, a situation that is certain to test the president-elect’s promise to let the Justice Department operate independently of his personal interests … John T. Owens, the husband of Biden’s sister, Valerie, and a former college classmate of the president-elect, owns a Delaware-based telemedicine company that markets itself as a solution amid pandemic restrictions, with medical second-opinion operations in Europe and Asia. The president-elect spoke to a conference for the company, MediGuide International, in 2017, which the firm boasted about in its marketing materials."
Other news:
  • Yellen and Adeyemo held their first joint meeting: “Treasury Secretary-designee Janet Yellen and Deputy Treasury Secretary-designee hosted a virtual roundtable with racial and economic justice leaders Monday afternoon,” per the transition team. “They discussed joint priorities including infusing equity into policymaking and leveraging the full powers and authorities of the Treasury Department to counteract the legacy impact of systemic racism …”
  • Biden will confront an expanding China in Latin America: “A Reuters investigation, including interviews with current and former officials and advisers, and an analysis of trade data, found that under Trump, China has left the United States trailing in terms of power and influence across most of Latin America,” Cassandra Garrison reports.

Fannie, Freddie Privatization Decisions Likely to Be Left to Biden Administration (WSJ)

When superpowers collide

Trade with China is roaring back.

The deficit was suppose to narrow this year, but then the pandemic happened: “American imports from China are surging as the year draws to a close, fueled by stay-at-home shoppers who are snapping up Chinese-made furniture and appliances, along with Barbie Dream Houses and bicycles for the holidays,” the New York Times’s Ana Swanson reports.

“In November, China reported a record trade surplus of $75.43 billion, propelled by an unexpected 21.1 percent surge in exports compared with the same month last year. Leading the jump were exports to the United States, which climbed 46.1 percent to $51.98 billion, also a record.”

Russian hack

Massive Russian hack was classic espionage, experts say.

The Department of Homeland Security was among the entities targeted: “Investigators at cybersecurity firm FireEye, which itself was victimized in the operation, marveled that the meticulous tactics involved ‘some of the best operational security’ its investigators had seen, using at least one piece of malicious software never previously detected,” Craig Timberg and Ellen Nakashima report.

“The impact may ultimately prove to be profound. SolarWinds, the maker of widely used network-management software that the Russians manipulated to enable their intrusions, reported in a federal filing Monday that ‘fewer than 18,000’ of its customers may have been impacted. That’s a small slice of the company’s more than 300,000 customers worldwide, including the Pentagon and the White House, but still represents a large number of important networks worldwide. (Russia has denied any role in the attacks.)”

Money on the Hill

Sacklers agree to testify before Congress.

Two members of the family will appear before a panel probing the opioid epidemic: “David and Kathe Sackler reached an agreement in recent days with the House Oversight Committee to appear at a hearing set for Thursday ... The two are among the Sackler family members who own Purdue Pharma, the maker of OxyContin,” Reuters’s Mike Spector reports.

“Purdue Chief Executive Craig Landau is also slated to testify at the hearing.”

Pocket change

Unilever says it will let investors vote on its climate goals.

The multinational conglomerate would be the first major company to hold such a vote: “The global consumer goods giant said in a statement that it believes the global shift to net zero emissions ‘will require a greater and deeper level of engagement between companies and their investors about their climate transition plans.’ By voluntarily submitting its plans before shareholders for a vote, Unilever said it hopes that other firms will follow suit,” ABC News’s Catherine Thorbecke reports.

“Among the company’s ambitious climate goals are achieving zero emissions from its own operations by 2030, reducing the average footprint of its products by 50 percent by 2030 and achieving net zero emissions from sourcing to point of sale for its products by 2039.” A vote is expected next May.

  • Meanwhile, ExxonMobil aims to cut emissions by 2025 amid intense pressure: “Several of Exxon’s rivals this year have set longer-term climate ambitions, including Royal Dutch Shell and BP, which aim to reduce greenhouse gas emissions to net zero by 2050. … By 2025, Exxon would reduce the intensity of its oilfield greenhouse gas emissions by 15 percent to 20 percent from 2016 levels. It did not set an overall emissions target, however, and reducing intensity means that emissions still could rise if oil and gas output grows,” Reuters’s Jennifer Hiller reports.

Boeing’s problems continue: “The company has expanded inspections of newly produced 787 Dreamliners after finding a previously disclosed manufacturing defect in sections of the jet where it hadn’t been initially detected …,” the WSJ’s Andrew Tangel and Andy Pasztor report.

“Boeing engineers and U.S. air-safety regulators agree the newly discovered problem doesn’t pose an imminent safety hazard, the officials said. But the new issue is likely to ramp up a Federal Aviation Administration review of 787 production safeguards sparked earlier this year by other defects, one of these officials said.”

Adidas is exploring a sale of Reebok: “Adidas said a sale was one of the options it was considering as part of a five-year strategy plan it is set to present March 10, 2021. It may also decide to keep the business, the German sports retail group said,” the WSJ’s Ruth Bender reports.

“Adidas, the world’s second-largest sportswear maker after Nike Inc., bought Reebok in 2006 for roughly €3 billion, equivalent to $3.6 billion, as part of a bid to expand in the U.S. and challenge its bigger rival on its home turf. Reebok at the time was a sponsor of the National Basketball Association. But the plan has disappointed, analysts say.”

UAW settles corruption probe: “Federal prosecutors have agreed to end a multiyear corruption probe into the United Auto Workers under a proposed civil settlement that will include an independent monitor overseeing the American union for six years,” CNBC’s Michael Wayland reports.

“U.S. Attorney Matthew Schneider and UAW President Rory Gamble said Monday that the settlement, which must still be formally approved by the government, comes after months of negotiations between the two sides, including several voluntary reforms by the union.”

Citi Was Mocked by Asset Managers: ‘Take the Money and Run’ (Bloomberg)

Daybook

Today:

  • Slack CEO Stewart Butterfield and Box CEO Aaron Levie headline a Post event on the future of work
  • Eli Lilly CEO David Ricks speaks during a Post event
  • A Senate Commerce subcommittee holds a hearing on how the pandemic has affected the live-entertainment industry
  • A Senate Commerce subcommittee holds a hearing on the venture capital gap that exists in different regions throughout the country

Wednesday:

  • The Feds Federal Open Market Committee (FOMC) begins its two-day meeting

Thursday:

  • Fed Chair Jerome H. Powell meets the press after the FOMC meeting concludes
  • The Labor Department reports weekly jobless claims
  • FedEx, RiteAid and BlackBerry are among the notable companies reporting their earnings, per Kiplinger 

Friday

  • Fed Governor Lael Brainard gives a speech about climate change and financial regulation at the Center for American Progress
  • Nike and Darden Restaurants are among the notable companies reporting their earnings

The funnies

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