The next phase for Covid relief: Not enough

8/10/20

The Bureau of Labor and Statistics publishes a number of key statistics: U3 is considered the “official” unemployment rate (10.2% in July); U5 adds in discouraged workers (11.3% ); and U6 also includes part-time workers who seek additional hours (16.5%). These rates posted a historically large retrenchment from the record levels of the prior month, but they’re still extraordinarily high. Moreover, since February of this year (i.e., before any Covid-related shutdowns), cumulative job losses have totaled almost 13 million jobs, wiping out all of the civilian jobs that were made during the last seven year and leaving in excess of 30 million people unemployed.

With this history as a backdrop, as we went into this past weekend, prospects for entering into a recovery phase anytime soon seem remote, at best, given that (a) we continue to face a pandemic that’s nowhere near being controlled; (b) congress’s failure to extend the unemployment insurance supplement to those who had been getting it will reduce aggregate disposable income sharply, thereby serving to depress consumer spending from current levels; and © a round of layoffs in the state and local government sector is all but inevitable without federal aid directed there. The unwillingness to extend unemployment benefits and the reluctance to support state and local governments reflect either an inability to connect the dots and appreciate the desperate straits that millions of people will be facing without this aid or else a callous indifference to that fate.

Thankfully, we seem to have an extraordinarily compassionate chief executive who’s ready to save the day! Over the past weekend, Trump signed four memoranda or executive orders relating to the pandemic:

· Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019

· Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster

· Executive Order on Fighting the Spread of COVID-19 by Providing Assistance to Renters and Homeowners

· Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic

The first restores $400 of the $600 per week supplemental unemployment benefits to approximately 30 million people, $100 of which would be sourced from state treasuries (although, late in the weekend, Trump seemed to be backing away from this requirement). The second defers payroll taxes for operating businesses and employed workers until the start of next year. The third voices platitudes relating to the plight of at-risk renters and homeowners but does nothing concretely to ameliorate their circumstances. And finally, the fourth defers the obligation to repay student debt until the end of the year.

The second and third of these edicts deserve further discussion. With respect to the payroll tax deferment, ever-worried about taxes being too onerous, the president’s memorandum includes the following text: “The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” Apparently, you can never have too many tax cuts. The fact that these taxes serve to fund the social security insurance and Medicare be damned.

On assistance to homeowners and renters, as noted above, this Executive Order has no teeth. I love this language: “The Secretary of Housing and Urban Development shall take action, as appropriate and consistent with applicable law, to promote the ability of renters and homeowners to avoid eviction or foreclosure resulting from financial hardships caused by COVID-19. Such action may include encouraging and providing assistance to public housing authorities, affordable housing owners, landlords, and recipients of Federal grant funds in minimizing evictions and foreclosures.” I’m sure those dependent on that assistance are reassured. Thank you very much Mr. President.

The idea that these measures will materially alter the dire circumstances faced by those behind on their rent with little or no income or that this aid will ignite the V-shaped recovery that the president has promised would be laughable if people’s lives weren’t at stake. We’re at a precarious juncture, and these half-hearted and half-baked responses are insufficient. They virtually assure an expanded population of those with food and housing insecurity and a deteriorating economy from already depressed levels. A much more generous response is required. Smoke and mirrors won’t do it, but that’s apparently all the ammunition this administration is willing to provide.