Friday, July 17, 2020

The Next Disaster Is Just a Few Days Away

Millions of unemployed Americans face imminent catastrophe.
Paul Krugman, NYT. 

Some of us knew from the beginning that Donald Trump wasn’t up to the job of being president, that he wouldn’t be able to deal with a crisis that wasn’t of his own making. Still, the magnitude of America’s coronavirus failure has shocked even the cynics.
At this point Florida alone has an average daily death toll roughly equal to that of the whole European Union, which has 20 times its population.
How did this happen? One key element in our deadly debacle has been extreme shortsightedness: At every stage of the crisis Trump and his allies refused to acknowledge or get ahead of disasters everyone paying attention clearly saw coming.
Blithe denials that Covid-19 posed a threat gave way to blithe denials that rapid reopening would lead to a new surge in infections; now that the surge is upon us, Republican governors are responding sluggishly and grudgingly, while the White House is doing nothing at all.
And now another disaster — this time economic rather than epidemiological — is just days away.
To understand the cliff we’re about to plunge over, you need to know that while America’s overall handling of Covid-19 was catastrophically bad, one piece — the economic response — was actually better than many of us expected. The CARES Act, largely devised by Democrats but enacted by a bipartisan majority late in March, had flaws in both design and implementation, yet it did a lot both to alleviate hardship and to limit the economic fallout from the pandemic.
In particular, the act provided vastly increased aid to workers idled by lockdowns imposed to curb the spread of the coronavirus. U.S. unemployment insurance is normally a weak protection against adversity: Many workers aren’t covered, and even those who are usually receive only a small fraction of their previous wages. But the CARES Act both expanded coverage, for example to gig workers, and sharply increased benefits, adding $600 to every recipient’s weekly check.
These enhanced benefits did double duty. They meant that there was far less misery than one might otherwise have expected from a crisis that temporarily eliminated 22 million jobs; by some measures poverty actually declined.
They also helped sustain those parts of the economy that weren’t locked down. Without those emergency benefits, laid-off workers would have been forced to slash spending across the board. This would have generated a whole second round of job loss and economic contraction, as well as creating a huge wave of missed rental payments and evictions.
So enhanced unemployment benefits have been a crucial lifeline to tens of millions of Americans. Unfortunately, all of those beneficiaries are now just a few days from being thrown overboard.
For that $600 weekly supplement — which accounts for most of the expansion of benefits — applies only to benefit weeks that end “on or before July 31.” July 31 is a Friday. State unemployment benefit weeks typically end on Saturday or Sunday. So the supplement will end, in most places, on July 25 or 26, and millions of workers will see their incomes plunge 60 percent or more just a few days from now.

Two months have gone by since the House passed a relief measure that would, among other things, extend enhanced benefits through the rest of the year. But neither Senate Republicans nor the White House has shown any sense of urgency about the looming crisis. Why?
Part of the answer is that Trump and his officials are, as always, far behind the coronavirus curve. They’re still talking about a rapid, V-shape recovery that will bring us quickly back to full employment, making special aid to the unemployed unnecessary; they’re apparently oblivious to what everyone else sees — an economy that is stumbling again as the coronavirus surges back.
Delusions about the state of the economic recovery, in turn, allow conservatives to indulge in one of their favorite zombie ideas — that helping the unemployed in a depressed economy hurts job creation, by discouraging people from taking jobs.
Worrying about employment incentives in the midst of a pandemic is even crazier than worrying about those incentives in the aftermath of a financial crisis, but it seems to be at the core of White House thinking (or maybe that’s “thinking”) about economic policy right now.

One last thing: My sense is that Republicans have a delusional view of their own bargaining position. They don’t seem to realize that they, not the Democrats, will be blamed if millions are plunged into penury because relief is delayed; to the extent that they’re willing to act at all, they still imagine that they can extract concessions like a blanket exemption of businesses from pandemic liability.
Maybe the prospect of catastrophe will concentrate Republican minds, but it seems more likely that we’re heading for weeks if not months of extreme financial distress for millions of Americans, distress that will hobble the economy as a whole. This disaster didn’t need to happen; but you can say the same thing about most of what has gone wrong in this country lately.

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