“Congress flails as coronavirus ravages the nation and the economy stalls.”
That Washington Post headline sums up the national crisis we’re now confronting. Extra unemployment benefits of $600 a week have run out for 30 million Americans, and yet Congress and the White House are slowly slogging through negotiations on a new stimulus package and blaming each other for the lack of progress.
They have to do better. Much better.
The main victims of this paralysis are the American families thrown out of work by the pandemic. “Many people are living on the edge with no savings,” Michael Klein, an economics professor at Tufts, told USA Today. “Without this money, we’ll likely have a huge wave of people not being able to make their rent or mortgage, or not being able to feed their families.”
Moreover, the whole economy could suffer because those $600 payments were quickly spent at grocery stores, gas stations, pharmacies and beauty parlors. As Arindrajit Dube, an economist at the University of Massachusetts, stated in the Boston Globe: “The empirical evidence is extremely strong that the UI (unemployment insurance) benefits have a huge consumption stimulus effect. If people are going to lose that $600 boost, that is a disaster for both people’s lives as well as for the economy, because that consumption drop is going to lead to more job losses.”
If the need is so great, why is the response so slow? The answers reveal a lot about the state of American politics in the Age of Trump. He didn’t initiate the dysfunction now crippling our institutions, but he’s made things a lot worse by his incendiary insults and refusal to recognize reality.
“In order to cut deals and find compromise in this hyperpartisan political environment, you have to have at least a small amount of trust in each other,” Jim Manley, a former top aide to Senate Democrats, told the Post. “The problem now is that no one trusts their colleagues on the other side of the aisle.”
The $600 benefit is part of a much larger debate about responding to the pandemic, from increasing food stamps to supporting local governments. But the unemployment issue crystalizes the core problems blocking an agreement, starting with a Republican preference for ideology over evidence.
Republicans propose slashing the weekly payout to $200, arguing that more generous benefits rob folks of the incentive to work. This is a familiar GOP trope going back at least to Ronald Reagan’s presidency, when he repeatedly blamed “welfare queens” for defrauding the government.
But a range of economic studies have refuted the Republican argument. The most widely quoted, done by a group of Yale economists, found “no evidence” that “enhanced jobless benefits” led to reduced employment.
Republican resistance to those benefits is also fueled by another argument: that those benefits add to an already out-of-control deficit. But that position reeks of hypocrisy.
Many of those same “deficit hawks” eagerly embraced Trump’s mammoth tax cut package, saying it would “pay for itself with economic growth,” as Treasury Secretary Steven Mnuchin put it. But that was a textbook case of magical thinking. In fact, those cuts helped inflate the deficit to almost $1 trillion in the last fiscal year — before the pandemic hit.
Republicans bear most of the blame for the legislative stalemate, but not all of it. While the Yale survey demonstrates that overall, higher benefits do not undermine the will to work, some small businesses report having trouble attracting and keeping low-wage workers who could make more collecting insurance checks.
One banker I trust says the problem is most acute for businesses like hotels and low-end retailers, who hire many casual shift workers, not full-time employees with benefits. The workers are making a “rational economic choice” to stay home, he says, and Democrats should not pretend the problem doesn’t exist. Yet Rep. Hakeem Jeffries said on MSNBC that the $600 figure was a “line in the sand” on which Democrats refuse to negotiate.
His comment reveals a second Democratic calculation: Since voters overwhelmingly disapprove of Trump’s handing of the coronavirus, continued inaction on a new package and deeper economic distress works to their political advantage.
It doesn’t take a math genius to figure out a possible compromise between $600 and $200, but both sides remain frozen — the Republicans by ideology, and the Democrats by politics. Meanwhile, working families — the very voters both parties profess to value so highly — are caught in the squeeze.
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