Aid workers first in COVID-19 crisis, says study
Immediate cash, unemployment, paid leave necessary, along with biz loans, help for states on coronavirus
Steelworkers await President Trump at a rally at the U.S. Steel Granite City Works two years ago. (One Illinois/Ted Cox)
By Ted Cox
The federal government needs to move swiftly on a stimulus package in order to stave off an economic collapse from the coronavirus outbreak, according to a new study from the Roosevelt Institute.
“The current economic collapse is more sudden and wide-ranging than any slowdown in at least a generation,” writes Mike Konczal, director for progressive thought at the institute, a nonprofit think tank associated with the Franklin D. Roosevelt Presidential Library in Hyde Park, N.Y. In “A Forward-Thinking Policy Response to the Coronavirus Recession,” released Wednesday, Konczal adds, “That means policymakers need to be thinking big as they try to address the situation. Economists and market analysts across the political spectrum agree that federal relief packages in the $1 to $2 trillion range are required. It is rapidly becoming conventional wisdom that the risk of doing too little economically far outweighs the risk of doing too much.”
After dismissing the global COVID-19 pandemic for months, President Trump agreed with that assessment just this week. When Treasury Secretary Steve Mnuchin suggested that the federal government get immediate checks out to workers idled by the economic downturn, along the lines of the proposed Universal Basic Income, Trump echoed that, saying, “We’re going big.” Such an aid package is reportedly being put together in Congress this week.
Pointing out that economists estimate the U.S. economy could drop 5 percent just this quarter, and that unemployment claims are seven times what they normally are at this time of year — actually nine times the normal in Illinois, according to information provided by the Department of Economic Security — Konczal suggests five concrete steps, emphasizing the impact on workers.
A cash infusion to workers (“while recognizing that cash alone is insufficient for the moment we’re in”)
Immediate expansion of unemployment insurance
Help for states and municipalities as they deal with diminished revenue
Business loans and other “backstops”
Liberalized bankruptcy policies to help businesses recover
“Note, importantly, that any government support to industry must come with significant guarantees,” Konczal writes, specifying no layoffs and no stock buybacks by management, along with “governing companies differently (e.g., less rampant executive compensation at the expense of paying workers a living wage). This is to ensure that companies themselves operate in ways that make them and their workers more economically resilient.”
“The risk of doing too little economically far outweighs the risk of doing too much.”
He added: “First the federal government can and should send checks immediately to all households, on the order of $2,000 per adult and $1,000 per child.” Estimating the cost at $580 billion, Konczal said that’s intended to “provide an immediate backstop to free-falling family budgets.” He also suggested a moratorium on student debt payments.
Warning that workers face exploitation as the ranks of the unemployed rise, Konczal proposed that “Congress should require all employers to provide paid sick, medical, and family leave for all workers,” while the federal and state governments expand unemployment insurance.
Konczal suggested that the federal government take responsibility for state Medicaid payments and that the U.S. Federal Reserve buy state and municipal debt. He explained: “States will be under significant economic stress because they will face a quadruple bind. The first is declining revenues from decreased economic activity. The second is extraordinary spending obligations, including state and local emergency responses, to meet urgent health needs. The third is additional expenses from people accessing social-safety-net programs. The fourth is state requirements to balance their budgets, which means they have little economic capacity at a time when action is required.”
He said businesses big and small will also need aid, but Konczal emphasized, “The government should have a strong preference for loans, even loans on very generous terms with forbearance, rather than for cash payments.” He said the Small Business Administration is too small to deal with the magnitude of the problem and proposed a new agency to focus solely on coronavirus fallout to the business community.
Konczal acknowledged that, as in the Great Recession of a decade ago, bailouts may be necessary to keep some large businesses afloat, but he warned, “We cannot repeat the mistakes of 2008 and give corporations bailouts without also requiring that they restructure and govern so they are responsible for more than short-term financialized needs.” He suggested not only deterrence for companies possibly using the bailout money to buy back their own stock, but adding workers to corporate boards, hiking the minimum wage to $15 an hour, and giving unions a boost, at very least by calling for businesses to “remain neutral toward unionization efforts.”
According to Konczal, the current low interest rates on loans makes it the perfect time to adopt these costly policies, but he also advocates making them permanent, for instance by adopting programs in the proposed Green New Deal as a “permanent stimulus” putting people to work, as in the Great Depression, and bolstering the social safety net.
“The nation and world face unprecedented challenges as a global pandemic rapidly spreads and economies collapse,” Konczal writes. “The days, weeks, and months to come are filled with uncertainty, and it is very likely that the situation is going to get worse before it gets better. Policymakers right now have the chance to put forward a response that meets the moment we’re in — one that is large in size, broad in scope, and sustained over time. There is little risk in doing too much to stabilize the economy; the danger is doing too little.”