COMMENTARY | The feds should pay people to stay home while investing in a long-term recovery plan
The death toll and suffering due to the coronavirus pandemic has been much worse in the U.S. than elsewhere. It didn’t have to be.
Fortunately, we can still follow the examples of many other countries that have fought the pandemic and its economic fallout far more effectively, and we are on track for stronger, more inclusive economic recoveries.
Australia, for example, doubled unemployment benefits, subsidized wages to keep people on business payrolls, supported child care providers to enable them to make child care free, and authorized these benefits into September.
There’s no economic case for reopening the economy quickly and pushing people back into unsafe workplaces. The 1918 flu pandemic taught us that. Instead, the federal government should run deficits to pay people to stay home until the virus is controlled while preparing a long-term recovery package based on Green New Deal investments in physical and social infrastructure. The country can afford it, it won’t burden our children and grandchildren with debt, and the economic recovery will be faster and stronger.
High rates of death, unemployment, hunger
American mortality rates from the COVID-19 pandemic should be relatively low. The virus hits older people hardest, and our population is young compared to other affluent countries. But by mid-May, the proportion of our population that had died was the sixth highest in the world, even though 60 countries’ populations are older, measured by the median age.
Poor policy choices by the Trump administration — on top of the decades-long neglect of the needs of the majority of Americans — have meant high death rates and widespread economic insecurity. Unlike Germany, Taiwan, New Zealand and South Korea, we did not follow our already developed pandemic plans or act quickly to adopt a good test, gather protective equipment, build hospital capacity and track down people who’d been exposed.
The U.S. Bureau of Labor Statistics said it believed the April unemployment rate was far higher than the nearly 15% it reported; it’s likely that at least 1 in 5 workers was unemployed.
More than 4 in 10 mothers of children younger than 12 told researchers last month that the food they bought just didn’t last, and they didn’t have enough money to get more. Nearly 2 in 10 said that their kids weren’t getting enough to eat.
Harm targets low-income communities, people of color
Several factors conspired to put low-income communities and people of color in harm’s way: concentration of jobs in low-wage, face-to-face service work and other occupations that can’t be done from home; lack of paid sick leave; crowded housing or no housing at all; reliance on public transportation; discrimination in testing and care; and overrepresentation in jails and detention centers. Lack of access to health care, unaffordable medications, stress, food deserts and long-term exposure to air pollution created preexisting health conditions the coronavirus preyed on. The result is huge discrepancies by race and income in infection, hospitalization and death rates in the U.S.
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Economic shutdowns require huge income supports
The rapidly deepening recession resulting from the shutdown of big parts of the economy will be longer and worse here than in other countries, unless we change direction soon. In the short term, we must replace the incomes of households and businesses so they can pay their bills, and we must maintain employment and supplier relationships so they’re in place when the economy can restart.
Federal relief bills are a start, but they have left far too many people with too little while steering the bulk of relief to large corporations that shouldn’t need it.
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Countries with the smartest policies immediately started paying the bulk of employers’ expenses, so they kept people on the payroll. Examples include Britain, Germany, France, Australia, Denmark, Austria and Belgium.
An English friend with a small business told me:
“In mid-March a 'job retention scheme’ started, backdated to the beginning of the month. Businesses could send some or all of their staff home and get 4/5ths of their wages paid by the government. People laid off earlier could be taken back on the payroll. Orders for my business fell by more than half after the lockdown. I furloughed my one employee and committed to making up her pay in full, partly by using some of her holiday entitlement, as British employers are bound by law to pay five and a half weeks paid leave per year.
“It took a few weeks to organize the application website and then, once you filled in the form, payment was deposited into the business bank account four days later. The scheme was later extended to include the self-employed and to run to the end of June and possibly longer.
“Also, small businesses could apply for grants worth between $12,000 and $30,000 for rent and other ongoing expenses. Larger businesses could apply for government backed loans at a low interest rate and with nothing to pay back for a year.”
End the pressure to return to unsafe workplaces
Our economy won’t really get going until the pandemic is controlled by providing adequate personal protective equipment to everyone who can’t avoid close contact with others, widespread testing, and effective tracing of the contacts of everyone who tests positive for the virus, as has been widely reported. If businesses open too soon, we’ll see a second wave of infections that will set back economic recovery, on top of causing unnecessary deaths, suffering and strain on the medical system.
Consumers effectively shut down businesses before the states required people to stay home, except for essential travel. Most families will continue to minimize their risk of exposure, and save as much money as they can, until they have confidence that the danger has passed and the economy is back on track.
It’s callous, cruel and unnecessary to force people back to work by pushing businesses to open and call workers back so that they lose unemployment benefits.
Best economic strategy
The path we should follow is to expand income supports to families and small businesses, to make sure that all households have what they need until people can safely return to work. Only the federal government can fund that effort. Increased federal spending must include significant aid for state and local governments, which are responsible for unemployment benefits and most public services.
It’s not the case that federal borrowing will burden the future, if the money is spent in one of two ways that strengthen the economy. The first short-term goal is keeping people solvent, paying the bills while preserving both employment relations and supply chains. And, of course, pursuing effective medical treatments and a vaccine.
The second longer-term tactic is investing in physical and social infrastructure that will make us more productive in the future, easing the transition to climate-friendly technologies, investing in education, health and care of people, and creating an economy that works for us all.
Street Smart Economics is a periodic series written for Street Roots by professors emeriti in economics. Mary C. King is a professor emerita of economics, Portland State University.
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