Leading economists have long advocated for using “automatic stabilizers” to help counteract the destructive impact of recessions and to hasten recovery. Such mechanisms, like unemployment insurance, automatically expand when the economy worsens and shrink when it recovers. This prevents consumer demand—and the economy—from falling into a downward spiral.

Congress has acted forcefully to counteract the economic fallout of coronavirus with a dramatic expansion of unemployment insurance, aid to state and local governments and more. But that aid is temporary and, unlike enhanced automatic stabilizers, will begin to expire this summer while we likely remain in the middle of dual public health and economic emergencies.

Providing economic support to Americans during the public health emergency is critical to beating the virus. The goal in every other economic downturn has been to get people back to work quickly, but the current objective is to allow them to stay home or practice social distancing for as long as it takes to get the virus under control. Public health experts predict that

Americans will not cooperate with these measures if they can’t support their families.

Economic assistance should continue even after the end of the public health emergency, given how deep the current economic downturn is and how long it may last. We already have seen more than 24 million Americans lose their jobs in just five weeks and images of food lines have proliferated across the country, evoking the depths of the Great Depression. This will likely not end quickly: the Congressional Budget Office notes that its forecast is highly uncertain, but estimates that, without additional economic support by Congress, unemployment at the end of 2021 will be 9.5%, only slightly better than the very worst (10%) of the Great Recession.

The most sensible way for Congress to guarantee that economic assistance will continue as long as it is needed is by directly linking it to the state of the economy instead of picking arbitrary expiration dates. This would mimic the automatic stabilizer approach that economists have long urged, provide certainty to families that they will get the aid they need, ensure that support does not depend on politics and automatically turn off support when it is no longer needed. Neither economists nor epidemiologists can predict the length of this recession—some believe the economy will begin to rebound quickly while others say it will remain depressed for years. Linking aid to economic conditions accounts for either possibility.  

A discretionary approach to economic support risks cutting off aid to families as they comply with public health guidelines that essentially require unemployment or wait for the economy to recover. These consequences would be especially grave for low-income Americans and people of color. This risk—in an election year with divided partisan control of Congress—is too grave.

Linking support to economic conditions, on the other hand, avoids that unnecessary risk.

Washington, D.C. —Today, Congressman Don Beyer (D-VA), the Vice Chair of the U.S. Congress Joint Economic Committee, released a report arguing that federal aid to state and local governments is crucial for containing the coronavirus and preventing economic disaster and should be a major focus of Congress’s fourth legislative response to the public health crisis.

As the report shows, states are being simultaneously strained by skyrocketing spending to combat the coronavirus and large losses in revenue (i.e. sales tax, income tax, tourism). Furthermore, since almost every state is required by law to balance its budget, this may force many to cut spending in areas like education.

Budget cuts at the state level will in turn force budget cuts at the local level, creating a downward spiral that will slow response and recovery nationwide.

“State and local governments are crying out for assistance, and our health and economy depend on Congress helping them,” Beyer said. “If Congress does not respond with aggressive aid, we risk repeating the mistakes of the Great Recession, which lasted years longer for state and local governments because the federal government left them to fend for themselves.”

Beyer continued, “No one should think that this is someone else’s problem. While the fire is hottest in New York right now, it soon will burn from state to state, especially if Congress does not do enough to help state and local governments. As a result, every town in America will be crushed by the coronavirus and our economy will fall a lot further than it has already fallen.”

As the report shows, Medicaid will account for much of states’ increased spending since individuals who lose their jobs (and employer-sponsored health insurance) will need to enroll and many current enrollees will contract the coronavirus and need to be cared for. While the second coronavirus response package includes a 6.2 percentage point increase in the federal government’s share of Medicaid funding (known as the Federal Medical Assistance Percentage or FMAP), the increase was about 3.8 percentage points less than the average increase in the American Recovery and Reinvestment Act. On average, states cover about 40 percent of the cost of Medicaid with the federal government paying the rest.

“One of the most important things Congress’s fourth legislative response must do is increase the federal government’s share of Medicaid funding—the current increase is less than what was given to states during the Great Recession and should be much higher, especially when you consider that the joint federal-state health insurance program is states’ second biggest cost and 10 million people have filed for unemployment over the last two weeks,” Beyer said. “The last thing we want states to do is reduce Medicaid eligibility in the middle of a public health crisis.”

Beyer continued, “Congress’s fourth legislative response must increase aid to state and local governments and allow the Federal Reserve to purchase long-term state and local debt.”

WASHINGTON, DC—Congressman Don Beyer (D-VA), Vice Chair of the Joint Economic Committee, today released a new report examining recent economic progress and remaining challenges facing the Black community in America.

“The data captured in this report show significant changes affecting African Americans which include both progress and areas where significant disparities remain,” said Beyer. “In the latter category, the unemployment rate for Blacks is almost twice what it is for Whites, which is unacceptable. Closing persistent, and in some cases, growing gaps between the economic experiences of White Americans and Black Americans is vital to helping our society overcome its history of racial discrimination.”

The report shows that Black Americans have made substantial progress, for example:

  • Black college graduation rates more than doubled from 1990 to 2018.
  • By 2017, the share of Black women enrolled in college exceeded the share of White men enrolled.
  • Incarceration rates for Black Americans fell by nearly one-third between 2007 and 2017.
  • The gap in life expectancy between non-Hispanic Blacks and Whites decreased between 2006-2010, though progress since has stalled.

Yet glaring inequities persist:

  • The Black unemployment rate remains twice as high as the White unemployment rate (6.0 percent vs 3.1 percent in January 2020).
  • The median net worth for White families is nearly 10 times greater than for Black families.
  • Black households earned just 59 cents for every dollar White households earned in 2018.
  • Fewer than half of Black families own their home compared to nearly three-fourths of White families.

Congressman Beyer is currently serving his third term in the U.S. House of Representatives, representing Northern Virginia suburbs of the nation’s capital. In addition to his role as Vice Chair of the JEC, Beyer serves on the House Committee on Ways and Means and the House Committee on Science, Space and Technology. 

In December 2017, just days before President Donald Trump signed the $1.9 trillion tax legislation that would create sweeping changes to the U.S. federal tax system, he told television viewers that “it’s going to be one of the great Christmas gifts to middle-income people.”

For several months, the president had been selling the legislation on the claim that the tax cuts would “be rocket fuel for our economy.” His claim was critical to defending against the criticism that most of the tax cuts would go to corporations and the very wealthy—supposedly, the money would ‘trickle down’ to the middle class. Unfortunately, nearly two years of evidence show that his administration's estimates were wildly wrong.