Cutting off Additional Unemployment Benefits While Millions are Unemployed Would be a Human and Economic Catastrophe
Jun 04 2020
Most public health experts believe that it is too soon to begin reopening the economy. Few states meet the guidelines for reopening; and there are far too few effective tests to determine how widely the disease has spread. Although some other industrialized countries have developed sophisticated contact tracing programs to contain the virus, in the United States there is no system in place.
The rate of growth of confirmed cases has slowed overall, but it is rising in some parts of the country. Epidemiologists widely believe that the number of actual infections is much higher because the lack of testing means that even many of those who have symptoms aren’t counted in the official figures. The rate of growth of deaths also has slowed, but not much from the recent peaks. Experts believe that the death rate from COVID-19 also is substantially understated.
Nevertheless, President Trump has advocated relaxing social distancing mandates since late March—even before the number of confirmed cases exploded, causing what likely will exceed 100,000 American deaths by Memorial Day. Although he now claims that he leaves such decisions to the states, he has applied tremendous pressure and even has threatened governors who oppose him.
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.