Wall Street Journal 08_04_2020

A4| Wednesday, April 8, 2020 PWLC101112HTGKRFAM123456789OIXX ***** THE WALL STREET JOURNAL.

In the scramble to contain the coronavirus financial fallout, U.S. policy makers have embraced an ambitious big- government agenda—from new worker protections to a guaranteed minimum income— that could redefine Washing- ton’s role in the economy. The evolving emergency response playbook, adopted by the White House and congressional leaders from both par- ties, draws from key elements of the liberal activist platform honed over the past decade. These include: extending to gig workers unemployment benefits; shielding hard-hit renters from evictions; giving relief to those with student debt; and creating guidelines governing how private companies pay their executives, re- ward shareholders, and inter- act with organized labor. Most of these measures—as adopted over the past month through regulation, executive order and the roughly $2 trillion relief package and other legislation—are temporary and are being diluted in the imple- menting rules. Trump administration officials and congressional Republicans portray these actions as tailored to the unique circumstances of this unusual economic shock, not a longer-term shift in governing principles. Democrats see the policies as just the beginning of a more ambitious overhaul to fix what they consider pre-existing economic ailments ex- posed by the crisis. These arguments will play out in the coming weeks, as lawmakers debate whether to craft another relief package and to extend any policies en- actedsofar. Even in limited form, the policies embraced in the pandemic response are significant for shifting the debate over government intervention to fix perceived market failures. This has by no means been a sweep- ing New Deal-style overhaul.

before getting laid off. Steelcase Chief Executive Jim Keane said he had no choice but to temporarily lay off thousands of the company’s hourly workers after the office- furniture maker last month had to shut its Michigan factories. What softened the blow, he said, was that many of his employees were actually going to receive the same money as they did in their paychecks because of the recently passed federal stimulus bill. “The combination of state unemployment benefits plus the federal unemployment benefit is nearly a complete re- placement for our Michigan factory workers who were laid off. It made that part of the decision more palatable,” he said. Macy’s Chief Executive Jeff Gennette said the new benefits in the federal-stimulus program played a role in the company’s decision to furlough 125,000 workers this past week. The retailer’s leadership team decided that the extra $600 a week, plus the fact that Macy’s would continue paying health benefits through May, provided enough of a cushion to furloughed workers, he said. Like Macy’s, Equinox is also continuing to provide health insurance to all staffers already enrolled, and the company said it plans to welcome back furloughed employees when its gyms reopen. A spokeswoman said the company “has had to make a number of difficult de- cisions that impact individual roles and payroll at all levels of the organization.” Other parts of the stimulus package encourage companies to keep people on the payroll. The Small Business Administra- tion’s Paycheck Protection Pro- gram allows companies to take out loans that are forgivable if they keep their workforce largely intact and use the money for eligible expenses such as rent and utilities. Companies of all sizes risk losing their employees for good if they opt to lay them off, whichiswhysomanyare choosing to furlough people, Ms. Lamb said. A furlough gen- erally implies that an employee’s hours are cut, often completely, but that they will be recalled back to work at some point. Furloughed workers qualify to apply for unemployment benefits in the same way that people who are fully laid off do. For companies that don’t qualify or are unwilling to take

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But the pandemic may, like the Great Depression, foster struc- tural policy change that out- lasts the calamity itself. “It’s been shocking how cer- tain ideas that had been viewed as fringe and partisan have quickly come into the main- stream,” said Ed Mills, a Wash- ington policy analyst for Ray- mond James & Associates, a Florida-based brokerage. “These tools are now in the tool kit. They will be used again.” One big shift is in the raft of new labor policies. The U.S. has historically fa- vored flexible labor markets, with the government leaving struggling firms free to shed employees, while helping workers find new jobs. By con- trast in Europe and Asia, officials prioritize keeping workers in existing jobs. Now, the U.S. government is encouraging and cajoling employers to maintain their workforce. The $800 billion in grants and loans for companies comes with incentives and mandates to minimize layoffs. Congress also has authorized funds sub- sidizing European-style work- sharing, in which distressed employers avoid shedding workers by reducing working hours for each employee. For companies saying they still need to cut payroll, new policies encourage furloughs over layoffs by widening ac- cess to unemployment insurance. Under a furlough, workers are ostensibly assured their jobs back when the downturn

ends; and while they lose pay, they often keep benefits. Organized labor has also won new protections. One new rule says that larger corporate aid recipients are required to honor existing collective bar- gaining agreements for the duration of their federal loans and two years beyond. That provision flows from the lingering political fallout from the bailouts during the 2008 financial crisis. “Compa- nies that took bailout money said, ‘Let’s share the sacrifice, we have to renegotiate our agreements,’ ” said Sharon Block, executive director of the labor and worklife program at Harvard Law School. “Then shareholders benefited quickly during the recovery, while it took workers—espe- cially auto workers—a long time to get back to where they were before,” said Ms. Block, who was a labor adviser in the Obama White House. Additionally, some companies seeking federal funds are facing restrictions on their ability to oppose attempts to unionize their workforce. One of the new laws states they should “remain neutral in any union organizing effort for the term of the loan.” “To tell companies they can’t even do things that are otherwise lawful and legiti- mate—that’s a pretty huge re- striction,” said Joseph A. Hall, co-head of the corporate gov- ernance practice at Davis Polk & Wardwell LLP. Beyond unions, labor advo-

cates have grown increasingly vocal in recent years about two causes: expanding paid sick leave to low-wage workers and extending benefits to many workers currently excluded from such programs. Among them are the so-called gig workers, the growing workforce classified as self-employed and independent contractors. Under the relief program, Congress requires companies with 500 or fewer employees to provide two weeks paid sick leave, although there are ex- emptions. Lawmakers created an unemployment assistance fund, running through July, of- fering independent contractors jobless benefits normally available only to workers des- ignated full-time employees. Washington has also altered longstanding conventions on income-support policies, with its $1,200 payments coming soon to most Americans. Over the past three de- cades, those programs have come with strings attached. They require recipients to earn a minimum amount before they can get a government check, with payments starting small and only getting bigger, as recipients earn more. The relief plan drops the earnings requirements, expanding eligibility and creating a near-universal income guarantee, at least for the next few weeks. Also in the response program is targeted relief for renters and people with student loans—precrisis causes for some progressive politicians. Some firms receiving public money will be banned from re- turning cash to shareholders through stock buybacks and dividend payments—not only for the duration of their loans, but for an extra year beyond. Businesses receiving aid face government limits on how much they can pay their executives, and the new law says they shouldn’t “outsource or offshore jobs for the term of the loan and 2 years after com- pleting repayment of the loan.”

BYJACOBM.SCHLESINGER

Crisis Expands Government Role

As Liberal, Labor Goals Advance

on all the conditions of the federal loans, there is some com- fort in the fact that their furloughed employees can get unemployment at a sustainable level, said Kathleen Anderson, a Fort Wayne, Ind., employment attorney at Barnes & Thornburg. Some of Ms. Anderson’s cli- ents are essential businesses that have employees who would make more in the short term under the federal benefits program and, in some cases, have asked to be laid off. Some of those workers are fearful for their safety—and that of their family members—during the pandemic, she said, and would rather take the federal benefit and not come into work. Steelcase’s Mr. Keane said he made voluntary layoffs available for his salaried workers. He estimated that some would take the newly expanded federal unemployment benefits, which would allow him to use the expected savings to curb pay cuts for some of the company’s other salaried workers. “We think this bill is going to make voluntary layoffs more attractive, so let’s find a way to make that be possible for people for whom it’s a good choice and then take the savings and share that back,” he said. Nick Mann, 30 years old, worked his last shift as a bar- tender at a Philadelphia sushi restaurant in mid-March. He filed for unemployment benefits, and expects to receive $341 a week from the state. The $600 federal unemployment benefit has been delayed. Mr. Mann is looking for jobs in other fields, such as sales or information technology. He

said he may dip into savings to pay his $630 monthly rent. “In general, I’m pretty opti- mistic,” Mr. Mann said. “The only thing I’m pessimistic about is the amount of time this is all going to last.” While the new stimulus measures will boost unemployment assistance, it won’t last long. Brenda Eaden, 67, was furloughed from her position as a sales associate at a Macy’s store near Seattle. Ms. Eaden said that she is counting on unemployment payments and that she and many of her colleagues are filled with uncertainty. “We know how to plan for the next four months, and that’s about it because of the unemployment and the extra stimulus,” she said. “After that, we’re screwed.” —Suzanne Kapner contributed to this article.

THE CORONAVIRUS PANDEMIC

leaders about the package. “We’re going to be going for, it looks like, a very sub- stantial increase in the number, because we will be running out of money pretty quickly—is a good thing, in this case, not a bad thing,” Mr. Trump said. Senate Majority Leader Mitch McConnell (R., Ky.) said he was aiming to pass a bill by the end of this week. With lawmakers out of town, Mr. McConnell will need agree- ment with Senate Minority Leader Chuck Schumer (D., N.Y.) to pass the measure through unanimous consent or a voice vote. Lenders have been inun- dated with applications for the funds since the program launched on Friday. The loans, capped at a maximum of $ million for businesses with 500 or fewer employees, are in- tended to cover roughly two months of essential costs, and

the government will forgive debt if businesses don’t lay off workers. Many businesses have had to shut down or sharply reduce staffing amid the coronavirus outbreak. The Small Business Admin- istration has recorded 220, loans totaling roughly $66 billion as of Tuesday, according to a letter sent by the administration to congressional leaders to formally request the additional funding. “Given the level of demand for the program, the administration believes the funds ap- propriated for this program will soon be exhausted,” act- ing Office of Management and Budget Director Russ Vought wrote. Still, very few small businesses are reporting that they have received any money from the program. After the SBA approves a loan, it is up to the banks to actually provide the funds.

“We are looking at laying off 28 people if we don’t get the PPP as promised by the government,” said David Levinson of Dino’s Pizza Bur- bank, in Burbank, Calif., who said he had applied for a $220,000 loan on Friday when the program began. He said he closed the restaurant on March 30. The program is designed to keep employees in small firms on company payrolls—or have them rehired—rather than see them added to burgeoning ranks of the unemployed. But it doesn’t provide money for the firms to gear up to do business once the pandemic fades. House Speaker Nancy Pelosi (D., Calif.) said on CNN Tuesday afternoon that she discussed passing an “interim package” for small businesses with Mr. Mnuchin. She said House Democrats would look to include measures aimed at

equitably distributing the money. While negotiations aren’t yet complete, House Majority Leader Steny Hoyer (D., Md.), said that the House could approve additional small business assistance this week. House Minority Leader Kevin McCarthy (R., Calif.) also said the House should move to approve additional funding after the Senate has. The bid to rapidly put into place more small-business relief could run into difficulty if lawmakers insist on including other relief measures in the bill, rather than in a subse- quent one, or otherwise object- ing. Any individual lawmaker could stop an effort to pass the bill by unanimous consent. Earlier Tuesday, Senate Democrats sidestepped the question of whether they would block more money for small businesses in a bid to en- sure that some of their priori-

ties, including higher pay for essential workers, are included in the next aid package. “This is one of our very highest priorities,” Mr. Schumer told reporters on a call Tuesday, talking about a proposal to boost compensa- tion for health-care workers, grocery clerks, transit employees and other essential workers. A spokesman for Mr. Schumer said Tuesday he hadn’t heard from Mr. McCon- nell about the small-business plans. On Monday, Mrs. Pelosi told the Democratic caucus in a call that there must be more assistance for small businesses and for those who rely on food stamps in the next package, according to multiple Democratic aides. She saw this funding as part of a new bill worth at least another $1 trillion, on top of the $2.2 trillion bill signed into law last month.

WASHINGTON—The Trump administration and top lawmakers said they hope to move within days to approve hun- dreds of billions of dollars in

new funding for small-business loans, citing widespread demand for assistance from firms hit by shutdowns related to the coronavirus pandemic. Heavy requests for the pre- viously approved $350 billion in loans are pushing Republi- can and Democratic lawmakers to consider augmenting the Paycheck Protection Program less than a week after it started accepting loan applications. President Trump said he supported providing an additional $250 billion in funding for loans, and Treasury Secre- tary Steven Mnuchin said he had spoken with congressional

ByAndrew Duehren, Peter Rudegeair andBob Davis

U.S. Seeks to Boost Small-Business Loans

People waited in long lines Tuesday to apply for unemployment benefits in Hialeah, Fla., as the state attempts to fix its website.

CRISTOBAL HERRERA/EPA/SHUTTERSTOCK

New Deal (1936)

World War II (1945)

Great Society (1968)

Financial Crisis (2009)

Coronavirus (2020)*

0% 5 10 15 20 25 30 35 40

Peak federal spending as percentage of GDP

*Spending authorized as of March 27. Total likely to increase. Sources: St. Louis Fed (1930-2009); Hamilton Place Strategies (2020)

Firms Cite

Stimulus

In Layoffs

While the stimulus measures will boost assistance, it won’t last long.

Macy’s has closed its stores and furloughed most of its employees.

ANDREW HARRER/BLOOMBERG NEWS

Wall Street Journal 08_04_2020

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