The New York Times - USA (2020-07-22)

That means that more than 20

million Americans could soon see

their weekly income fall by half or

more at a time when the unem-

ployment rate remains higher

than in any other period since

World War II.

Economists warn that it isn’t

just individual recipients who will

suffer if the benefits are cut. The

federal payments are injecting

billions of dollars into the econ-

omy each week, money that flows

to landlords, grocery stores, re-

tailers and countless other busi-

nesses. Ernie Tedeschi, a former

Treasury Department official and

an economist at Evercore ISI Re-

search, has estimated that if the

payments ceased, the U.S. gross

domestic product would be 2 per-

cent smaller at the end of 2020

and there would be 1.7 million

fewer jobs nationwide.

“These unemployment benefit

checks are really doing a large job

in propping up spending by these

unemployed households,” said Jo-

seph Vavra, a University of Chi-

cago economist who has been

studying the impact of the bene-

fits. If they expire, he said,

“there’s a good chance that what

is now an unemployment problem

becomes a foreclosure crisis and

eviction crisis.”

Congress returned from recess

this week to consider a new relief

package, which could include at

least a partial extension of the ex-

tra unemployment benefits. Sen-

ate Republicans and the White

House are considering a roughly

$1 trillion package that would re-

tain the program but scale it back.

Democrats are pressing to contin-

ue paying the full $600 a week.

But Congress seems unlikely to

act before benefits lapse. And be-

cause of the antiquated computer

systems in many state unemploy-

ment offices, which do the pro-

cessing, it could take weeks to re-

start payments. That means that

millions are likely to see their in-

come drop at least temporarily.

For people depending on the

checks, that uncertainty is frus-

trating.

“I have no idea why Congress

would wait until a few days before

the checks are going to run out,”

said Jacob Perlman, a benefits re-

cipient in Chicago. “This should

have been done a month ago.”

Mr. Perlman, 26, earned $12 an

hour as a housekeeper at a fitness

club, making him one of the mil-

lions of Americans earning more

on unemployment than they had

on the job. But he is eager to re-

turn to work.

“The jobs simply are not there

right now,” he said.

Mr. Perlman’s regular benefits

from the state of Illinois total $

a week, barely enough to cover his

$500 share of the monthly rent, let

alone food or other expenses. So

he is already trying to save as

much as possible.

Decisions like Mr. Perlman’s to

curtail spending even before the

benefits expire, multiplied across

millions of households, are a sort

of uncertainty tax on the broader

economy, damping the stimula-

tive effect of the payments.

“There are people who are on

the precipice of financial disaster

here,” said David Wilcox, a former

Federal Reserve official who is an

economist at the Peterson Insti-

tute for International Economics.

“We may think that the odds are

that Congress will come to a rea-

sonable conclusion. But for a per-

son who is on the precipice of fi-

nancial disaster, it’s very low com-

fort to be told, ‘You know, I think

there’s a 70 percent chance that

this is going to work out fine.’ ”

The risk is particularly acute

for Black and Latino workers,

who have been disproportion-

ately affected by job losses and

are less likely to have savings or

other assets to fall back on. A re-

cent working paper from re-

searchers at the University of Chi-

cago and the JPMorgan Chase In-

stitute found that Black and Lati-

no households cut spending by far

more than white households

when their income drops.

“When 30 percent of your popu-

lation has no wealth, this has real

implications,” said William E.

Spriggs, a Howard University

professor and the chief economist

for the A.F.L.-C.I.O. “There isn’t a

piggy bank. This is it. So when you

cut their benefits, their drop in

consumption is going to be huge.”

The extra unemployment pay-

ments were part of a multitrillion-

dollar federal response to the pan-

demic’s economic devastation.

Congress expanded eligibility for

unemployment benefits and food

stamps, sent $1,200 checks to

most households and offered for-

givable loans to millions of small

businesses.

Together, those programs did

much to offset the damage: Aver-

age personal income rose in April,

the worst month of the crisis to

date, and consumer spending re-

bounded quickly once federal dol-

lars started flowing into the econ-

omy. Mortgage delinquencies,

credit card defaults and other

signs of financial stress rose by

less than many forecasters ini-

tially feared.

When Congress created the

various programs, it still seemed

possible that the pandemic would

have begun to ebb by summer and

that the economy would no longer

need as much federal help.

Instead, after falling steadily in

May and early June, virus cases

are rising in much of the country,

and states are reimposing busi-

ness restrictions. Real-time meas-

ures suggest that the economic

recovery that began in May has

begun to lose momentum, and

some economists expect the un-

employment rate to start climb-

ing again.

The threat of an economic stall

has led some Republicans in

Washington to embrace more ag-

gressive federal action than they

were considering a few weeks

ago. Larry Kudlow, a top eco-

nomic adviser to President

Trump and a critic of the $

payments, said this week that

there was “no way” Republicans

would allow the benefits to expire

entirely. But the congressional

outcome remains unclear.

Some economists, particularly

on the right, say there are good

reasons to wind down the pay-

ments as the economy improves.

But even economists who have

been critical of the extra benefits

say it would be a mistake to cut

them off entirely.

“That’s a lot of income to just

withdraw from the economy re-

ally suddenly,” said Michael R.

Strain, an economist at the con-

servative American Enterprise

Institute. “Right now there’s no

question that the positive eco-

nomic effects of those payments

are outweighing the negative eco-

nomic effects.”

Mr. Strain and many other

economists would like to see the

benefits linked to economic condi-

tions, ideally at the state level.

That would allow payments to

shrink as local economies im-

prove, while eliminating the un-

certainty that comes with setting

a fixed end date and then waiting

to see if Congress extends it.

Progressive economists also fa-

vor linking benefits to economic

conditions. But they dismiss con-

cerns about discouraging work

when there are millions more un-

employed workers than available

jobs. And they argue that cutting

benefits now would set off eco-

nomic ripples that would lead to

more job losses.

“When they can’t pay their rent,

now it’s the landlord whose busi-

ness is hurting,” said Sharon Par-

rott, a senior vice president at the

progressive Center on Budget

and Policy Priorities. “Those are

all dollars that are not circulating

through the economy.”

Cutting off benefits could also

increase the spread of the virus by

forcing people to take jobs in

which they might be exposed to it

or expose others.

“When that $600 goes away,

people who live week to week,

paycheck to paycheck, they’re

suddenly going to be unable to

pay basic expenses and will be

desperate for work,” said Michele

Evermore, a senior policy analyst

for the National Employment

Law Project.

For now, people like Mr. Perl-

man, who lost his job at a fitness

club, are left to wonder what

comes next.

“I just want security,” he said.

“That’s what I want. I’m not look-

ing to profit off this. If there was a

job out there, I would take it.”

A8 N THE NEW YORK TIMES, WEDNESDAY, JULY 22, 2020

Tracking an OutbreakThe Stimulus

Millions of Americans Risk Losing

$600 Weekly Benefit, and a Lifeline

‘There are

people who are

on the precipice

of financial

disaster here.’

DAVID WILCOX,
a former Federal
Reserve official who is
an economist at the

Peterson Institute for
International Economics.

From Page A

UNEMPLOYMENT SUPPLEMENT

REBEKKA DUNLAP

Emily Cochrane contributed re-

porting.

WASHINGTON — Republican
leaders labored on Tuesday to
avert a party revolt over the next
round of coronavirus aid, an-
nouncing that they planned to pro-
vide $105 billion for schools, direct
payments to American families
and more aid for struggling small
businesses as rank-and-file law-
makers balked at the proposal’s
cost.
Even as Senator Mitch McCon-
nell of Kentucky, the majority
leader, divulged details of his
emerging plan, expected to total
roughly $1 trillion, President
Trump had yet to sign on and Re-
publicans remained deeply divid-

ed over several key elements.

Ahead of what are expected to

be fraught negotiations with Dem-

ocrats, Senate Republicans and

White House officials were still

fighting among themselves over

how much money to devote to

testing and the federal health

agencies on the front lines of the

virus response, whether to in-

clude a payroll tax cut that Mr.

Trump has demanded, and how to

address the expiration of en-

hanced unemployment benefits at

the end of the month.

It was an inauspicious start to

talks on the measure, and top Re-

publican officials privately cau-

tioned on Tuesday that the coming

negotiation, a wide-ranging elec-

tion-year brawl, was likely to

stretch into August, leaving tens

of millions of unemployed Ameri-

cans without extra help as Con-

gress hammers out the latest re-

covery plan and the virus surges.

“We’re going try to get some-

thing done by the end of next

week,” Treasury Secretary Steven

Mnuchin said after meeting with

Mr. McConnell, telling reporters

that he planned to update Mr.

Trump on the day’s discussion.

But during a private lunch that

Mr. Mnuchin attended with Mark

Meadows, the White House chief

of staff, some Republican senators

balked at the prospect of doling

out another trillion dollars in tax-

payer funds and bickered over

what should be included in their

opening bid, according to five peo-

ple familiar with elements of the

discussion, who spoke on the con-

dition of anonymity to disclose de-

tails of a private meeting.

“What in the hell are we do-

ing?” Senator Ted Cruz, Republi-

can of Texas, asked at one point

during the lunch, arguing that Re-

publicans should prioritize re-

opening the economy instead of

spending more money.

Democrats, who are pressing

for a much more expansive, $

trillion measure along the lines of

what the House approved in May,

said the Republicans’ disputes

were standing in the way of the bi-

partisan negotiation needed to get

the measure to the president.

“We have been united in our pri-

orities; their delay is their disar-

ray,” said Speaker Nancy Pelosi

after meeting with Mr. Mnuchin

and Mr. Meadows in her Capitol

office suite along with Senator

Chuck Schumer of New York, the

minority leader. “We want to see

what they’re putting forth.”

Several elements of the Repub-

licans’ plan remained in flux, and

Mr. Trump told reporters at the

White House late Tuesday after-

noon that he had yet to be briefed

on it. Still undecided was how the

bill would address the expiration

of a $600-a-week unemployment

benefit supplement put in place by

the stimulus law enacted in

March. Republicans have made

clear that they intend to scale

back the payment, which they say

disincentivizes work because it is

larger than what workers in some

parts of the country earn in regu-

lar wages.

Mr. McConnell, who said he

hoped to release a final version of

his measure in the coming days,

doubled down on his insistence

that the package include liability

protections for businesses, medi-

cal workers, schools and busi-

nesses navigating the pandemic

— a proposal that Democrats

fiercely oppose.

“I’m going to introduce a bill in

the next few days that is a starting

place that enjoys fairly significant

support among Republican sena-

tors, probably not everyone,” he

said at his weekly news confer-

ence.

“There’s always room for nego-

tiation,” he added, “because the

Democrats are not irrelevant.”

Mr. Schumer, however, said Mr.

Mnuchin and Mr. Meadows only

put forward vague ideas about

what they wanted in a deal when

they met with him and Ms. Pelosi

on Tuesday afternoon.

“Before we can negotiate, we

need to see what their specific

plan is,” Mr. Schumer said.

“They’re all in disarray, and you

hear different Republicans say

different things. We can’t negoti-

ate on a vague concept.”

CONGRESS

By EMILY COCHRANE

and LUKE BROADWATER

Republicans Squabble Over What to Include in Next Round of Virus Relief

Jim Tankersley and Nicholas Fan-
dos contributed reporting.