Economists fear that if the expanded benefits aren’t reauthorized, it could lead to an absolute tidal wave of food insecurity, poverty, loan defaults, bankruptcies, evictions, foreclosures, and homelessness.
When Amy received her first unemployment insurance benefits after being furloughed from her restaurant job in mid-March, she was startled by the payment amount.
The 32-year-old resident of West Hollywood, California, received a biweekly payment of $250 from the state on April 6. “It was nothing close to what I was making,” said Amy, who asked that she be identified by first name only. “It was kind of disheartening and scary.” The payment equaled roughly one night of what she used to take home as a server.
The next time Amy received a payment, however, the amount had dramatically increased, thanks to the passage of the CARES Act, which expanded unemployment benefits by an additional $600 a week in federal funds to supplement what each state already provided. She described the extra money, which she continues to receive, as a “lifesaver.” (COURIER obtained a copy of Amy’s payment history and confirmed her benefit status.)
That lifesaver, however, may soon be taken away from Amy and tens of millions of other Americans who’ve relied on that income to get by after being laid off, furloughed, or having their hours reduced during the coronavirus pandemic. When Congress passed the CARES Act in late March, they had little idea just how catastrophic the pandemic-induced job losses would be and how long the economic carnage might last. The benefits came with an expiration date: July 31.
With that deadline roughly three weeks away, lawmakers in Washington are at an impasse. House Democrats have already passed a bill reauthorizing the expanded benefits through January 2021, but most Republicans oppose an extension, even though 58% of Americans want the expanded unemployment benefits extended beyond July.
“Over our dead bodies, this will get reauthorized,” Sen. Lindsey Graham of South Carolina said in May. Graham was one of the Republicans who unsuccessfully tried to strip the weekly payment boost from the CARES Act in March, and has repeatedly argued the benefits are too generous and will discourage Americans from working by paying them more in unemployment benefits than they would earn from the jobs they had prior to their layoffs.
Many workers do earn more from unemployment than they did from their previous jobs, but Democrats have argued that says more about low wages and income inequality than about the social safety net being too generous.
While Republicans have railed against the benefits, economists have largely agreed that they helped stave off utter calamity. “The extra $600 has been by far the most effective part of our economic policy response to the coronavirus shock,” Josh Bivens and Heidi Shierholz of the Economic Policy Institute wrote in May.
Indivar Dutta-Gupta, the co-executive director of the Georgetown Center on Poverty and Inequality (GCPI), agreed, saying the benefits helped prevent financial ruin for millions of Americans, especially the country’s most vulnerable communities.
“Job losses in this economy have been heavily concentrated among people who are the lowest paid, in low-income households, and disproportionately Black and brown workers and families, so the $600 weekly increase in unemployment benefits through pandemic unemployment compensation have been extraordinarily well-targeted and among the most stimulative spending that Congress has enacted to date,” Dutta-Gupta told COURIER. “The $600 weekly benefits increase has unquestionably prevented virtually every material hardship from being more prevalent and more intensely felt by people.”
The expanded program hasn’t been perfect. Virtually every state unemployment system was completely overwhelmed by the volume of applications and struggled to meet demand. This has led to long lines at unemployment offices and long hold times on the phone as frustrated jobless Americans tried to get updates on the status of their benefits. More than three months after the pandemic first began to spread in the U.S., hundreds of thousands of people across the country have still yet to receive their benefits.
But for those who have gotten their benefits, the additional funds have been life-changing, study after study shows. The law’s benefits prevented an estimated 12 million people from falling into poverty, according to research from Columbia University. Many of these Americans, however, will soon be left to fend for themselves amid the nation’s worst economic crisis in nearly a century if Congress doesn’t act.
What Will Happen If the Benefit Isn’t Extended?
Experts, like former Secretary of Labor Robert Reich, fear that if the expanded benefits aren’t reauthorized, the loss of that support could lead to an absolute tidal wave of food insecurity, poverty, loan defaults, bankruptcies, evictions, foreclosures, and homelessness.
“Every single material hardship you can think about is going to increase if we don’t extend the $600 pandemic unemployment compensation,” Dutta-Gupta said. “That includes hunger, homelessness, foreclosure, disease, and death as well, both from COVID-19, and even from the mental health challenges and stress that will ensue.”
If lawmakers don’t reauthorize the benefits, Amy will be back to receiving $250 every two weeks. “It’s a scary thing,” she said. “That’s not enough to live on.”
Amy has some savings and her partner is still employed, so she’s not in immediate danger of financial ruin, but she’s afraid of what will happen if the crisis drags on.
“If this shutdown goes on forever, me and many people I know would have to move cross-country back in with our parents to save money every month,” she said. In fact, many of her millennial peers are doing just that. “If my boyfriend lost his job, we definitely couldn’t pay our rent, and that’s not something that we ever thought we’d have to deal with.”
Many Black and brown people—who’ve faced higher rates of unemployment during the pandemic—would face tough decisions like that almost immediately. A study from the Center on Poverty and Social Policy at Columbia University found that “an end to the CARES Act’s income support after July 2020 may exacerbate racial and ethnic differences in poverty.”
What’s the Alternative?
Rather than extend the benefits, Republicans have said they may instead try to push for an employment “bonus” to provide cash aid to workers who find a job.
“I don’t think it’s productive to extend the added money from the federal government. We’re finding numerous people … that it’s becoming a hardship for individuals to go back to work,” House Minority Leader Kevin McCarthy (R-CA) said at a news conference last week. “We want incentives. We want all Americans to work. So our focus is to rebuild, to renew and restore America.”
Conservative economist and White House adviser Stephen Moore has also repeatedly railed against the benefits. “My message to the White House is: ‘If you want to lose the election, extend the $600 unemployment benefit,” Moore said in June.
Amy was angered by Republicans’ attempt to end the expanded benefits.
“I don’t know who raised these people that didn’t teach them how to step into someone else’s shoes, but there is an actual problem,” she said. To her, comments like that suggest Republicans believe service workers are “expendable” during a public health crisis.
“That is not a way to lead a country and that is not a way to treat people who pay taxes and who live in this country,” she added. “I find it really insulting, to be honest.”
But Isn’t the Economy ‘Roaring Back’?
Republicans have pointed to the nation’s recent jobs reports as proof that the economy was rebounding. The June jobs report, released Thursday, found that the economy added 4.8 million jobs as unemployment fell to 11.1% in June, down from 13.3% in May. But those numbers are still Depression-era figures and were collected during the second week of June, before the nation’s coronavirus outbreak began to spiral out of control and force states like Arizona, California, and Texas to hit pause on reopening or reinstitute restrictions.
President Trump said the June jobs report shows the economy is “roaring back,” but economists expect the recovery to take much longer than Trump’s rosy projections. Nineteen million Americans continue to receive unemployment benefits, and another 1.4 million people filed for unemployment benefits last week. In another ominous sign, the number of Americans who said they had lost their jobs permanently in June also rose by 600,000, to nearly 2.9 million.
All of those numbers could once again rise as parts of America hunker down for a second time. Economists have long warned that the economic benefits of allowing businesses to reopen would be short-lived if the virus wasn’t brought under control and people didn’t feel confident enough to dine out, travel, and shop.
They also refute the argument that generous unemployment benefits are preventing workers from returning to their jobs. “There is no evidence right now at all that businesses cannot hire people when they have jobs available,” Dutta-Gupta said. “People will return to work when there is demand for those jobs and they feel safe when returning to work.”
Amy is among those who does not feel safe returning to work. “I personally have asthma and my partner is diabetic and I really would not want to put myself at risk like that at a restaurant right now,” she said.
She has begun to look for other ways to make money, but is skeptical she’ll be successful.
“As this goes on longer, companies are realizing that they don’t know what their bottom line is going to be next quarter, and I just feel like hiring is coming to a slowdown and it will come to—I think—a halt at some point,” she said.
Dutta-Gupta also defended the expanded unemployment benefits as beneficial for the economy by citing a new Chicago Federal Reserve study of data from 2013 through 2019 that found that “those currently receiving UI benefits search intensely for new work, and their effort appears to be somewhat greater than that of the unemployed not receiving benefits.” The paper’s authors also found that once those benefits lapse, individuals’ search efforts drop “precipitously.”
This drop-off, Dutta-Gupta said, can be at least partially attributed to the discouragement that many unemployed individuals feel, which can often lead them to drop out of the workforce altogether.
“I think fundamentally the reason why more people aren’t employed has nothing to do with unemployment insurance,” he said. “If anything, unemployment insurance is probably one of the few things that are stimulating demand in the economy.” .
In fact, letting the benefits lapse might actually increase unemployment, argues Wayne Vroman, a labor economist who focuses on unemployment insurance benefits at the Urban Institute. Starting in August, households and individuals will experience a “major drop in income, because it’s unlikely they’re going to find employment in the very short run,” Vroman said. Faced with this decrease in income, these individuals will then cut back on spending, thus, driving down demand and forcing businesses to lay off more workers.
“We’re just in the middle of a highly uncertain situation, and the $600 ending just adds to the uncertainty,” he added.
Stephanie Kelton, a professor of economics and public policy at Stony Brook University and a former advisor to Sen. Bernie Sanders (I-Vermont), meanwhile, believes that expanding unemployment is beneficial to both individuals and businesses.
How to Get People Back to Work
“The right way to think about helping people get back to work is not that they need financial incentives to be employed, but that they need safe job openings and work opportunities to go to,” Dutta-Gupta said. “Study after study is showing that if you don’t control the virus, lifting state stay-at-home home orders and other restrictions will do almost nothing to boost economic demand and in the long run actually might reduce it by leading to surges in infections due to the coronavirus.”
But it’s not just about reauthorizing the unemployment expansion, he said. Congress must also develop a plan for the child-care sector.
“People aren’t going to be able to go back to work if they can’t do so in ways that don’t endanger their children,” he said. “The key test for me is: Are they willing to spend the tens of billions of dollars that we know the child care sector alone needs so that people can go back to work?”
As the crisis has spiraled in recent weeks, Democrats have introduced new bills to extend the $600-a-week in unemployment benefits and institute a nationwide moratorium on evictions, and there appears to be a growing recognition among Republicans that further action is needed.
Senate Majority Leader Mitch McConnell of Kentucky, who has blocked the House-passed Heroes Act for nearly two months, said on Monday that he believed another relief bill would be necessary and might even include direct stimulus checks. But McConnell also said he wants to implement liability protections for hospitals, doctors, nurses, businesses, colleges and universities.
“If you’re looking for what I think the theme of what a next package that I’m likely to roll out here in a few weeks would focus on: liability reform, kids in school, jobs and health care, that’s where the focus, it seems to me, ought to be,” McConnell said.
Democrats and advocates have largely opposed legal protections for businesses because they would protect institutions and individuals from COVID-19 related lawsuits, even if they don’t take adequate measures to address the safety and health of their employees, customers, and patients.
Whether a deal is reached and whether the unemployment benefits are expanded remains to be seen. But the cost of not acting as COVID-19 continues to spiral out of control is becoming increasingly scary to ordinary Americans.
“That $600 felt like such a lifeline and it does feel like it’s running out before we even have a handle on the pandemic or any idea how to move forward, so it is a very scary thing,” Amy said. “If we don’t give millions and millions of people that are on unemployment a lifeline, I can’t imagine the world we’re going to see in six months.”