Mailing a letter the other day, I saw a “Help Wanted” sign in the post office window, for jobs starting at $17.59 an hour.
Some quick math in my head and that’s about $700 a week, which is maybe $600 of take-home after taxes. Here in Washington, a person who earned $700 a week before Covid-19 gets $350 of state + $600 of federal benefits, or $950 a week. Or did until the federal add-on expired July 31.
You see the problem.
And why extending those federal benefits is a sticking point in negotiations over the relief bill bogged down in Congress.
Despite the massive unemployment caused by Covid-19, there are some job openings, and employers are having trouble filling them. Republicans argue that’s why. Is this common sense, or a vacuous, vapid, substanceless political talking point?
No, it’s not simple, it’s complicated. Hardly anything involving complicated public policy is simple.
There’s a lot going on here. Let’s start with this: Trump is no longer an outlier; today, Trump and the GOP are one and the same, because the Republican establishment has fallen in behind him and marches in lockstep with him. So, for our purposes here, the words “Trump” and “GOP’ are interchangeable.
Now to brass tacks. 1. Trump has pushed to reopen the economy. 2. Trump is pushing to reopen schools (so parents can work). 3. Trump and GOP governors have tried to force workers leaving jobs because of safety concerns (see, e.g., meatpacking plants) back to those jobs. 4. Red states tend to have low unemployment benefits. (Oklahoma’s max is $44 a week.) 5. Trump and GOP senators have been hostile to extending the federal “plus” unemployment benefit, or at least want to slash the amount and shorten its life. What this adds up to is they want to let businesses reopen, pandemic be damned, and force scared workers to return to their jobs, health risks be damned, so the businesses can. This isn’t an ideology, it’s a policy, driven by practical motives.
Broadly speaking, the GOP is the party of business, which is concerned about profits, while the Democrats represent workers, who are worried about paying bills and not dying from Covid-19. The disagreement over extending federal add-on unemployment benefits stems from these clashing priorities.
These benefits are “helicopter money,” as were the $1,200 payments to individuals (which, technically, are tax credits; so you don’t have to report them as income or pay taxes on them — remember this when you fill out your 2020 tax return next year. The fact they’re effectively a tax cut also explains why Republicans like them, and are proposing them again, because as everyone knows Republicans love to cut taxes). It’s important to think of them as such, because that defines what comes next.
The concept of “helicopter money” isn’t new. Former Federal Reserve chief Ben Bernanke talked about it, and floated the idea, at the time of the 2008 financial crisis and Great Recession. To save myself space here, I’ll just refer you to the Wikipedia explanation of “helicopter money” here. Suffice to say its purpose is to get money into the economy to stave off contraction. Whether you do it by giving money to banks, businesses, or individuals is incidental. The phrase comes from the imagery of throwing cash out of helicopters, which nobody advocates literally doing, it merely underscores the point that it doesn’t matter who picks it up, as long as it gets into the economy.
The Democrats recognize these benefits’ utility as “helicopter money,” but also strongly desire to use them to help the millions of workers pushed out of their jobs by Covid-19 to stay afloat. They’re not against work, but they’re against shoveling kids into unsafe schools or pushing workers into unsafe working conditions, and have resisted reopening businesses and schools, and ending unemployment benefits, too soon.
Although Republicans have some differences with Democrats with respect to competing economic theories and policy preferences, they unquestionably recognize the utility of these benefits as “helicopter money,” too. After all, they approved the federal add-on benefits that expired on July 31, which couldn’t have happened if blocked by the GOP-controlled Senate and/or Trump’s veto. Even in the current impasse, they’re exhibiting some flexibility on continuing these benefits, in some amount, for a time.
They’re being practical. They understand not everyone can return to work right away. They want to remove what they see as a disincentive to returning to work as soon as there’s work to return to.
But these benefits — the “helicopter money” — are a disincentive only if people can return to work, and choose not to. Otherwise, it doesn’t matter if they get more from collecting unemployment benefits than they would earn from a job. It simply doesn’t matter; and getting that “helicopter money” in circulation — plus enabling people to pay mortages and rent, pay bills, and buy food — does matter. A lot.
As for whether Republicans’ insistence on reducing and time-limiting these benefits is a sensible policy or an empty talking point, I can only tell you what my opinion is. I think it’s somewhere in between, and I think a deal will be struck somewhere between the Democratic and Republican positions on the issue, which from a policy perspective is probably the best outcome for society as a whole.
Here’s my reasoning. We need to keep that “helicopter money” flowing while the economy needs it, which is until it’s replaced by wages. That will happen when people have real jobs, not theoretical jobs, they can return to. So, theorizing about “disincentives to working” doesn’t get you there. This isn’t b.s., it’s merely inapplicable right now.
Intertwined with this is your judgment of when people can return to jobs. On this, Trump and the GOP have zero credibility. They’ve blown it. They were wrong about how serious Covid-19 would be; they didn’t prepare for it; Trump, instead of leading a coordinated national response, tried to dump the problem (and responsibility) on ill-prepared states; and, against scientific and medical advice, pushed for reopening the economy as fast as possible — not because it was safe, but because Trump’s re-election hopes are pinned on a strong economy. The Republican lieutenant governor of Texas, who hasn’t learned when to keep his mouth shut, even went so far as to suggest sacrificing the lives of senior citizens for the sake of the economy. That was back when Republicans thought Covid-19 only kills people over 65. And, of course, it didn’t help to turn masks (they’re against them) and social distancing (they’re against it), our two best weapons to fight the spread of Covid-19, into a political issue and partisan rallying cry.
Unless your head is a block of cement, you probably won’t trust Republicans’ judgment about when people can go back to their jobs, and when we can replace “helicopter money” with wage income. The Democrats’ judgment of that may be flecked with some partisan bias, but better to err on the side of the life preserver, rather than telling drowning people to “swim.” At least, that’s where I lean on this.
Until now, the federal add-on benefit has been a flat $600 a week, not tied to how much the recipient earned prior to becoming unemployed. Democrats want it to stay that way, which is the position most consistent with viewing these benefits, first and foremost, as “helicopter money.” One of the things Republicans want to do is make these benefits a percentage of the individual’s previous wages. They’re working with 70%. Democrats don’t like this idea on principle, actually several principles, but the argument they’re using is states can’t implement it. They’re computer systems are incapable of doing the computations required on the mass scale required. This is certainly true; the GOP scheme would lead to chaos in the actual distribution of benefits, which is reason enough — a compelling reason — for not going that route.
Alternatively, Republicans want to reduce the flat benefit to $200 a week, to incentivize people to return to jobs that don’t exist yet, and may not ever exist again, if a lot of small businesses go under (which is likely). They also want to sunset these benefits after three more months. Democrats say that’s not enough to keep unemployed households afloat, nor is that long enough for the economy to reopen or all the jobs to return. And while they didn’t mention it, that also weakens the benefit’s utility as “helicopter money,” which I’m arguing here is its most important function of all — take away that money, and you turn a hopefully-temporary recession into a depression. Maybe a real bad one.
Here’s the latest update: “On Tuesday, the Trump administration team offered to extend extra federal unemployment insurance into December at $400 per week, NBC News and Politico reported.” (Read story here.) This is a big step toward meeting the Democrats’ demands, and what it means is Republicans are blinking first, Trump is caving in even faster than they are, and Democrats are winning the game of chicken.
The Republicans must be getting nervous about the election.
The next thing to watch is whether they back off “reopen now!” and recognize the reality that this deadly virus isn’t under control, we’re not ready to rip off our face coverings and start congregating again, and the economy isn’t going to bounce back all at once, or even soon. There’s reason to hope. A few days ago, Trump started telling people to wear masks.