New Economic Misery Index

Update 426: New Economic Misery Index;
Weekly Initial Jobless Claims Out Tomorrow

With the nation bracing for more bad news tomorrow, the sense in Congress is that the historic $2 trillion Corona III won’t be enough. Indeed, talks (over the phone) are already in progress on a fourth Corona bill. We hear some talk of a traditional infrastructure package but larger, that it can be sold as a recovery measure. 

Today, the U.S. leads the world in coronavirus cases and the national statistical curves look vertical. How could you decide on a recovery program when the range of possible economic outcomes is so vast? With the nation bracing itself against pain, recovery seems to deny the clear and present crisis. We hope a fourth coronavirus bill will be comprehensive and focus on continuity of essential economic functions. 

Today, we evaluate Corona III and explore an alternative approach to Corona IV.




On Friday, President Trump signed the third coronavirus package into law. The $2 trillion-plus bill is a hodgepodge of economic stimulus and relief measures, the largest of which was a $500 billion fund for large corporations. Nor is it well-designed as stimulus. It does provide generous but temporary relief. We will need to return to the table and even as the House and Senate are in recess, members of Congress are already beginning to discuss a probable fourth coronavirus package.

Corona III Corrections

Much of the $2.2 trillion Corona III package focused on big businesses and untargeted cash relief instead of supporting small businesses and ensuring adequate health care during the pandemic. In proportional terms, the third coronavirus package appropriated a staggering 23 percent of total funds towards corporations. In comparison, only 16 percent of the funds went to small businesses, 5 percent to hospitals, and .02 percent to election assistance. Big business received over four times the amount of assistance as hospitals. 

Compounding proportionality concerns, the bill was deeply flawed, and did not include key policies:

  • Oversight of the Corporate Slush Fund: After disagreements doomed the passage of the initial version of the package, Republicans agreed to some oversight of the $500 billion in funds for corporations. Even after Senate Republicans ensured that Treasury Secretary Mnuchin would have the authority to waive the prohibitions on stock buybacks and paying dividends, Trump overruled the issue with a signing statement rejecting the entire oversight provision.

    The strictest requirements only apply to airlines, cargo carriers, and “businesses critical to maintaining national security,” which may be required to provide the government with equity stakes to receive funds and which the bill prohibits from reducing their workforce by more than 10 percent through September. Only airlines are banned from cutting employee wages. 
  • Protections for Frontline Workers: Beyond cash payments, which are unavailable for many immigrant workers, Corona III provides few safeguards for health care and other essential workers. Warehouse, sanitation, and poultry workers have staged nation-wide strikes to protest their treatment at a time when their industries are demanding that they work longer and harder under worse conditions. Health care workers, grocery store employees, delivery drivers, contractors for ride-share services, and agricultural workers, among others, are largely operating without needed personal protective equipment, adequate compensation, and sufficient paid sick and family leave under uniquely dangerous circumstances.

Congress Gearing up for Corona IV

Congress is currently recessed until April 20, at which point members will likely begin debate on a fourth coronavirus rescue package. Exact timing on Corona IV will depend on how well the country and its healthcare system absorb the ever-increasing infections, as well as how well the economy absorbs Corona III. Already, Corona IV trial balloons are floating. On Monday, Speaker Pelosi announced that Democrats are eager to advance another relief package, which would focus on investments in infrastructure and post-crisis recovery efforts — not just immediate assistance to workers and businesses.

As more cars are added to the legislative train that is Corona IV, from vote-by-mail provisions to clean energy initiatives, Republicans are starting to balk. Senate Majority Leader McConnell has accused Democrats of using the COVID-19 emergency to enact their ideological agenda. Meanwhile, Republicans are laser-focused on watering down accountability measures and augmenting Corona III’s $500 billion corporate slush fund. 

The Continuity Proposal

Americans want a plan. A compelling plan recognizes that fiscal assistance beyond relief is needed, but it would not pretend to be stimulus. It would be comprehensive, forward-looking, and responsive to the first and loudest voices. We believe that the pre-coronavirus economy would be able to resume if the most critical pre-crisis economic operations were to continue. Instead of neverending piecemeal reform, we propose a twofold focus: continuity of payments for workers and continuity of credit for firms. 

It is a bridge from pre-March 1 to a safe future: paychecks to workers granted outright and bridge loans to business owners on pre-negotiated terms. In Germany, Denmark, the Netherlands, and the United Kingdom, the government is paying workers’ wages so that they stay on their employers’ payroll, at varying replacement rates. 

Small businesses need continuity of credit to survive during lockdowns and social distancing efforts. Eliminating payroll costs through income continuity is a necessary first step, but small businesses — many of them forced to shutter temporarily — have other expenses. The federal government should step in and provide grants and low-cost/forgivable loans so small businesses can continue paying rent, insurance payments, etc. Providing wage and credit continuity to workers and small businesses, respectively, may carry with it an expensive price tag, but it more than pays for itself by halting further disruptions and speeding up the post-crisis recovery. 

The Progressive Path Forward

Because Corona III originated in the Republican-controlled Senate, progressive opportunities for shaping the bill were limited. House Minority Leader Kevin McCarthy recently dismissed the need for an immediate Corona IV package. If Republicans are taking a step back from coronavirus policymaking, Democrats have an immense latitude to craft the next package and orient it around progressive priorities. So far, House Democrats are mainly reacting to activity in the Senate, but this won’t cut it in this crisis. Our leaders should lean in and propose the progressive solutions necessary to stave off economic turmoil and hasten the recovery efforts. 

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