Virus Stops Economy Cold

Update 422: Virus Stops Economy Cold;
Congress in Search of Plan, Consensus

Legislation to address the impact of the coronavirus is making its way through the Congressional mill. An initial $8 billion targeted relief package was enacted last week. This week, the House and Senate have taken a week to hammer out the finer points of a much bigger package, which we outline below. 

A third, still bigger package — possibly $1 trillion — is on deck. But elusive, as the virus spreads and the legislation grows in scope and scale, is a consensus on how best to prevent or minimize the inevitable large-scale economic damage ahead. 

20/20 Vision hosts a Progressive Congress Action Network call tomorrow (Thursday), 5pm ET, with Jared Bernstein, former Chief Economic Advisor to VP Joe Biden and Mark Zandi, of Moody’s Analytics on the economic policy choices before Congress. 

Best,

Dana

______________________________________

After Congress passed an $8.3 billion coronavirus relief bill on March 5, attention turned to the second coronavirus package now making its way through Congress. Early Saturday morning, the House passed the Families First Coronavirus Relief Act, H.R. 6201, providing $104 billion in funds for free universal testing, supplemental unemployment insurance, a six-month holiday for federal student loans and mortgages, and tax credits for companies that provide paid leave, among other things. The Senate is voting now, but passage of the bill is assured.

Below, we review the legislative state of play surrounding the coronavirus and what economic concerns must be addressed by future legislation.

What’s in Corona II: Relief and Stimulus

House Democratic leadership and Treasury Secretary Steven Mnuchin negotiated H.R. 6201, the second piece of coronavirus relief legislation. On Monday, the House rushed to pass technical changes through unanimous consent but were initially stymied by Rep. Louie Gohmert. After Rep. Gohmert announced he would support the bill, the House passed the updated legislation on Monday evening. But “technical corrections” is a misnomer.

The revised bill is inarguably worse than the original. The bill now gives businesses large subsidies for bearing the costs of paid sick and medical leave. The revised bill’s changes include:

  • Paid family leave would only be available for workers whose children’s daycares or schools are closed due to the coronavirus
  • Paid family leave is limited to 12 weeks and capped at $200 per day and $10,000 total
  • Employers can use the bill’s new paid leave tax credits to offset the costs of employee medical insurance
  • Employees who are eligible for 10 days of paid sick leave under the bill are eligible for 10 days maximum, not in addition to any paid sick days they had before

Now that the bill’s passage in the Senate is assured, it will make its way to Trump’s desk. Fights over the next package have begun in earnest — we will cover developments in our Friday update. 

Bitter Battle Brewing over Corona III

Senate Minority Leader Schumer introduced a $750 billion package to increase hospital capacity, provide emergency child care, and impart loan relief to those most affected by the economic downturn. Speaker Pelosi announced Monday that the House would be in recess until March 23, delaying a third coronavirus package until then at the earliest. 

The coronavirus supplement, H.R. 6201, addresses some of the medical and economic hardships already faced by Americans. But many of the most vulnerable people are still out in the cold.

  • Workers at Large Companies

H.R. 6201’s paid sick leave provision only applies to workers at companies with more than 15 employees but fewer than 500 employees. Per Public Citizen, major companies like McDonald’s, Walmart, and Kroger do not ensure paid sick leave for their employees, leaving millions of workers at extremely profitable companies without coverage.

More than half of all workers work at companies with more than 500 employees. Companies with fewer than 50 employees will be able to apply for a waiver, dampening the benefits of such a provision even further. With these exemptions, the mandate only covers 20 percent of workers. 

Speaker Pelosi defended this choice by arguing that many large companies already provide some form of paid sick leave for their workers. The revised bill, however, prevents companies that already provide some form of paid sick leave from receiving government compensation. With this adjustment, there’s no reason for Congress not to extend the paid sick leave requirements to large companies, as the draft bill had.

  • Gig Workers 

Roughly 25 percent of American workers participate in the gig economy, and for about half, gig work is their primary source of income. What workers gain in mobility, they sacrifice in economic security. Gig workers are rarely eligible for workplace benefits like paid sick leave and are ineligible for state unemployment insurance programs. 

In the face of ongoing coronavirus concerns, gig workers will find themselves in dire straits. While the use of temporary, direct transfers of cash may help mitigate some of the short-term economic pressures on low- and middle-income families, Congress should use the opportunity to create a better, long-term safety net for gig workers.

  • Rural America

Thanks to the Affordable Care Act, more rural Americans have health insurance than ever before. But having insurance doesn’t matter if you can’t access medical facilities or receive care from specialists. Recruiting doctors to rural communities has always presented challenges (they can make much more money as specialists in metropolitan areas), but health system consolidation has accelerated in recent years. Since 2010, 125 rural hospitals have closed, and the National Rural Health Association estimates that rural areas are now short about 45,000 doctors, leaving 85 percent of rural counties with insufficient medical care.

  • The Indentured Postgraduate

With $1.5 trillion in outstanding debt, student loans are the second largest category of household debt, behind only mortgage loans. About 70 percent of students leave college in debt, with the average graduate owing slightly over $37,000. Last Friday, President Trump announced that he was waiving interest on all student loans. The Department of Education quickly clarified, announcing that monthly loan payments will not decrease, and instead, the entire payment will be applied to outstanding principal. 

This will save borrowers some money over the life of the loan, but it brings no short-term relief. For those who remain employed, the impact of the administration’s decision is negligible. For those whose incomes have fallen – or will fall in the near future as labor markets contract – Trump’s proposal accomplishes nothing in the way of providing relief. 

Just Ahead

Gearing up for Corona III, Trump continues to demand that Congress pass a $500 billion payroll tax cut. Today, the Treasury began circulating a sheet of priorities for the next phase. The proposals offer $300 billion in loans to small businesses, $500 billion in direct cash payments to taxpayers, a $50 billion lifeline for the airline industry, and $150 billion for “other severely distressed sectors.” 

The battle looming goes beyond how to provide relief to victims and their often surviving families. The prospect of severe economic dislocation raises the question: if salary and employment agreements in force today were insured during the crisis, offering compensation continuity and job security to workers, can the economic damage be contained?

Leave a Comment

Your email address will not be published. Required fields are marked *