Congress Needs to Act Boldly to Help the Unemployed
(Bloomberg Opinion) -- From May through August the U.S. economy bounced back from Covid-19’s first strike, gaining millions of new jobs per month. That growth slowed in September, with the the economy adding 661,000 jobs. The unemployment rate now stands at 7.9%, according to the Bureau of Labor Statistics’ last jobs report before Election Day.
These figures aren’t as dire as April, when 20.8 million jobs were lost in one month and the unemployment rate spiked to 14.7%. But they’re seismic measurements nonetheless.
About 25 million people living in the wealthiest country on the planet still rely on jobless benefits to get by. And the landscape for workers going forward looks bleak. Over the past few days, the Walt Disney Co. said it would lay off 28,000 people, while American Airlines Group Inc. and United Airlines Holdings Inc. announced 32,000 job cuts.
Consumer spending accounts for about two-thirds of gross domestic product in the U.S. But unless companies start hiring again, or jobless benefits are extended and drastically enhanced, many Americans will deplete their savings and stop spending. The economy will be hammered. And since the hardships of the downturn have already landed disproportionately on low-wage workers, particularly workers of color, a deeper crisis would further damage the lives and prospects of the most vulnerable Americans.
What is Congress doing about this? Arguing.
The blame for the standoff over another federal economic bailout bill isn’t bipartisan. Democrats had a fully baked plan months ago. The Republicans, lacking a unified approach within their party, waited until the end of the summer — when workers’ benefits began expiring — to gin up a competing proposal. Negotiations faltered almost immediately, but in recent days they revived.
The two sides are still far apart on money — specifically, on how much federal aid should be delivered to workers, states and local governments. Democrats want a $2.2 trillion package on the heels of the historic $7 trillion bailout engineered by Congress and the Federal Reserve in the spring. Republicans initially proposed a $1 trillion plan but have raised that offer to $1.6 trillion.The GOP wants to give workers an extra $400 a week in unemployment insurance; Democrats want an extra $600 a week (the same amount the Cares Act allowed before the funds expired in July). Republicans are also offering $250 billion in assistance to state and local governments, up from an earlier $150 billion offer but well below the $1 trillion package Democrats originally wanted. Democrats are now seeking about $436 billion for state and local governments. On Thursday night, after talks on an agreement between House Democrats and Senate Republicans broke down, the Democrats voted to approve their own aid package. The measure passed without a single Republican voting for it.
The parties could continue jousting, of course, but workers watching their lives wither can’t afford to wait. It’s imperative that the bailout now taking shape not repeat the miscues and inequities built into the 2008 federal bailout arranged in response to a financial crisis that almost sent the economy off a cliff. Back then, Wall Street and big banks got bailed out while average Americans lost their homes, savings and futures. The pain and resentment that followed has informed the social divisions, public hostility and political chaos the country is living with today.
At the moment, both Democrats and Republicans have got this stimulus wrong. Neither party is thinking creatively or ambitiously enough about how to put a floor beneath workers and their families suffering through the pandemic’s economic and social fallout. As we have said before, the federal government ultimately needs to create a federal jobs program that puts Americans to work tackling some of the country’s most urgent public health, education and infrastructure needs.
If the government were to hire every unemployed American at a living wage of, say, $58,000 a year, it would cost roughly $1.1 trillion annually — far more than what either party currently proposes, but something the government could manage if it were serious about making bold, constructive public policy.
That is unlikely to happen this round. But it’s also unlikely that this will be the last time the government has to come up with a plan for rescuing the economy, workers and families. Congress might as well take the first steps now, and avoid repeating the mistakes of 2008.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.
Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.
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