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Latinas are getting slammed in the COVID-19 economy, this week in the war on workers

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Latina Equal Pay Day was this week, and if it’s not bad enough that it took this long for Latinas to be paid as much as white men made in 2019, the coronavirus pandemic is dumping additional bad news on them. Women are dropping out of the workforce in large numbers, but Latinas are dropping out in larger numbers than white or Black women—nearly three times and more than four times the rate, respectively.

Then there are Latina domestic workers, who have been crushed by the COVID-19 economy, losing work and in many cases not being eligible for government assistance.

The pandemic is hitting hardest where people were already struggling—with higher infection and death rates among Latino and Black people, and with the economic impact also falling disproportionately on people who are already discriminated against and underpaid and unprotected.

This blog originally appeared at Daily Kos Labor on October 31, 2020. Reprinted with permission.


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How Were 46 Million People Trapped by Student Debt? The History of an Unfulfilled Promise

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The democratic principle of tuition-free education in our country pre-dates the founding of the United States. The first public primary education was offered in the Massachusetts Bay Colony in 1635, and its legislature created Harvard College the following year to make education available to all qualified students. Even before the Constitution was ratified, the Confederation Congress enacted the Land Ordinance of 1785, which required newly established townships in territories ceded by the British to devote a section of land for a public school. It also passed the Northwest Ordinances, which set out the guidelines for how the territories could become states. Among those guidelines was a requirement to establish public universities and a stipulation that “the means of education shall forever be encouraged.” After the nation declared independence, Thomas Jefferson argued for a formal education system funded through government taxation.

Jefferson’s vision took form over the course of more than a century, as state and local governments began creating primary schools and then high schools. The federal government became involved in higher education in the 19th century with the creation of land grant colleges and other institutions, used primarily to teach agriculture and education after the Civil War. These institutions created opportunities for people who had long been locked out of the learning process, including formerly enslaved African Americans and impoverished people of all races.

State universities and colleges rapidly expanded as well. By the middle of the 20th century, low-cost or tuition-free education was available in many American states. After the Second World War, the federal government once again turned to education to promote opportunities for its citizens and economic growth for all. The G.I. Bill paid educational expenses for 8 million people, without regard to individual wealth, which helped create a robust middle class and contributed to the vibrant growth economy of the 1950s and 1960s. While those opportunities were still denied to many people as the result of racism, efforts were underway to improve educational access for people of color.

The Reagan era ushered in a belief that government programs, including education, stood in the way of people’s dreams and should be severely cut back. Public goods came to be seen as investments, ones that were purely economic in nature. For these reasons, among others, a nation that had expanded publicly funded education for centuries decided to reverse course. Instead of funding higher education on the principle that it benefits us all, the country began shifting the cost to individual students.

In the 1950s, as part of the National Defense Education Act, student loans were created as an experiment in social engineering. Concerned about competition with the Soviet Union, policymakers wanted to increase students’ capabilities in math and sciences. To do that, the country needed more teachers. So, lawmakers offered loans to college students, with the opportunity to have half the loan canceled after 10 years if they became teachers.

The experiment failed. Researchers have not been able to prove that the student loan program led more people to become teachers, despite multiple attempts to do so. The experiment was also cruel. Over the years, the student loan program was expanded, with the claim that a student’s personal investment in their education was an “investment” that would pay off in higher wages. Banks and other private lenders were brought into the process and given considerable incentives and subsidies to issue student loans, without considering the burden being imposed on the student. This financial opportunity was given to banking interests that were already wealthy, with little thought of the resulting damage to an economically sustainable future.

Proponents of financializing the cost of higher education argued that it was cheaper to lend money to students than it was for federal and state governments to provide grants for their education, even after paying subsidies to the private sector for their loans. An entire industry grew up around this process. State and nonprofit guaranty agencies were created to insure the loans. These agencies got paid, no matter what: when loans were issued, when loans became delinquent, when borrowers defaulted, and when they collected on defaulted loans.

In response, most states created guaranty agencies so they could make money from people who needed to borrow to pay for ever-increasing tuitions and fees. Now, states had an extra incentive to cut funding for public higher education. Not only would they save on expenditures, but they could increase the need for students to borrow, which increased their revenue. In many cases, these guaranty agencies don’t handle the loans themselves. They pass the work on to private debt collectors who take collection fees and are aggressive in their handling of cases.

The system took on a life of its own. By the mid-1990s, student loans had surpassed grants in funding students’ higher education. But a system built on debt financing only works if borrowers pay back their loans. That led Congress to make the system even crueler with the Bankruptcy Amendments and Federal Judgeship Act of 1984, which exempted student loans from bankruptcy proceedings and subjected borrowers to draconian collection tools. These tools included wage garnishment without a court order and the seizure of Social Security checks and tax refunds. The Clinton and Obama administrations attempted to lessen the burden slightly by allowing the federal government to lend directly to students while introducing income-based repayment options, but the system’s fundamental cruelty remains unchanged today.

It is time to recognize that the cruel experiment in financing higher education through student loans has failed. It has captured 46 million people and their families in a student loan trap, including people who received vocational training, and has weakened the financial strength of higher education. Inescapable debt is a major driver of social collapse. It has made the racial wealth gap worse and weakened the entire economy, as debt holders are prevented from buying homes or consumer goods, starting families, or opening new businesses. It’s time to restore funds for higher education and cancel student debt for the victims of this failed experiment.

Learn more at Freedom to Prosper.

This article was produced by Economy for All, a project of the Independent Media Institute on September 15, 2020. Reprinted with permission.

About the authors:

Mary Green Swig is a senior fellow at the Advanced Leadership Initiative at Harvard University and co-founder of Freedom to Prosper.

Steven L. Swig is a senior fellow at the Advanced Leadership Initiative at Harvard University and co-founder of Freedom to Prosper.

David A. Bergeron is a senior fellow for postsecondary education at the Center for American Progress. Bergeron previously served as the acting assistant secretary for postsecondary education at the U.S. Department of Education.

Richard “RJ” Eskow is senior adviser for health and economic justice at Social Security Works. He is also the host of The Zero Hour, a syndicated progressive radio and television program.


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‘A tale of 2 recessions’: As rich Americans get richer, the bottom half struggles

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The path toward economic recovery in the U.S. has become sharply divided, with wealthier Americans earning and saving at record levels while the poorest struggle to pay their bills and put food on the table.

The result is a splintered economic picture characterized by high highs — the stock market has hit record levels — and incongruous low lows: Nearly 30 million Americans are receiving unemployment benefits, and the jobless rate stands at 8.4 percent. And that dichotomy, economists fear, could obscure the need for an additional economic stimulus that most say is sorely needed.

The trend is on track to exacerbate dramatic wealth and income gaps in the U.S., where divides are already wider than any other nation in the G-7, a group of major developed countries. Spiraling inequality can also contribute to political and financial instability, fuel social unrest and extend any economic recession.

The growing divide could also have damaging implications for President Donald Trump’s reelection bid. Economic downturns historically have been harmful if not fatal for incumbent presidents, and Trump’s base of working-class, blue-collar voters in the Midwest are among the demographics hurting the most. The White House has worked to highlight a rapid economic recovery as a primary reason to reelect the president, but his support on the issue is slipping: Nearly 3 in 5 people say the economy is on the wrong track, a recent Reuters/Ipsos poll found.

Democrats are now seizing on what they see as an opportunity to hit the president on what had been one of his strongest reelection arguments.

“The economic inequities that began before the downturn have only worsened under this failed presidency,” Democratic presidential nominee Joe Biden said Friday. “No one thought they’d lose their job for good or see small businesses shut down en masse. But that kind of recovery requires leadership — leadership we didn’t have, and still don’t have.”

Recent economic data and surveys have laid bare the growing divide. Americans saved a stunning $3.2 trillion in July, the same month that more than 1 in 7 households with children told the U.S. Census Bureau they sometimes or often didn’t have enough food. More than a quarter of adults surveyed have reported paying down debt faster than usual, according to a new AP-NORC poll, while the same proportion said they have been unable to make rent or mortgage payments or pay a bill.

A historic House vote on marijuana legalization will take place later this month. We break down why Democrats are voting on the bill despite the fact that it’ll be dead upon arrival in the Senate.

And while the employment rate for high-wage workers has almost entirely recovered — by mid-July it was down just 1 percent from January — it remains down 15.4 percent for low-wage workers, according to Harvard’s Opportunity Insights economic tracker.

“What that’s created is this tale of two recessions,” said Beth Akers, a labor economist with the Manhattan Institute who worked on the Council of Economic Advisers under President George W. Bush. “There are so obviously complete communities that have been almost entirely unscathed by Covid, while others are entirely devastated.”

Trump and his allies have seized on the strength of the stock market and positive growth in areas like manufacturing and retail sales as evidence of what they have been calling a “V-shaped recovery”: a sharp drop-off followed by rapid growth.

But economists say that argument fails to see the larger picture, one where roughly a million laid-off workers are filing for unemployment benefits each week, millions more have seen their pay and hours cut, and permanent job losses are rising. The economy gained 1.4 million jobs in August, the Labor Department reported Friday, but the pace of job growth has slowed at a time when less than half of the jobs lost earlier this year have been recovered.

Some economists have begun to refer to the recovery as “K-shaped,” because while some households and communities have mostly recovered, others are continuing to struggle — or even seeing their situation deteriorate further.

“If you just look at the top of the K, it’s a V — but you can’t just look at what’s above water,” said Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth. “There could be a whole iceberg underneath it that you’re going to plow into.”

The burden is falling heavily on the poorest Americans, who are more likely to be out of work and less likely to have savings to lean on to weather the crisis. While recessions are always hardest on the poor, the coronavirus downturn has amplified those effects because shutdowns and widespread closures have wiped out low-wage jobs in industries like leisure and hospitality.

Highly touted gains in the stock market, meanwhile, help only the wealthiest 10 percent or so of households, as most others own little or no stock.

The disconnect between the stock market and the broader economy has been stark. On the same day in late August that MGM Resorts announced it would be laying off a quarter of its workforce, throwing some 18,000 workers into unemployment, its stock price jumped more than 6 percent, reaching its highest closing price since the start of March.

“The haves and the have-nots, there’s always been a distinction,” Sahm said. But now, she added, “we are widening this in a way I don’t think people have really wrapped their head around.”

A store going out of business
A customer leaves a retail store, which is going out of business, during the coronavirus pandemic. | Lynne Sladky/AP Photo

Without further stimulus, the situation appears poised to get worse. Economic growth until now had been led by increasing levels of consumer spending, buoyed by stimulus checks and enhanced unemployment benefits that gave many people, including jobless workers, more money to spend.

Low-income consumers have led the way, and they spent slightly more in August than they did in January, according to the Opportunity Insights tracker — even as middle- and high-income consumers are still spending less.

But those low-income consumers were also the most dependent on the extra $600 per week in boosted unemployment benefits, which expired in July. Since that lapsed — and since Congress appears unlikely to extend it any time soon, if at all — “we’re likely to see other macroeconomic numbers really fall off a cliff in the coming weeks,” Akers said.

The expected drop in spending, paired with the expiration of economic relief initiatives like the Paycheck Protection Program, could also spell trouble for businesses in the coming months. Many economists expect a wave of bankruptcies and business closures in the fall, contributing to further layoffs.

In that sector, too, owners are feeling disparate impacts. More than 1 in 5 small business owners reported that sales are still 50 percent or less than where they were before the pandemic, according to a recent survey from the National Federation of Independent Business, and the same proportion say they will need to close their doors if current economic conditions do not improve within six months.

At the same time, however, half said they are nearly back to where they were before, and approximately 1 in 7 owners say they are doing better now than they were before the pandemic, the survey showed.

Those diverging narratives could be understating the need for further stimulus by smoothing over some of the deeper weaknesses in the labor market and the economy, experts say.

“This is a case where the averages tell a different story than the underlying data itself,” said Peter Atwater, an adjunct economics professor at William & Mary.

While Republicans appear to be embracing the idea of further “targeted” aid, they are also touting what Trump has called a “rocket-ship” economic recovery and emphasizing record-breaking growth while downplaying the record-breaking losses that preceded it.

“There’s no question the recovery has beat expectations,” said Rep. Kevin Brady (R-Texas), the top Republican on the House Ways and Means Committee, this week on a press call with reporters.

Talks between the White House and Democratic leaders, meanwhile, have been stalled for weeks. The Senate is set to return from its summer recess next week with no clear path forward on a relief package.

“People are in these bubbles,” Atwater said. “And if people aren’t leaving their homes, are not really getting out, it’s unlikely that they’re seeing the magnitude of the downside of this K-shaped recovery.”

This article originally appeared at Politico on September 7, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

A D.C.-area native, Megan headed south for a few years to earn her bachelor’s degree in business journalism and international politics at the University of North Carolina at Chapel Hill. Now settled back inside the Beltway, Megan’s on the hunt for the city’s best Carolina BBQ — and still rooting for the Heels.


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Economy Gains 1.8 Million Jobs in June; Unemployment Declines to 10.2%

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The U.S. economy gained 1.8 million jobs in July, and the unemployment rate declined to 10.2%, according to figures released Friday morning by the U.S. Bureau of Labor Statistics. The improvements reflect the continued resumption of economic activity that previously was curtailed because of the COVID-19 pandemic.

Last month’s biggest job gains were in leisure and hospitality (+592,000), government (301,000), retail trade (258,000), professional and business services (170,000), other services (149,000), health care (126,000), social assistance (66,000), transportation and warehousing (38,000), manufacturing (26,000), financial activities (21,000) and construction (20,000). Mining lost 7,000 jobs in July.

In July, the unemployment rates declined for teenagers (19.3%), Black Americans (14.6%), Hispanics (12.9%), Asians (12.0%), adult women (10.5%), adult men (9.4%) and White Americans (9.2%).

The number of long-term unemployed workers (those jobless for 27 weeks or more) was little changed in July.

This blog originally appeared at AFL-CIO on August 7, 2020. Reprinted with permission.

About the Author: Kenneth Quinnell is a long-time blogger, campaign staffer and political activist. Before joining the AFL-CIO in 2012, he worked as labor reporter for the blog Crooks and Liars.


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A growing side effect of the pandemic: Permanent job loss

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More jobs are disappearing for good, dashing hopes of a rapid economic rebound.

Tens of millions of Americans have lost their jobs in the coronavirus recession, but for many of them the news is getting even worse: Their positions are going away forever.

Permanent losses have so far made up only a fraction of the jobs that have vanished since states began shutting down their economies in March, with the vast majority of unemployed workers classified as on temporary layoff. But those numbers are steadily increasing — reaching 2.9 million in June — as companies start to move from temporary layoffs to permanent cuts. The number is widely expected to rise further when the Labor Department reports July data on Friday.

Workers themselves are growing increasingly pessimistic as the permanent losses spread beyond the service industry to occupations like paralegals and financial analysts who weren’t initially affected by the shutdowns. Nearly half of American families whose households have seen a layoff now believe that job is probably or definitely not coming back, an AP-NORC poll found late last month. That marks a steep drop from the April survey, which showed nearly four in five respondents expecting their job loss to be temporary.

The rise in permanent job loss is the latest signal that the economic damage from the coronavirus is likely to be long-lasting, and that the Trump administration’s dream of a quick, V-shaped recovery is at odds with what workers are seeing across the country. That could create the need for even more government spending and long-term solutions beyond the temporary fixes that Congress has been debating.

“This recession has been really confused, because what we had was really a suppression where we told everybody to stay home — and that wasn’t really job loss,” said Betsey Stevenson, a former chief economist at the Labor Department and a member of the Council of Economic Advisers during the Obama administration. “The real question is, when you end the suppression, how many jobs are left? And boy, it sure looks like we lost a whole lot of jobs.”

Permanent layoffs have already begun spreading beyond industries directly affected by the pandemic. Nick Bunker, the director of economic research with the Indeed Hiring Lab, found that while permanent losses were concentrated in April in service-sector occupations that have been the hardest hit — waiters and retail salespersons, for example — they had spread by June throughout the labor market.

The trend appears poised to get worse. The number of Americans applying for unemployment aid has risen in recent weeks after months of steady decline, as the coronavirus surges across much of the country and a majority of states have either paused or reversed reopening plans. Another 1.2 million workers filed a new unemployment claim last week, the Labor Department reported on Thursday, marking the 20th consecutive week that applications have risen above 1 million. More than 32 million people are receiving either state or federal unemployment benefits, according to the most recent data.

Layoffs taking place now are more likely to be permanent rather than a temporary furlough. A Goldman Sachs analysis from July 31 found that 83 percent of job losses since February had been deemed temporary. But of all new layoffs in July in California, which it used as an example, only 35 percent were temporary.

“What’s happening now is more companies that thought they could survive are giving up,” said Nicholas Bloom, an economics professor at Stanford. “The most painful time to lose your job may well be coming up.”

The permanent losses hold greater weight than temporary layoffs, economists say, because they are far more likely to lead to long-term unemployment that would prolong any economic recovery. While a furloughed worker is likely to get his or her job back as soon as consumer behavior returns to normal, a permanently laid-off worker has to wait for an employer to create a new job, then apply and get matched with the right one.

“That’s what recessions are made of — that’s why they are so costly. That’s why they take so long to clean up,” said Adam Ozimek, chief economist at Upwork, a platform that connects businesses with freelancers.

Workers who remain unemployed over the long term end up increasingly less likely to return to the labor market for a number of reasons: Their skills may erode; they may lose motivation or employers may discriminate against them, Bloom said. Even after returning to the labor market, they could see effects like lower pay that linger throughout their careers.

“The reason that’s important from a macro perspective is, if you have this army of long-term unemployed, it becomes almost impossible to have a rapid rebound,” said Bloom, who co-authored a study in May that found that 42 percent of recent layoffs were likely to become permanent.

Economists argue the growing trend toward permanent job losses highlights a need for further federal spending to support laid-off workers, to keep consumer spending close to normal levels and to help small- and medium-size firms in particular weather the shutdowns.

Without more aid, business closures are likely only to increase, in turn keeping unemployment high. A recent Goldman Sachs survey found that 84 percent of business owners who had received loans under the Paycheck Protection Program said they would exhaust the funding by this week. And only one in six reported being “very confident” they would be able to maintain their payroll without further aid.

As more businesses close, it also becomes harder to restart the economy once consumer demand does start to return because there are fewer places for people to spend their money.

Even when consumers want to go out to eat or travel again, “That’s going to take a long time to turn into job benefits if you’ve had massive amounts of small business closures there,” Ozimek said.

Regardless of whether the July data shows the headline unemployment rate rising or falling for the month, the share of permanently unemployed workers is likely to continue to rise, complicating the administration’s touting of what President Donald Trump has previously called a “rocket-ship” economic recovery. And it underscores that even if states begin to reopen their doors in the near future, any return to normal for the labor market is likely years away.

“So are we moving in the right direction? I think not,” said Stevenson, now a professor at the University of Michigan. “I think most people went home from work in March, April or May and thought, ‘Surely they’re going to bring me back to work.’ And what’s happened is fewer of them were brought back than were expecting it.”

This blog originally appeared at Politico on August 6, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro.


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‘Tidal wave’: States fear fiscal disaster as Congress slow-walks aid

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The most vulnerable states for seeing their federal aid cut are those that already carried some of the lowest credit ratings.

Senate Majority Leader Mitch McConnell and New York Gov. Andrew Cuomo couldn’t be farther apart in their views of how Congress should help states recover from the recession. But their states are among those with the most to lose if the situation gets much worse. 

While every state is feeling the pressure, the most vulnerable ones are those that already carried some of the lowest credit ratings even when the economy was at its best — including Illinois, New Jersey, Connecticut and Kentucky. Even New York, which had good credit, has seen its outlook downgraded and will suffer without more federal help.

That’s left some local officials bitter that the federal government has been willing to cut blank checks to businesses regardless of how they are run but views helping state governments as unacceptable “blue state bailouts.” Now, with Congress debating another economic relief package that is unlikely to contain the $500 billion in aid that state officials were hoping for, they’re warning of a looming fiscal disaster, not only for themselves but for the country. 

“If Congress underestimates the economic tidal wave that is coming, even by the smallest of margins, we are all going to be swept away,” said Illinois State Treasurer Michael Frerichs. 

Already, the U.S. Labor Department has reported that some 1.5 million state and local government jobs were lost from February to June, adding to the tens of millions of private sector jobs that have been shed nationwide.

Nowhere is the politics of state aid more complicated than in McConnell’s Kentucky, which Donald Trump won by 30 points in the 2016 presidential election. Next fiscal year, its shortfall could be as high as $1 billion, according to the state’s budget director. 

McConnell has largely stayed out of the debate since setting off a political firestorm — and drawing a blistering rebuke from Cuomo — in April with the suggestion that states might use bankruptcy as a way to emerge from a fiscal crisis – a step that they’re not even allowed to take under federal law.

He walked that back a week later, saying there “probably will be” more funding from Congress.

Kentucky Gov. Andy Beshear — a Democrat — averted deeper cuts or layoffs this budget cycle by instituting hiring freezes and asking for a 1 percent reduction in agency budgets government-wide after coronavirus shutdowns suggested a potentially massive shortfall. But he warned this month that without additional federal support, cuts in the next cycle will need to go deeper than even during the Great Recession. Beshear has urged Congress and the Kentucky delegation, including McConnell, to approve more state funding.

Cuomo said the characterization that only Democratic states needed budget help was “the epitome of hypocrisy.” 

“You now have Republican states that are suffering worse than Democratic states,” he said earlier in July of the new surge of coronavirus outbreaks. “If they want to get this economy back running, you have to fund state and local governments.” 

Kentucky and New York have already begun either reductions in services or payment slowdowns, as have New Jersey and Illinois. 

While Connecticut planned to fill an operating deficit estimated to exceed $1 billion using reserve funds, the state ultimately balanced its budget through a combination of higher-than-expected revenue, tax increases and spending reductions, including by postponing service increases. Still, that the rainy-day fund is expected to quickly dry up in the future with deficits projected to increase.

The finances of those and other state governments have been upside down since the wave of economic shutdowns squeezed tax revenue. A federal delay in the tax filing deadline led many states to follow suit, which also slowed money coming in. At the same time, a historic plunge in crude oil prices further decimated oil-rich states like Alaska and North Dakota that rely heavily on royalties.

While the federal government has been able to print money to blunt the crisis’s economic blow to businesses, workers and the unemployed, states don’t have that option. Already, credit downgrades for some like New Jersey and Illinois mean future borrowing could be more costly, disrupting recovery plans. 

Still, state officials were hoping Congress would provide enough in direct grants to fill budget holes after lawmakers agreed to dole out hundreds of billions in forgivable loans to small businesses in the March stimulus bill. Then in May, House lawmakers agreed on legislation that included $250 billion to backfill state budgets.

Legislation proposed by McConnell’s Republicans on July 27 didn’t offer much room for optimism, however. The legislation calls for $105 billion to go to states for schools — but two-thirds of that is dependent on maintaining certain levels of in-person instruction.

The National Governors Association slammed the lack of additional state aid in the GOP package as “disappointing” in a statement Wednesday from Republican Gov. Larry Hogan of Maryland, the group’s chair, and Cuomo, the vice chair. 

Sen. Pat Toomey (R-Pa.) said in an interview on CNBC Tuesday that it was unlikely Congress would spend much more on local budget issues: “There’s a lot that’s already been done,” he said.

Toomey said money appropriated to states has not even been fully spent and that the Federal Reserve has set up a short-term government credit facility “that has not been drawn significantly but that is available.”

recent report from the Treasury Inspector General backs up Toomey’s argument. The report found that as of June 30, states nationwide had only used an average of about a quarter of the funds from the CARES Act, the $2 trillion economic relief package Congress approved in March. But the National Governors association countered that states have already allocated approximately 74 percent of those funds, on average.

The next agreement will probably fall short because unemployment benefits, stimulus checks and additional small business loans — not state budget deficits — have dominated the debate. 

One ray of hope for the states: Legislation proposed by Sen. John Kennedy (R-La.) in May would give them more discretion to use a $150 billion coronavirus relief fund to cover operating expenses. Congress explicitly prohibited the use of the fund for that purpose when the money was appropriated in March.Language similar to Kennedy’s bill was included in the Finance Committee portion of the Republican Senate package.

But Sen. Rick Scott (R-Fla.), a former governor of Florida, criticized the increased spending flexibility in the Republican plan. “What I don’t want to do is bail out the states,” he said to POLITICO.

“We’re not crying wolf out here in the states about some of the drastic measures that would be necessary, and we’ve got proof in past recessions that we will cut,” said John Hicks, Kentucky’s budget director. “Federal fiscal relief is just critical for us to be able to maintain education, health and public safety.”

For its part, New York’s fate is tied financially to New Jersey and Connecticut — both states in worse economic shape — putting the financial health of its massive public transportation network at risk.

The Metropolitan Transportation Authority, which also provides rail service to Connecticut, is burning through $200 million a week.

New York officials said the state has already reduced spending by $4 billion since April through a combination of hiring freezes, new contracts and pay raises, as well as holding back 20 percent of funds to some of the state’s larger cities.

“This means lower spending for police, schools, health care, roads, courts, and support for our most vulnerable neighbors,” Freeman Klopott, a spokesperson for the New York State Division of the Budget, told POLITICO. “The Federal government must act to provide states with the resources we need or the negative impacts of its failure to do so thus far will only deepen.”

New Jersey has cut $1.2 billion in spending and delayed some major payments to schools and pensions. On top of that, Democratic Gov. Phil Murphy pared operating costs and grants and has ordered 15 percent reductions across departments. The governor is trying to get clearance to borrow up to $9.9 billion, but Republicans are challenging him in court.

“I would hope this is the moment right now for Congress,” Murphy said at a daily coronavirus press briefing in Trenton. “The next three weeks is do-or-die.” 

“I can’t tell you exactly what happens to our services or programs without that federal cash, but it’s ugly,” he said. 

Financial analysts sense big trouble in Illinois, which has the worst credit rating in the nation. Even before the crisis, the state had to slow down payments because expenditures exceeded revenue, and the coronavirus has stalled them even more, according to the comptroller. The state was hit with a series of negative financial assessments in April, further imperiling future borrowing.

Democratic Gov. J.B. Pritzker signed a budget with a $6 billion deficit in June and has warned that layoffs could come without significant extra federal funding.

In a sign of how bad things have gotten, the state is among the few to have accessed short-term credit from a Federal Reserve emergency facility set up in March. Advocates for more state aid have criticized the Fed’s lending option as too expensive, but the terms were actually more favorable for Illinois than the open market because of its poor credit. 

With all the election year pressure, governors fear Congress will opt for the approach taken in the Great Recession: Let states cut their budgets and gripe about a dragged-out economic recovery later. But this time around, it’s clear that governors are laying the groundwork to blame Congress. 

“It doesn’t matter what the political party of the state’s legislature or governor is,” Hicks of Kentucky said. “We’re all in the same boat together.”

This blog originally appeared at Politico on August 3, 2020. Reprinted with permission.

About the Author: Katherine Landergan covers the state budget, tax policy and labor issues for POLITICO New Jersey.

About the Author: Kellie Mejdrich is a reporter for POLITICO Pro Financial Services.


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‘A meaningful hit to the economy’: What could happen if Congress cuts unemployment benefits

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White House economic advisers and GOP lawmakers including Senate Majority Leader Mitch McConnell contend the extra payment acts as a disincentive for workers to seek new jobs.

More than 30 million people are receiving unemployment benefits and new applications for jobless aid have started to rise again. But Republicans want to reduce a $600 enhanced unemployment benefit in the next coronavirus relief package, a proposal that could leave families with billions of dollars less to spend to bolster the economy.

White House economic advisers and GOP lawmakers including Senate Majority Leader Mitch McConnell contend the extra payment acts as a disincentive for workers to seek new jobs, because some people are receiving more money in benefits than they would earn working. Democrats and many economists say there are no jobs for those people right now anyway, and the payments are essential for keeping the economy afloat — and ensuring Americans can buy food and pay the rent.

Here’s a look at the potential impact of cutting benefits right now:

The GOP argument

The Senate GOP’s latest $1 trillion plan calls for the reduction in increased unemployment benefits from $600 to $200 a week for 60 days, or until states are able to provide a 70 percent wage replacement. Some Republican senators are rolling out their own proposals that would reduce the benefits with varying levels of wage replacement.

Their argument is that payments should be pegged to workers’ former wages as an incentive for them to seek jobs instead of remaining on benefits.

“Should we have generous unemployment insurance in this crisis? Of course,” McConnell said on the Senate floor Wednesday. “But obviously we should not be taxing the essential workers who’ve kept working so the government can pay their neighbors a higher salary to stay home.”

Under the GOP plan, weekly benefits would drop from a national average of $920.68 per week to $520.68 per week, an average overall cut of 55 percent, according to a recent analysis by The Century Foundation, a progressive think tank.

Laid-off workers would lose more than $10 billion per week, under the GOP proposal. And by the end of September, the losses would reach $90 billion, the analysis found.

But White House economists say the checks aren’t stimulating the economy.

Do not repeat this idiot notion that giving people money is somehow a stimulus to the economy,” said Stephen Moore, a conservative economist and outside adviser to President Donald Trump, in an interview. “I mean, in that case we could just give everybody $100,000 and we’d all be rich right? It’s just so stupid.”

The impact on the economy

It’s a “meaningful hit to the economy,” if lawmakers reduce or cut off the enhanced benefits, wrote Mark Zandi, chief economist at Moody’s Analytics. He estimates that cutting the benefit to $200 per week as the GOP has proposed would cost nearly 1 million jobs by the end of the year and raise unemployment by 0.6 percentage points.

Other estimates of job losses are higher. Economists caution that a reduction in benefits could spark a drop in demand, setting off a “vicious cycle” that eventually results in the permanent loss of millions of jobs. Slashing the extra $600 week could destroy as many as 5 million jobs, according to an analysis by the left-leaning Economic Policy Institute.

“People will have to make terrible choices between things like medicine and rent, but it also means that they will no longer be buying things that they had been buying, and the workers that produce the goods and services that they will no longer be buying will lose their jobs,” said Heidi Shierholz, EPI policy director and former Labor Department chief economist. “And the vicious cycle is set off. So it’s terrible macroeconomic policy.”

Federally enhanced unemployment benefits led to a 10 percent increase in consumption among those out of work when they were first rolled out, according to an analysis by the JPMorgan Chase Institute, estimates that have alarmed business groups.

A disruption could result in a drop in spending as high as 20 percent, the research found.

“Small businesses desperately need the consumer demand” Small Business for America’s Future, a coalition of small business owners, said in a statement. “We need legislation that puts money in the hands of people who will spend it at local small businesses. The future of our Main Street economies depend on it.”

Rachel Greszler, a senior policy analyst at the conservative Heritage Foundation, agreed that the change in benefits will have short-term negative impacts on the economy. But she warned the increased spending will have the longer-term consequence of running up the national debt.

“If you continue excessively high payments, then you end up just trading a global health pandemic for a fiscal crisis,” she said.

The impact on Black and Hispanic workers

Because Black and Hispanic workers are disproportionately reliant on unemployment aid, slashing the benefits could do permanent damage to the economic well-being of those demographics, already among those the pandemic has hit hardest. Forty-seven percent of recipients of state unemployment benefits in July are projected to be nonwhite, according to the Congressional Budget Office.

“These universal approaches to addressing economic issues ignore the recent and past history of structural racism, and how wealthy is distributed in the country,” said Andre Perry, a research fellow at Brookings Institution.

“We need to think about the long-term protection of the most vulnerable,” Perry said. “And unemployment insurance provides that safety net for now.”

Is a $600 payment causing workers to stay home?

The Congressional Budget Office estimated in June that extending the boost by six months would likely lead to greater economic output in the second half of 2020. But the non-partisan scoring office also forecast that the work disincentive would lead to lower levels of employment for the remainder of the year and into 2021 — an estimate Republicans have seized on during discussions over the benefits.

Yale University researchers recently found “no evidence” that the boosted unemployment benefits increased layoffs at the outset of the pandemic or discouraged workers from returning to their jobs over time, according to a report based on data from the business scheduling software company Homebase.

“If there is still really depressed labor demand, asking people to go out and search more intensely will not necessarily yield higher employment,” said Dana Scott, the primary author of the report. “And on the flip side of the coin, reducing people’s income will also decrease those stimulus effects…where they’ll have income replaced, go out and spend more money, which isn’t just for the economy.”

But those close to the White House disagree. “I get ten calls a day from employers telling me the workers will not come back on the job,” Moore told POLITICO. He pointed to the 5.4 million new job openings reported by the Bureau of Labor Statistics in May. “That’s a lot of jobs,” Moore said, “but look that’s not 20 million.”

The most recent jobs report from BLS indicated that the number of workers who permanently lost their job increased to 2.9 million in June. Some 9.1 million workers would have preferred working full-time, but were only able to get part time jobs in June. And 8.2 million individuals said they would like a job, but were unavailable or not actively seeking out work in June, according to BLS.

What about just sending stimulus checks?

Republicans’ proposal would suggest another round of stimulus checks, similar to those enacted via a previous round of aid, in an effort to bolster consumption.

“The way the previous bill was crafted, five out of six workers are actually making more staying at home than going back to work,” McConnell said on CNBC’s “Closing Bell” Tuesday. “And remember, all of these folks are going to get another $1200 in direct payment.”

But the cash is a less efficient way to rejuvenate the economy because it is not as narrowly tailored, economists warn.

“Spending less on unemployment insurance and also doing the stimulus check … is terrible economic policy,” Shierholz said. “You’re taking something that’s very, very well targeted — getting money to people who’ve lost their jobs — and giving it broadly.”

This blog originally appeared at Politico on July 30, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.

About the Author: Eleanor Mueller is a legislative reporter for POLITICO Pro, covering policy passing through Congress. She also authors Day Ahead, POLITICO Pro’s daily newsletter rounding up Capitol Hill goings-on.


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Biden vows to create 5M manufacturing jobs, ‘Buy American’

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Biden is pledging to invest $300 billion in research and development over four years that would be spread across the U.S. 

Former Vice President Joe Biden is laying out a plan to rebuild the U.S. economy that includes cracking down on outsourcing, investing billions in research and development and creating at least 5 million jobs in manufacturing and innovation.

The plan places a major emphasis on “Buy American” provisions that would tighten restrictions on what qualifies as a U.S.-made good and invest $400 billion in government procurement, both of which the Democratic presidential candidate’s campaign says will help power demand for American products and services.

Biden is pledging to invest $300 billion in research and development over four years that would be spread across the U.S. to a diverse array of businesses and entrepreneurs, including women and minorities. The spending would spark what campaign officials called “high-quality job creation” around the country.

He is also calling for a pro-worker trade strategy in which the U.S. will work with its global allies and within World Trade Organization rules to get tough on China, which he blames for harming American workers and contributing to a decline in U.S. manufacturing.

“Joe Biden’s going to fight like hell for American workers through trade, enforcing deals and rallying the world to take on China’s abuses,” a senior Biden campaign official told reporters on a press call.

The moves come as part of Biden’s four-part “Build Back Better” economic plan, which was released Thursday morning and which focuses on clean energy, the caregiving workforce and racial equity as well as trade and manufacturing. But senior campaign officials sharing details Wednesday night focused on the latter subject, saying information on the other “pillars” will be released later.

Officials sought to draw contrasts with the current administration, saying “the Trump trade strategy has simply failed.” But when asked whether Biden would reverse any of President Donald Trump’s major trade policy moves — including withdrawing from the preliminary trade deal signed with China or lifting tariffs on steel and aluminum imports — an official declined to commit, saying the former vice president would have to review each of those issues once in office.

Trump himself won the presidency in 2016 pledging to cut down on outsourcing, revive American manufacturing and take on Beijing.

Officials, who spoke on background, emphasized this plan is “not just a response to Donald Trump’s massive mismanagement of the pandemic” but also aims to address longstanding weaknesses and inequities in the economy.

“Vice President Biden truly believes that this is no time to just build back to the way things were before,” one official said. “This, he believes, is the moment to imagine and build the new American economy for our families and next generation.”

This blog originally appeared at Politico on July 9, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.


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‘It’s all backwards-looking’: June’s positive jobs data obscures a grimmer reality

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Thursday’s jobless data failed to capture the latest devastation, economists say.

Thursday’s monthly jobs numbers look great on paper: 4.8 million jobs were added in June as states reopened. But those numbers are a deceiving bump — with the resurgence of the virus and a fresh wave of shutdowns, the reality of the job market is likely far more bleak.

With more than 40 percent of the country now reversing or pausing its plans to reopen, the already struggling U.S. economy has begun to show signs of another shock. Another 1.43 million Americans applied for jobless benefits last week, the Labor Department reported on Thursday, and 19.3 million remain on unemployment insurance — a slight increase from the previous week’s revised level.

Real-time measurements ranging from job postings to restaurant reservations and small-business operations are also suggesting a renewed decline in economic activity. And the number of households expecting to lose income over the next month increased in the most recent week, according to a U.S. Census Bureau survey released on Wednesday — the first rise recorded since the agency began conducting weekly household surveys two months ago.

But because of a lag in the federal data, the employment numbers the Department of Labor released Thursday morning for June — the results of a survey conducted through the middle of the month — are failing to capture the latest round of devastation, economists say. The numbers therefore should be taken “with a whole stockpile of salt,” said Diane Swonk, the chief economist at Grant Thornton.

“It’s all backwards-looking because of what we’ve experienced since then,” Swonk said. “Fear is its own tax, and the pullback was pretty dramatic.”

The official unemployment rate came in at 11.1 percent in June, a drop from May’s 13.3 percent. The steady improvements from April to June suggest the economy has been starting to recover, and employees were getting called back to work. 

President Donald Trump celebrated the data on Thursday, saying that it “proves that our economy is roaring back.”

“We have some areas where we’re putting out the flames of the fires, and that’s working out well,” he said at the White House.

But the monthly unemployment rate does not include those who haven’t been actively searching for work over the past four weeks, potentially leaving out those who were waiting for new job opportunities as states reopened. The economy is still down 14.7 million jobs from February levels.

And while the economy has improved since the spring, there have been some signs that the pace of growth may be slowing. Weekly unemployment claims have steadily dropped from their peak of 6.8 million in late March but plateaued at around 1.5 million for most of June — still more than double the previous highest level on record. When you add in Americans applying for aid under a temporary Pandemic Unemployment Assistance program, the total number of people filing for benefits climbs as high as 2.3 million last week, a slight increase from the week before. 

The number of Americans receiving unemployment benefits has also held relatively steady at roughly 20 million in the most recent weeks of data.

“There’s no shortage of concerns around what we’re seeing in the jobless claims data and … of course the fact that the improvement in the data has seemed to have slowed somewhat,” said Mark Hamrick, senior economic analyst at Bankrate.com. “And then there is a risk that new restrictions will cause further job loss.”

Private companies have also been collecting data suggesting a slowdown. The reservation website OpenTable has seen the number of restaurant diners fall in the past few days after weeks of steady improvement. Homebase, a company that collects data from more than 60,000 businesses and 1 million hourly employees, has recorded Main Street business activity flattening in late June and even starting to drop in the past week, particularly in states like Arizona, Florida and Texas where coronavirus cases are surging.

And the online jobs marketplace ZipRecruiter — which had seen the number of job openings posted rise more than 14 percent in May compared to the month before — recorded a 7 percent drop in June, dragged down by particularly weak numbers in just the past few days, said Julia Pollak, a labor economist with the company.

“That likely reflects increasing awareness that we haven’t got this virus under control yet, that businesses may have to re-close,” Pollak said. “I think that is a very upsetting and worrying thing.”

The new numbers come as the Senate is gearing up for negotiations over another coronavirus relief package, including whether to extend the extra $600 per week in jobless benefits that are currently due to run out at the end of July. A bipartisan group of lawmakers is also hammering out the details of additional business rescue programs that would offer forgivable loans to employers who are able to maintain a percentage of their payroll — similar to the rules of the Paycheck Protection Program.

Senate Majority Leader Mitch McConnell signaled this week that Republicans are willing to move quickly on some sort of package, saying the chamber will focus on talks when it returns from its two-week July 4 recess. Another month of positive jobs numbers could alleviate pressure on Republicans to continue some of the more heavily debated aspects of that program, including the $600 sweetener.

Many GOP lawmakers argue that the benefit is so high that it provides a disincentive to return to work. Republicans have generally been taking a “wait-and-see” approach to the potential next round of stimulus funding, while House Democrats have already moved to extend it until January.

Other aspects of the stimulus, including the PPP, are likely keeping the economy as strong as it is, and economists warn it could quickly fall if and when benefits expire. Tom Gimbel, founder and CEO of the national staffing and recruiting firm LaSalle Network, said he doesn’t expect the unemployment figure to be an accurate reading of the economic situation until September’s or October’s report, when the small businesses relief program created under the CARES Act runs out.

“I think the numbers are wholly inaccurate as to where the state of the economy is,” Gimbel said, adding that when the government’s forgivable loan Paycheck Protection Program ends more people will be laid off. The program stopped accepting new applications this week but Congress is moving to keep it open until Aug. 8.

Not all of the real-time data is showing a slowdown. Daniel Zhao, a senior economist with Glassdoor, accurately predicted that nearly 5 million jobs would be brought back in June. But he also warned that job openings grew the fastest last month in the Midwest and South — areas that were some of the first to reopen, and that have also seen Covid-19 infections swelling in recent days.

“The jobs report is often thought of as a look in the rearview mirror, because the reference week is now two or three weeks past, and we’ve seen this surge in Covid-19 cases across the country,” he said.

“There is this open question about how it’s actually going to take into account the most recent information,” he added, suggesting the effect of the reinstated business closures could take a week or two to trickle down into the economic data.

There’s also the question of a misclassification issue that the Bureau of Labor Statistics has acknowledged contributes to an understatement of the actual level of joblessness in the country. That’s because large numbers of people have been classifying themselves as employed but absent from work in its monthly survey, which can artificially suppress the unemployment rate.

The issue reduced the overall April unemployment rate by as many as five percentage points, and the May rate by about three percentage points, the agency said. The same misclassification problem also occurred in the March report, but only reduced the unemployment rate by about 1 percent.

BLS said it had “taken more steps to correct the problem” and implemented more training for interviewers ahead of the most recent report. The agency said on Thursday that the degree of the problem “declined considerably” in Juneand that it only affected the unemployment rate by 1 percentage point at the most.

Despite the mixed picture, many economists and lawmakers are emphasizing that the new spike in coronavirus cases alone spells more trouble for the economy, which they say will need further help.

“The jobs crisis won’t be over until the public health crisis is over,” House Majority Whip Jim Clyburn (D-S.C.) said on a press call Wednesday. “This administration is burying its head in the sand and pretending that the virus is going to miraculously disappear. It won’t. And that approach will only prolong our nation’s crisis.”

This blog originally appeared at Politico on July 2, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter. Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.


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Economy Gains 4.8 Million Jobs in June; Unemployment Declines to 11.1%

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The U.S. economy gained 4.8 million jobs in June, and the unemployment rate declined to 11.1%, according to figures released Thursday morning by the U.S. Bureau of Labor Statistics. The improvements reflect the continued resumption of economic activity that previously was curtailed because of the COVID-19 pandemic.

Last month’s biggest job gains were in leisure and hospitality (+2.1 million), retail trade (740,000), education and health services (568,000), other services (357,000), manufacturing (356,000), professional and business services (306,000), construction (158,000), transportation and warehousing (99,000), wholesale trade (68,000), financial activities (32,000) and government employment (33,000). Mining lost 10,000 jobs in June.

In June, the unemployment rates declined for teenagers (23.2%), Blacks (15.4%), Hispanics (14.5%), Asians (13.8%), adult women (11.2%), adult men (10.2%) and Whites (10.1%).

The number of long-term unemployed workers (those jobless for 27 weeks or more) increased in June.

This blog originally appeared at AFL-CIO on July 1, 2020. Reprinted with permission.

About the Author: Kenneth Quinnell is a long-time blogger, campaign staffer and political activist. Before joining the AFL-CIO in 2012, he worked as labor reporter for the blog Crooks and Liars.


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