Elvert Barnes/Flickr

The Economic Recovery Depends on Controlling the COVID-19 Pandemic

, Policy Director and Lead Economist, Climate & Energy | July 23, 2020, 11:35 am EDT
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This post is a part of a series on COVID-19 and the Coronavirus Pandemic

As the US approaches 4 million COVID-19 cases, it’s pretty clear the public health crisis in our country is alarmingly out of control. The closely connected and worsening economic crisis also deserves careful attention, with data released today showing that 1.4 million workers filed for unemployment last week. Millions of people in the US have lost their jobs during the pandemic and now face an imminent end to expanded unemployment benefits, potential eviction from their homes, food shortages, loss of health insurance and other hardships. Additionally, many small businesses are failing. Congress must swiftly pass a new robustly funded COVID-19 emergency relief package to protect people’s health and their economic well-being.

It’s the virus, not the lockdown, that’s the real problem

First things first: let’s keep in mind that it is the novel coronavirus that’s the real problem. Efforts to keep people safe and limit the spread of the virus by temporarily shutting down some businesses, educational facilities, and entertainment venues are an appropriate, science-based response to a serious health risk. If we fail to take robust protective actions now, the risk of the pandemic worsening will grow significantly. And that will just extend the need for shutdowns, bringing with it a further spiral of economic woe.

The US leads the world, by far, in COVID-19 cases and never managed to emerge from its first wave of infections; instead infections are now at an even higher peak than back in April. Infection rates are soaring in many states, including Florida, Texas, California, Georgia, Arizona and Louisiana. The data show that states that failed to implement and/or sustain public health mandates including social distancing and mask wearing are seeing significant spikes in COVID-19 infection rates. All this adds up to potentially many more months of partial or complete shutdowns. The oft-invoked need to “flatten the curve” is a necessary step to getting this virus under control while we wait for effective cures and vaccines.

The health of our economy is directly tied to the health of our people. There’s no doubt that these health precautions come at a price—especially for those who are now unable to earn a living. But forcing people to choose between their lives and their livelihoods is cruel and unnecessary—and ultimately undermines efforts to slow the virus.

Now that we know once and for all that trying to negotiate with this virus is folly, Congress must take a humane approach and negotiate a sustained and just safety net for workers and families.

The economic shutdown is painful—and inequitable

The economic shutdown is triggering staggering job losses, with over 33 million people in the US now unemployed. This week was the 18th straight week when new claims have exceeded 1 million. Florida has seen jobless claims surge even as COVID-19 cases are also increasing rapidly.

Department of Labor data from June showed a drop in the overall unemployment rate from a high of 14.7 percent in April to 11.1 percent in June, as a result of some states choosing to reopen their economies prior to the latest surge in cases. However, it seems pretty clear that the recent surge in COVID-19 cases in many states will likely contribute to persistently high or increasing rates of unemployment that will be reflected in the forthcoming July data.

And, worryingly, many economists see a growing risk of lasting damage to the economy for years to come, rather than a quick rebound as some may have hoped for initially. Some businesses that had hoped to weather out the pandemic by shutting down temporarily are now being forced to permanently close down as the public health crisis persists. Major corporations like airlines are making deep, lasting cuts to their workforce as they see a lasting downward trend in business. Those lost jobs will not come back quickly.

Unemployment Rate. Credit: fred.stlouisfed.org

Just as with the public health crisis, the economic crisis is also disproportionately hurting communities of color. Black and Latinx workers have seen significantly higher rates of unemployment due to the pandemic than white workers. The June unemployment data also showed the largest racial disparity in unemployment rates in five years, with the unemployment rate for white workers at 10.1 percent compared with 15.4 percent for Black workers and 14.5 percent for Hispanic workers. Black male workers faced an even higher unemployment rate of 16.3 percent.

The long-standing systemic racism and deeply embedded socioeconomic inequities in our nation are on stark display as the COVID-19 economic crisis deepens.

Our nation’s lack of a strong and fair social safety net is making things worse

With the expanded unemployment benefits from the first relief package (the additional $600 per week in Federal Pandemic Unemployment Compensation benefits that was included in the CARES Act) set to end on July 31st, many people face a severe financial cliff. Black and Hispanic workers and their families are likely to be among those hurt the most.

Hunger and food insecurity are also on the rise. An analysis from Brookings Institute based on survey data found that:

By the end of April, more than one in five households in the United States, and two in five households with mothers with children 12 and under, were food insecure. In almost one in five households of mothers with children age 12 and under, the children were experiencing food insecurity.

Lines at food banks around the country are growing. Feeding America estimates that 1 in 6 Americans could face hunger as a result of the COVID-19 crisis. In a country as rich as the US, these kinds of statistics are shocking and shameful.

A recent study estimated that 5.4 million workers lost their health insurance recently because of job losses between February and May 2020 (see map below). This number doesn’t include their family members or dependents who may also have also lost their health insurance. (As always, this begs the question of why the US ties a basic right like health insurance to employment.) Imagine how scary it is to lose your health insurance during one of the worst public health disasters our nation has ever experienced. And incomprehensibly, President Trump continues to double down on efforts to dismantle the Affordable Care Act.

Looking at the map, it’s sobering to see that many of the states with the highest rates of insurance loss are also now experiencing a significant rise in COVID-19 cases. As the report mentioned above points out:

In eight states 20% or more of adults are now uninsured: Texas, where nearly three in ten adults under age 65 are uninsured (29%); Florida (25%); Oklahoma (24%); Georgia (23%); Mississippi (22%); Nevada (21%); North Carolina (20%); and South Carolina (20%). All but Oklahoma are also among the 15 states with the country’s highest spike in new COVID-19 cases during the week ending on July 12.”

Non-elderly Uninsured Adults, May 2020

Uninsured Adults, May 2020. Credit: The National Center for Coverage Innovation (NCCI)

According to the Center on Budget and Policy Priorities, states that implemented an expansion in Medicaid under the Affordable Care Act have performed better in terms of keeping people insured, and this has been especially important for low income essential workers in those states. If the 15 remaining holdout states expanded Medicaid, that could help insure 4 million more people.

The current federal ban on rental evictions ends on July 24, putting many renters—especially those in the poorest communities—at risk of eviction. Black and Latino households are twice as likely to be renters that white households, putting them at higher risk.

A recent study by Amherst Capital estimated that 28 million renter households are at risk of eviction nationwide due to the COVID-19 pandemic. Homeowners are also struggling to pay their mortgages. The Amherst study estimated that 15.6 million homeowners could be at risk of foreclosure.

A stock market that seems to have lost touch with reality

The economic crisis has also affected the stock market. We saw some of the steepest declines in decades early during the COVID-19 crisis. But what’s been more stunning is to see the stock market repeatedly tick up at the very same time as the public health and economic news gets grimmer!

How is it possible that on the very day the unemployment rate hits record highs the stock market sees a boost? How is it possible that the market is failing to account for the galloping growth in the COVID-19 case count in the US, earning us an unenviable #1 position in the world? It’s impossible not to look at this with dread about the inevitable and harsh downward adjustment in the market.

The reality is that the stock market has never been the best indicator of the true economic well-being of people, and now the gap is absurd. Market indicators have also never really acknowledged the unjust and growing income inequality in our nation—which is going to further widen due to COVID-19’s disproportionate impact on Black and Latinx people and those who live in poverty.

As we invest in measures to rebuild our economy, let’s make sure the post-pandemic economy doesn’t just reinforce existing inequities and the fossil fuel dependence that is fueling climate change. Congress should make investments that ensure we’re building a just and equitable economy that truly works for ordinary people.

Health v. the Economy is a false choice

Those who continue to argue that people must choose between health and the economy are presenting us with a false choice. The truth is the economy cannot recover as long as this pandemic is raging. Anyone who tells you otherwise is seriously deluded.

Health measures like wearing face masks are good for health and the economy.

Public health experts agree that face masks are a proven vital and powerful tool to help contain the COVID-19 pandemic. A recent article coauthored by CDC Director Robert Redfield states that:

“At this critical juncture when COVID-19 is resurging, broad adoption of cloth face coverings is a civic duty, a small sacrifice reliant on a highly effective low-tech solution that can help turn the tide favorably in national and global efforts against COVID-19.”

And increasingly, this advice is being echoed by economic actors.

Robert Kaplan, president of the Federal Reserve Bank of Dallas, said in an interview with The Washington Post:

“We’re confident that masks work, and if you want to reopen the economy faster, you want to get people back on planes and in stores. Part of my job, I believe, is to call it out.”

Goldman Sachs researchers stated in a recent paper that “a face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP.”

Congress must pass a significant emergency relief bill—and soon

It’s astonishing that as the country faces multiple crises, as suffering, death and economic hardship are mounting, Congress is struggling to come to bipartisan agreement on the basic commonsense measures that are so desperately needed. (Of course, they should dismiss out of hand any of the Trump administration’s proposals to cut funding to the Centers for Disease Control (CDC) and the National Institutes of Health, including the ridiculous notion of cuts to funding for COVID-19 testing and tracing.)

The game of political brinkmanship playing out in news headlines is callously irresponsible, while people’s lives and livelihoods hang in the balance.

This is not the time to penny-pinch. If ever there was a time for a huge investment of federal dollars to double down on public health measures and keep people afloat in challenging economic times, this is it. The $2 trillion CARES Act passed in March was a first step. The next COVID relief package must be larger and more focused on measures that will directly benefit people, given the rapidly worsening scale of the public health and economic crisis. Indications are that a smartly targeted and just package on the order of at least $3 trillion is urgently needed. And given the ongoing scale of the challenges, the nation will likely need further economic relief and stimulus packages to get the economy back on track in the months and years ahead.

Here are some basic parameters for a relief package that Congress should approve as soon as possible:

  • An extension of the expanded unemployment benefits that were included in the CARES Act
  • Expanded funding for public health measures, including COVID-19 testing and tracing, and PPE and other urgently-needed equipment
  • A continued moratorium on evictions, foreclosures and utility shutoffs
  • Expanded funding for food assistance
  • Expanded funding for the LIHEAP program to help low-income households pay energy bills
  • Expanded funding for loans and grants to small businesses to help them survive
  • Funding for state and local governments that are facing severe budget shortfalls that threaten a range of important programs
  • Funding for schools to undertake the large investments that will be needed to openly safely, when and if public health conditions allow
  • Extending renewable energy tax credits and making them refundable, which is vital to help the clean energy industry which has hemorrhaged over 600,000 jobs thus far due to the economic crisis.

Congress must specifically address the racial disparities in the impacts of COVID-19 and the economic crisis by targeting public health expenditures and economic assistance to disproportionately harmed communities, including Black, Latinx, Tribal and rural communities. A payroll tax cut will do little to help those who are unemployed and should not be seen as a substitute for much-needed help for those who are struggling the most right now. Large corporate bailouts without any accountability, oversight or commitment to retain jobs should be anathema. Using bailouts to reinforce our dependence on fossil fuels should be completely off the table at a time at a time when addressing the climate crisis (yes, that hasn’t gone away) demands a rapid transition to clean energy.

States that have failed to expand Medicaid under the provisions of the ACA must do so immediately, which could allow millions more people to be able to access health insurance. The federal government must also take additional measures to restore and expand access to health insurance.

Around the world too, needs are growing too. A recent report from Oxfam states that “By the end of the year 12,000 people per day could die from hunger linked to COVID-19, potentially more than will die from the disease itself.” Young children are at heightened risk. Congress should also appropriate funding to help children in countries facing dire food shortages as the global economic crisis worsens, such as by passing the Global Child Thrive Act.

It’s unconscionable that the Trump administration has allowed the COVID-19 pandemic to spiral so badly out of control. Now policymakers must act quickly and decisively to and invest in public health measures and limit the harm to people.

Let’s not forget: Our health and the health of our economy are completely interdependent. The only path to lasting economic recovery is to contain the COVID-19 pandemic.

Elvert Barnes/flickr

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