Coronavirus Relief and the Slowing Economic Recovery

Coronavirus Relief and Economic Stimulus Vol. I

Jan 16, 2021

Hello again, and welcome to the second installment of the Economic Justice and Progress Newsletter. In this issue, rather than focusing on more theoretical economic discussions as I did in my first article, I want to instead turn towards current events that impact every working American during these difficult times.

Everyone who works for a living—including those who are currently unable to work due to the pandemic or other circumstances—should all have a basic understanding of our government’s response to the Coronavirus pandemic thus far, the ways in which our response could improve, and how these decisions impact working families across America. I hope people from all types of backgrounds will find it accessible to learn about such subjects by reading my Coronavirus Relief and Economic Stimulus series of articles. You can sign up for free to get each article emailed to your inbox.

Given how quickly the political dynamics surrounding our nation’s pandemic response and stimulus legislation has changed throughout even this past month, I decided to write this series of articles covering multiple aspects of Coronavirus relief. This first article will focus on the recently passed relief bill and the current state of our economic recovery, while my next article will examine the impacts of the CARES Act passed last March. Future articles will address topics including the ongoing debate around $2,000 relief checks and new legislation under the incoming Biden administration.

I encourage you to learn about our economy’s present situation, consider what policies you want to see enacted, and contact your elected lawmakers to have your voices heard. My hope is that the Democratic majority in Congress and the new administration in the White House will deliver robust, sustained relief for working families who are suffering unnecessarily. However, progress is not inevitable, and misinformation about our economic predicament abounds. Hopefully this series of articles will help clarify the state of the economy and our nation’s response to the pandemic for readers from all types of backgrounds.

As you form your opinions on this situation and what you’d like to see included in future relief bills, consider the most recent Coronavirus relief bill and how it fits into our federal budget.

The Federal Budget and Coronavirus Relief

As last year’s winter solstice ushered in an historically bleak holiday season, during the evening hours of December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021. While this might initially sound like mundane clerical work that Congress does as part of their yearly bookkeeping, this important bill contained the latest round of crucial relief spending in response to the COVID-19 pandemic.

This omnibus spending bill, which is basically the technical title for the federal budget of the United States government, consolidated several individual spending bills into a single must-pass bill. Unfortunately, attaching bills that cannot pass alone into massive, essential bills like the federal budget is fairly typical for our otherwise gridlocked Congress. As a result, this budget included—among several individual spending bills totaling $2.3 trillion in spending for various government departments and agencies—a bill specifically appropriating approximately $900 billion worth of additional Coronavirus relief spending.

Although much of the federal budget is relatively standard—for better or for worse—Trump used certain provisions in the bill as pretext for his short-lived refusal to sign the bill into law. Many of the items Trump complained about being “disgraceful” were in his own administration’s budget proposal, but this political reality helps provide important context regarding where taxpayer money gets spent. When everyone can clearly see in black and white that $33,000,000 for “democracy programs” in Venezuela appears in the same group of bills as direct relief checks for working families, the disingenuous narrative that “we don’t have any more money” becomes even less defensible.

Democracy programs for Venezuela — “Economic Support Fund” of $33 million made available for democracy programs for Venezuela buried deep within this Consolidated Appropriations Act

Because there is no shortage of discussion surrounding the Coronavirus relief spending, I wanted to clarify certain aspects of this bill and highlight where the $900 billion in spending is going. I also want to make the case that some of this money represents life-saving relief for millions of Americans, that it helps stimulate our economy out of recession and into recovery, and that we need more relief bills like this to help Americans face these unprecedented overlapping health and economic crises.

Keeping this in mind, let’s take a look at the details of this latest relief bill.

Donate via Ko-Fi

Key Features of the Latest Coronavirus Relief Bill

The full text of the consolidated bill is a staggering 5,593 pages long and essentially packs several individual bills into one massive bill, with roughly 640 pages devoted to the Coronavirus relief provisions. Rather than go through the bill line by line, I want to focus on certain aspects that directly affect working families.

Two important, but frankly long overdue and woefully insufficient, provisions included in this bill which impact the lives of working families are:

Extended Unemployment Insurance (UI) benefits amounting to an additional $300 per week in federal benefits, on top of the standard State benefits, which expire in mid-March 2021
Direct, one-time “Economic Impact Payments” (EIP) of $600—which were technically treated as an early payment of a refundable tax credit against 2020 federal income taxes—are being distributed to most adults, and qualifying children in their household, who meet criteria similar to those outlined in the CARES Act, such as the $75,000 income limitation, after which benefits gradually phase out for higher-income households

2020 Recovery Rebates of $600 per qualifying individual — $600 tax credits for qualifying individuals, which eventually became the second Economic Impact Payments or “stimulus checks”

Because these two provisions—also frequently referred to as “transfers”—target the broadest groups of people negatively impacted by this pandemic, I will focus most of my economic analysis on the direct payments and extended unemployment insurance benefits. There are, however, other important spending categories that, for example, provide small business relief, fund efforts to combat COVID-19, and other provisions which also add to the roughly $900 billion in total spending, including the following:

Paycheck Protection Program (PPP) loans and other forms of small business relief
Education, agriculture, and transportation funding
Supplemental Nutrition Assistance Program (SNAP, also known as “food stamps”) and rental assistance
Coronavirus vaccine distribution funding
Tax law changes affecting deductions, credits, etc.

Each of these spending categories play an important role in helping people survive this crisis and ward off economic recession, but again, most of my analysis in this article will focus on the provisions most directly impacting working families’ lives. Even if you are fortunate enough to not be struggling during these difficult times, many Americans are in dire straits, and this relief is long overdue. To gain a better understanding of the current state of our economy, and the people who have been waiting for months to receive this relief, we should examine the economic impact this pandemic had on our country and its people.

The Need for Economic Relief

One thing that I want to make clear is that, for many Americans, they need these relief payments in order to survive, despite what detractors may say to the contrary. While it’s virtually impossible to watch or read the news without seeing at least anecdotal evidence of struggling families across America, perhaps those who remain unconvinced need to see some empirical evidence compiled by experts.

I recently read an excellent paper by Elena Falcettoni, who serves on the Board of Governors of the Federal Reserve, and Vegard Nygaard of the University of Houston, titled Acts of Congress and COVID-19. This paper summarizes various economic studies analyzing the pandemic’s impact on unemployment as well as Congressional decisions in response to the pandemic. These studies paint a compelling picture that economic relief was and still is necessary, so I will link several of those studies throughout the paragraphs below.

Millions of Americans lost their jobs in the first months of the pandemic, especially those who already struggled to make ends meet before COVID-19, and there are still millions without jobs. These job losses disproportionately impacted workers receiving lower wages, women and minorities, and it will still take months or longer for vaccine distribution to allow many of these workers to safely return to the job market.

Here is a chart from the Bureau of Labor Statistics (BLS) that shows the job losses broken down by industry:

BLS 12-month net change in employment by industry, December 2020

Because I want these articles to be accessible to everyone, I’ll give a brief overview of how to read this chart for anyone unfamiliar with this format. Red dots represent the data points for BLS’s current best estimate for jobs numbers, and the grey rectangles show the range of estimates for that industry, since the BLS often revises their numbers as more information comes to light.

You can see that some industries’ data points are shown fairly close to the “0” line, or the line at which no jobs—i.e., 0 jobs—were lost during the year. Technically speaking, the “0” line is where data points would be if that category’s seasonally adjusted December 2020 employment numbers were the same as those from December 2019. Data points to the left of this “0” line represent job losses for that industry.

Examining the data points and their horizontal distance from the “0” line, the graph clearly shows that service jobs numbers are far below what they were a year ago. This is represented by the service producing sector’s data point sitting far to the left of the “0” line, beyond the 8 million lost jobs mark—denoted as “-8,000 thousand” due to the units of measurement being “thousands of jobs”—on the graph above. In particular, the leisure and hospitality industries, shown towards the bottom of the graph, suffered disproportionate losses. Studies further show that many of these job losses fell upon workers who could not perform their jobs from home, and those who could not physically distance themselves safely in the workplace.

Many of the workers in these service industries were already economically vulnerable —often relying on the generosity of customers’ tips and gratuities for a significant portion of their income—and a heartbreaking study by One Fair Wage reveals that the pandemic made these realities even worse. When so many of these service workers lost their jobs last year, reports indicate that the $600 per week in UI benefits provided by the CARES Act was often far more than they were paid in their low-wage jobs. But because of the temporary nature of the UI benefits, people still frequently went back to work if they could secure a job offer.

Although some service workers were able to return to work last spring, they are once again disproportionately losing their jobs as Coronavirus cases surge. Furthermore, while some workers may only be unemployed in the short term—because they generally expect to return to work once the pandemic subsides—many others are facing long-term unemployment or falling out of the labor force altogether.

See the excerpt below from the BLS December 2020 jobs report, formally known as the Employment Situation Summary, for a closer look at how they differentiate between long-term unemployment and other categories.

Long-term unemployed workers — BLS definition of long-term unemployed workers: those jobless for 27+ weeks

In order to track workers leaving the work force, the BLS compiles data on the labor force participation rate, which is essentially the percentage of the population that is either employed or actively looking for work. The graph below shows the trend of the labor force participation rate over time. As you can see, it dropped from around 63% last February to roughly 61% in December.

LFPR — Labor Force Participation Rate through December 2020 | Source: BLS

Although more people are back in the labor force now than at the lowest point of roughly 60% in April 2020, the upward trend of economic recovery driving an increase in the labor force participation rate has flatlined in the graph above. We also can examine other data which likewise reveal troubling signs that our economy risks falling back into recession.

Share The Economic Justice and Progress Newsletter

Economic Recovery is Slowing while Families are Suffering

Just as labor force participation fell dramatically last March and April, the overall initial job losses due to the pandemic caused the largest rise in Unemployment Insurance claims in U.S. history. Certain industries have since recovered, but the pace at which new jobs are being created is slowing, and many of the jobs lost may not exist after we stop the uncontrolled spread of the Coronavirus. Compounding the issue, small businesses are likewise closing at an alarming rate. These are all troubling indications that our economy has not turned the corner. Despite the record-breaking highs on Wall Street, millions of working families are suffering across America. This reminds me of a mantra often repeated by the public radio show Marketplace, which asserts that “the stock market is not the economy.”

To further illustrate the broader picture of our job market, you can see another BLS graph below which clearly shows in bright red how the trajectory of economic recovery during this recession compares to other post-World War II recessions—notably, the Great Recession of 2007-2009 shown by the solid black line.

Post-recession recovery rates since World War II | Source: BLS

As with the previous graph, focus on the line marked “0”, where all the trend lines begin, and see how the various trend lines fall from their starting point. Points below this “0” line represent job losses measured in percentage points. Then watch these trend lines gradually make their way back up towards the “0”, keeping an eye on the horizontal axis below to see how many months it took to recover from past recessions. With prior recession trends in mind, consider what more will need to occur before the red line representing our current recession approaches “0” any time soon.

Also recall that the Great Recession was caused by financial institutions who fraudulently misrepresented the value of their mortgage-backed assets, and when markets caught on to their fraud, Congress bailed them out while only offering modest, narrowly focused and unsustained support for working families. I will cover this in more detail in a future article, but we can see on the graph that it took well over 72 months, or more than six years, for jobs to recover to early-2007 levels before the recession. Perhaps if we had helped more working families then, and offered robust, sustained relief, our economy could have recovered more rapidly. Still, if the red line representing the present crisis continues at its current pace, how long do you suppose it will take before we recover the millions of jobs lost in this recession?

Although the BLS December jobs report is not yet reflected in the above graph, it confirms that we lost additional jobs in December. The first line of the Summary says, “Total nonfarm payroll employment declined by 140,000 in December, and the unemployment rate was unchanged at 6.7 percent”. We had been gaining jobs—rapidly at first, before slowing to a gradual increase—but now we are once again losing jobs, and the unemployment rate is the same as it was during last November. The red line in the graph above would therefore essentially flatten once accounting for this new data. Unlike the COVID-19 curves, this is one curve we should not try to flatten.

It is important to remember that these job loss curves and graphs represent working families who are seeking but are nevertheless unable to find jobs. Shocking images of people lining up in their cars to receive food from Food Banks and other charitable organizations are a stark reminder of the reality for countless families across America who are suffering. We can take solace in knowing that some charities do exist to help those in need when our government systemically fails, but we cannot ignore the systemic failure of our government to “promote the general Welfare” as our Constitution mandates.

Because of the financial hardships many working families face, and because charities do not have unlimited resources, people across America are being forced to make decisions no one in the richest country on Earth should have to make, such as: do they protect themselves from COVID-19 and face starvation and eviction, or do they risk getting a job while the virus spreads uncontrollably? Or perhaps we should do as “Weird” Al Yankovic facetiously suggested in a recent parody, when he rhetorically asked, “Will we ever get back all the jobs we lost? Or should we setup 11,000,000 Etsy shops?”

Instead of forcing Americans to make such impossible decisions, and allowing unnecessary suffering to persist, Congress can intervene as they have in the past. My next article in the series will continue this examination of Coronavirus Relief and Economic Stimulus by taking a closer look at the CARES Act and the impact it had on working families and the overall economy. If you learned something new and want to get my next article sent to your inbox, sign up for free below.

The Economic Justice and Progress Newsletter