Congress may have bought itself another month to negotiate over the Biden-Harris administration’s Build Back Better (BBB) agenda, but one thing is clear: Further reducing the scale and scope of the budget reconciliation package unequivocally means the legislation will support far fewer jobs and deliver fewer benefits to lift up working families and boost the economy as a whole.

How much will such compromise cost the U.S. economy? We crunched the numbers to find out what compromising on the BBB plan will mean for every state and congressional district in the United States. If the budget reconciliation package is cut from $3.5 trillion to $1.5 trillion—as Sen. Joe Manchin (D-W.V.) has called for—nearly 2 million fewer jobs per year would be supported.

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On Friday, the Bureau of Labor Statistics (BLS) will release September’s numbers on the state of the U.S. labor market. August employment growth came in lower than June or July due in part to the Delta variant spreading quickly. Another sign of weakness in the August job report was the rise of Black unemployment, which remains significantly higher than other groups. The August jobs report showed us, once again, just how much the ebbs and flows of the pandemic are the dominant influence by far on trends in the labor market.

This pronounced August slowdown also came after more than half of all states prematurely ended the pandemic unemployment insurance (UI) programs. All of the pandemic programs ended in early September.

While no longer accelerating, COVID-19 caseloads were still high in mid-September compared with the early summer months, so that may once again slow the recovery. In this jobs report, one indicator I’m going to be paying close attention to is public-sector employment, specifically public-sector education employment.

Overall government employment is still down 790,000 jobs since February 2020—the third largest employment deficit in any economic sector—but this shortfall is entirely in state and local employment and much of those losses were in education employment. Local education employment—think the public K-12 school system—cratered in the spring of 2020, experiencing losses in excess of those suffered in the Great Recession and, as of mid-August, remained 219,600 short of its pre-pandemic level.

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In a political system beset by many stupid and destructive institutions, the statutory limit on federal debt might be the worst. The debt limit:

• Measures no coherent economic value. The measure of debt it targets is not inflation-adjusted, would perversely make the debt situation look worse if there was a reform to Social Security that closed that program’s long-run actuarial imbalance, and ignores trillions of dollars in assets held by the federal government.
• Has no relationship to any economic stressor facing the country. Over the past 25 years, as the nominal federal debt rose from $5 trillion to $22.7 trillion, debt service payments (required interest payments on debt) shrank almost in half, from 3.0% of GDP to 1.8%.
• Can cause real damage if it’s not lifted in the next couple of weeks. It would only take a couple of months of missing federal payments due to the debt ceiling to mechanically send the economy into recession—and that’s without assessing damage it would cause from financial market fallouts.
• Has been used time and time again to enforce misguided austerity policies. The 2011 Budget Control Act (BCA) grew directly out of a GOP Congress threatening to not raise the debt ceiling absent spending cuts. The BCA provided an anti-stimulus about twice as large as the stimulus provided by the American Recovery and Reinvestment Act (ARRA—commonly known as “The Recovery Act”) and is largely responsible for the sluggish recovery from the Great Recession.

Given all of this, the debt ceiling should be abolished or neutralized in absolutely any way politically possible. It serves no good economic purpose and plenty of malign ones. Below we expand on these points.

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According to a new report released yesterday from the Bureau of Labor Statistics (BLS), just over three-quarters (77%) of private-sector workers in the United States have the ability to earn paid sick time at work. But, as shown in Figure A below, access to paid sick days is vastly unequal, disproportionately denying workers at the bottom this important security. The highest wage workers (top 10%) are nearly three times as likely to have access to paid sick leave as the lowest paid workers (bottom 10%). Whereas 95% of the highest wage workers had access to paid sick days, only 33% of the lowest paid workers are able to earn paid sick days.

Low-wage workers are also more likely to be found in occupations where they have contact with the public—think early care and education workers, home health aides, restaurant workers, and food processors. Workers shouldn’t have to decide between staying home from work to care for themselves or their dependents and paying rent or putting food on the table. But that is the situation our policymakers have put workers in. Meaningful paid sick leave legislation is incredibly important for low-wage workers and their families and important to reduce the spread of illness. At the same time, access to paid sick days has positive benefits to employers as it reduces employee turnover with no impact on employment. 

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Congress and the Biden-Harris White House have let expanded unemployment benefits expire in the middle of the ongoing COVID-19 pandemic, even while employment is still well below pre-pandemic levels. As a result, annual incomes across the U.S. will fall by $144.3 billion and annualized consumer spending will drop by $79.2 billion, according to the best available evidence on the effects of recent unemployment benefit cuts.

In March 2020, as the economic impact of the pandemic spread quickly, Congress critically expanded unemployment insurance (UI) benefits by providing $600 (and later, $300) monthly supplements, extending benefit periods, and making previously excluded workers—such as independent contractors and those with low incomes—eligible for UI.

However, about half of states prematurely terminated these programs between June and late July 2021, and then, by letting the federal law expire in September, Congress and the White House cut off pandemic UI entirely. In total, more than 10 million workers lost all of their unemployment benefits because of either the state-level program terminations or the September program expiration.Read more

The Census Bureau report on income, poverty, and health insurance coverage in 2020 reveals an expected shock to median household income relative to 2019 resulting from the COVID-19 pandemic and recession. Across all racial and ethnic groups, median household income either declined or was statistically unchanged from the previous year.

While Census cautions that the 2020 income estimates may be overstated due to a decline in response rates for the survey administered in March of this year, real median income declined 4.5% among Asian households (from $99,400 to $94,903), 2.6% among Hispanic households (from $56,814 to $55,321), 2.7% among non-Hispanic white households (from $77,007 to $74,912), and was statistically unchanged for Black households (from $46,648 to $46,600) as seen in Figure A.

In 2019, Black American households finally surpassed the median income peak they achieved prior to the Great Recession of 2008-2009. In 2020, however, the pandemic recession cut that long recovery short.

In 2020, the median Black household earned just 61 cents for every dollar of income the median white household earned (unchanged from 2019), while the median Hispanic household earned 74 cents (unchanged from 2019).

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Increasing income inequality has been at the forefront of economic policy conversations in the United States since at least the 2008 financial crisis. The roots of that inequality stretch back much further, though. Growing employer opposition to unions and the shift from manufacturing toward finance as a major growth industry over many decades has resulted in a separation between worker pay and productivity that has persisted to this day.

There has been growing concern about the wage stagnation faced by the typical American worker, and increasing attention paid to the need to rectify this—to ensure that workers reap the gains associated with their increased productivity.

However, there has not been as much attention paid to the distinct divisions that exist even among the generally undercompensated working class. While the typical worker has not seen their fair share of wage increases relative to the increase in productivity over the past 40 years, Black and Hispanic workers saw even smaller wage gains relative to their white counterparts.

These racial disparities in pay add another dimension to conversations about gaps between pay and productivity, and about income inequality in general. While policies designed to link the typical worker’s pay more closely with productivity are necessary to reduce income inequality overall, the persistence of disparities even within the working class shows us that targeted policies will be required in addition if we want to achieve the goal of true equity across the board.Read more