More FAQS on deficits and debt: Where is the money coming from?

Former Federal Reserve Chair Alan Greenspan told CNBC last week that his “biggest concern” in regard to the economic outlook included too-high budget deficits. This concern is both completely misplaced and widely expressed.

We have already addressed a number of FAQs about deficits and debt. Besides those FAQs, however, another common question people ask is, “Where is the money the government borrows coming from?” Related to this fear is concern that the source of borrowing (whatever it is) might dry up at any time, and the result could be spiking interest rates that force firms to cut back on investment in productive private-sector investments, which in turn would slow economic growth in the future.

The short answers to these concerns are pretty simple: The money the government is borrowing comes mostly from ourselves, and that’s a key reason why we can be sure that interest rates won’t start rising unless and until we have reached a full recovery.

Below, we’ll explain what it means that federal budget deficits mostly amount to U.S. households borrowing from themselves.

In March and April this year, whole industries in which U.S. consumers spend money were shut down (restaurants, hotels, air travel, gyms, etc.). While there are some substitutes for some of this spending (when restaurants close, people tend to spend more money on groceries, for example), these offsets are nowhere near one-for-one. This means that as the places where people spend lots of money closed, households spent less. Because one person’s spending is another person’s income, as household consumption spending collapsed, market-based incomes collapsed in turn (i.e., workers in COVID-19-shutdown sectors stopped getting paychecks and business owners stopped earning profits).

Absent any policy response, a horrific vicious cycle would have started. Laid-off restaurant and airline workers would have cut back spending on everything—including spending in sectors that COVID-19 had not directly shut down. At that point, workers in non-coronavirus-affected sectors would have seen cuts to their incomes and reduced their own spending—and the downward cycle would continue. The few months of significant economic support provided by the CARES Act starting in April didn’t just provide vital income support to laid-off workers—it also broke this vicious cycle and put up a firewall between the coronavirus-driven shutdowns and the rest of the economy.

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Raising the minimum wage to $15 by 2025 will restore bargaining power to workers during the recovery from the pandemic

The 1963 March on Washington for Jobs and Freedom demanded a federal minimum wage that would, as economist Ellora Derenoncourt has observed, be the equivalent in inflation-adjusted terms of almost $15.00 an hour today. While organizing efforts such as the “Fight for $15” have led to many minimum wage increases at the state and local levels, the current $7.25 federal minimum wage stands at less than half of that 57-year-old goal.

In spite of national grassroots efforts, Congress has failed for more than a decade to raise the federal minimum wage. Most recently, opponents have argued that the pandemic means that we still can’t afford to raise the minimum wage to the level sought by the civil rights movement back when John Kennedy was president.

In 1963, the applicable minimum wage varied by industry between $1.00 and $1.25 per hour, and there was no minimum wage at all for agriculture, nursing homes, restaurants, and other service industries that disproportionately employed Black workers. The March on Washington’s demands were for a $2.00 national minimum wage “that will give all Americans a decent standard of living” and to extend its coverage “to include all areas of employment which are presently excluded.” A few years later, Congress expanded the policy’s coverage to some of the previously excluded sectors and significantly raised the minimum wage, to $1.40 in 1967 and then $1.60 in 1968. Derenoncourt and Claire Montialoux demonstrated convincingly that these increases were responsible for more than 20% of the fall in the Black–white income gap during the Civil Rights Era.

But had policymakers met the original demands of the March on Washington, the minimum wage in 2020 would already be nearly $15 per hour. Concretely, as Figure A shows, if the minimum wage had been raised to $2.00 in 1963, with future increases tied to the cost of living, the minimum wage this year would be $14.79, more than twice its current value of $7.25. Instead, after it rose to the inflation-adjusted high point of $10.43 in 1968, infrequent increases since then have dramatically eroded its value.

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What to watch for in the 2019 Census data on earnings, incomes, and poverty

On Tuesday, the Census Bureau will release its annual data on earnings, incomes, poverty, and health insurance coverage for 2019. There are a number of important things to know about this data release, including:

  • These data report household incomes from 2019, not 2020. In short, this data will be silent on what has happened since the pandemic and ensuing recession hit the United States and resulted in widespread job loss and health devastation. It will, however, provide some insights into the labor market as we entered the current recession, which magnified deeply entrenched economic inequalities and racial and ethnic disparities.
  • The data on incomes in 2019 was collected in February, March, and April of 2020. Its collection was likely extremely hampered by the COVID-19 pandemic. This could make it less reliable than previous year’s releases, and biases could be particularly large for low-income households.
  • The data will give us insight into how evenly (or unevenly) economic growth has been distributed across U.S. households in 2019. Other data sources that are released more than once a year too often provide only averages or aggregates into what is happening in a particular month—but next week’s Census release gives a comprehensive picture of how the U.S. economy was working for typical households over the full year, including individual-, family-, and household-level data on annual earnings and incomes.
  • The data are likely to show strong, relatively widespread income growth in 2019. Policymakers should take heed of this, as the root of this growth was a labor market approaching full employment, with the unemployment rate below 4% for the entire year.

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UI claims rising as jobs remain scarce: Senate Republicans must stop blocking the restoration of UI benefits

Last week, total initial unemployment insurance (UI) claims rose for the fourth straight week, from 1.6 million to 1.7 million. Of last week’s 1.7 million, 884,000 applied for regular state UI and 839,000 applied for Pandemic Unemployment Assistance (PUA). A reminder: Pandemic Unemployment Assistance (PUA) is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits and expires at the end of this year.

Last week was the 25th week in a row total initial claims were far greater than the worst week of the Great Recession. If you restrict to regular state claims (because we didn’t have PUA in the Great Recession), claims are still greater than the second-worst week of the Great Recession. (Remember that when looking back farther than two weeks, you must compare not-seasonally-adjusted data, because DOL changed—improved—the way they do seasonal adjustments starting with last week’s release, but they unfortunately did not correct the earlier data.)

Most states provide 26 weeks of regular state benefits. After an individual exhausts those benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 13 weeks of benefits that is available only to people who were on regular state UI. Given that continuing claims for regular state benefits have been elevated since the third week in March, we should begin to see PEUC spike up dramatically soon (starting around the week ending September 19—however, because of reporting delays for PEUC, we won’t actually get PEUC data from September 19 until October 8). It is also important to remember that people haven’t just lost their jobs. An estimated 12 million workers and their family members have lost employer-provided health insurance due to COVID-19.

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Different economic crisis, same mistake: The Fed cannot make up for the Republican Senate’s inaction

Key takeaways:

  • Following the Great Recession of 2008–2009, Congress did little to help recovery, and we relied almost exclusively on actions from the Federal Reserve to spur recovery. That was a mistake.
  • It is Congress that has the tools that could end the economic crisis, and the Senate Republican caucus that is the roadblock to using these tools should be the focus of policy attention today.
  • While the Fed has shown better judgement than Congress in the last economic crises, the tools they currently have are too weak to spur the needed recovery. In the end, there is no good substitute for a dysfunctional Congress—and today’s dysfunction is caused by Senate Republicans who refuse to act.

The economic shock of the coronavirus is very different from the housing bubble shock that caused the Great Recession of 2008–2009. Yet six months into the current crisis, we are in danger of repeating a same key mistake: leaning too hard on the Federal Reserve to navigate the crisis while ignoring the much more important role of a bloc in Congress that is blocking needed aid. While it is true that the Fed has shown better judgement over the course of this crisis, the tools it currently has available to address it are weak. The tools Congress has are strong, but their actions have been stymied by the mystifyingly bad judgement of Senate Republicans.

The Fed is an enormously powerful institution in many ways, but their policy tools are actually quite limited for boosting the economy out of a recession or even increasing the rate of growth during recoveries. The Fed can decisively slow economic expansions, and too often in the past they have done this explicitly to weaken workers’ bargaining position and keep wage-driven pressure on prices from forming. In short, the Fed has a powerful brake but a very weak accelerator, and their use of this brake has merited much criticism in the past.

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Total initial UI claims have risen in each of the last four weeks: Congress must act

Last week 1.6 million workers applied for unemployment insurance (UI) benefits. Breaking that down: 881,000 applied for regular state unemployment insurance, and 759,000 applied for Pandemic Unemployment Assistance (PUA).

This is the fourth week in a row that total initial claims have risen. Further, last week was the 24th week in a row total initial claims were far greater than the worst week of the Great Recession. If you restrict to regular state claims (because we didn’t have PUA in the Great Recession), claims are still greater than the second-worst week of the Great Recession. And remember this: People haven’t just lost their jobs. An estimated 12 million workers and their family members have lost employer-provided health insurance due to COVID-19.

There was a (mostly) positive methodological development with the release of the UI data this week—DOL changed their seasonal adjustment methodology. The way they had been doing seasonal adjustments was causing major distortions during this recession, and the change is a big improvement. One big problem, however, is that they didn’t revise prior seasonally adjusted data, which means you cannot compare seasonally adjusted numbers over time. So, remember this: It’s OK to use the seasonally adjusted numbers, but if you want to compare UI data over time, use non-seasonally-adjusted numbers.

An example of how to do it wrong: Some are saying regular state UI claims dropped by 130,000 last week (from 1.01 million to 881,000). That’s wrong because it’s comparing two seasonally adjusted numbers that were calculated using two different methods (the old way and the new way). Regular state UI claims actually ticked up by 7,600 last week, from 825,800 to 833,400 (using non-seasonally-adjusted data). Including initial PUA claims, total initial claims rose 159,000 last week, from 1.43 million to 1.59 million.

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What to Watch on Jobs Day: Widespread economic pain continues in August

Rent was due again this week and millions of unemployed workers have now gone five weeks without the enhanced $600 unemployment insurance benefit. This benefit was a vital lifeline, and families across the country now face eviction and hunger in its absence. The drop in benefits will also make it far harder in coming months to claw back the jobs lost during the pandemic. As of the latest data, the labor market remains 12.9 million jobs below where it was in February, before the pandemic spread. And, the job gains we saw this summer slowed down remarkably in July, as a resurgence of the coronavirus re-shuttered part of the country. On Friday, the latest jobs data will tell us about the state of the labor market for August and how workers continue to fare in these difficult times.

Time and time again we learn how the recession has magnified the economic disparities many face in the U.S. labor market, whether it be by race, ethnicity, gender, age, education, or class. Women workers were disproportionately affected at the beginning of the recession with job losses in excess of their share of the workforce. In particular, Latina workers saw their unemployment rates skyrocket, exceeding 20% in March. Black workers also experienced devastating job losses, which they were less able to weather because of historical inequalities in employment, wages, incomes, and, in particular, lower levels of liquid savings to fall back on. Black workers are also more likely to be unemployed. Historically, Black workers have been less likely to receive unemployment benefits after losing a job. However, the expanded eligibility criteria included in the CARES Act has been a great equalizer in the current downturn—though these expanded criteria will cut off at the end of this year. Further, as shown in Figure A, Black men have yet to see much in the way of job gains in the recovery thus far. Young workers are also experiencing unprecedented levels of unemployment, and will likely face significant aftershocks from starting their careers at such a difficult time (more on this in a forthcoming EPI report).

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Calling out anti-Blackness in our response to police violence and economic inequality

The Black community has faced a long history of racial exclusion, discrimination, and inequality in the United States, causing these families to shoulder unequal economic and health burdens.

We must address anti-Blackness in our society and center Black women and their communities in our policies.

That was the resounding message from a panel of Black and brown women—leading economic and social justice experts—on creating lasting change. These women spoke in June at the Economic Policy Institute’s webinar, Rebuilding the House That Anti-Blackness Built in Our COVID Response, after the police murder of George Floyd.

Their words resonate today, as the nation continues to grapple with its history of systemic racism, inequities, and injustice, following the police shooting of Jacob Blake in Kenosha, Wisconsin.

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The Milwaukee Bucks’ strike shows what’s possible when workers band together

Typically, workers strike over pay or benefits, or to protest their employer’s violation of labor law. But last week, NBA players for the Milwaukee Bucks refused to take part in a playoff game against the Orlando Magic to protest the police shooting in Kenosha, Wisconsin, of Jacob Blake, an unarmed Black man who was shot multiple times in front of his children and was subsequently handcuffed to his hospital bed. The Milwaukee Bucks players’ actions sparked a movement within the NBA and larger sports community, with athletes from the WNBA, Major League Baseball, and Major League Soccer following suit in solidarity, causing games to be postponed in their respective leagues. On an unprecedented day in sports history, these athletes showed the power of workers’ collective voice in the workplace.

Professional athletes aren’t the only workers who have banded together to make their voices heard. During the coronavirus pandemic, thousands of essential workers have utilized their right to engage in concerted activity by protesting unsafe working conditions. This was most evident in the walkouts organized by Amazon, Instacart, and Target workers, as well as the dozens of strikes organized by fast-food and delivery workers earlier this spring. Even before the pandemic, data from the Bureau of Labor Statistics showed an upsurge in major strike activity in 2018 and 2019, marking a 35-year high for the number of workers involved in a major work stoppage over a two-year period. The resurgence of strike activity in recent years has given over a million workers an active role in demanding improvements in their pay and working conditions.

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Updated state unemployment data: Congress has failed to act as jobless claims remain high and workers scrape by on inadequate unemployment benefits

The most recent unemployment insurance (UI) claims data released on Thursday show that another 1.4 million people filed for UI benefits last week. For the past four weeks, workers have gone without the extra $600 in weekly UI benefits—which Senate Republicans allowed to expire—and are instead typically receiving around 40% of their pre-virus earnings. This is far too meager to sustain workers and their families through lengthy periods of joblessness.

In a largely unserious stunt, the Trump administration has issued an executive order that, at best, will slash the benefit in half to $300. On its own, this cut will cause such a huge drop in spending that it will cost 2.6 million jobs over the next year. In addition to being woefully insufficient, this aid will take many weeks to reach jobless workers, it will exclude low-wage workers, and it will only last through September with its current funding. Furthermore, it is distracting from the dire need for congressional action to strengthen UI benefits.

To give a sense of how many workers the Trump administration and Republicans in Congress are leaving behind, Figure A shows the share of workers in each state who either made it through at least the first round of state UI processing (these are known as “continued” claims) or filed initial UI claims in the following weeks. The map includes separate totals for regular UI and Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers.

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UI claims remain historically high and the president’s executive memorandum is doing more harm than good: Congress must reinstate the extra $600

Last week 1.4 million workers applied for unemployment insurance (UI) benefits. Breaking that down: 822,000 applied for regular state unemployment insurance (not seasonally adjusted), and 608,000 applied for Pandemic Unemployment Assistance (PUA). Some headlines this morning are saying there were 1.0 million UI claims last week, but that’s not the right number to use. For one thing, it ignores PUA, the federal program that is serving millions of workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments. One bit of good news is that with today’s release, DOL announced that, starting next week, they will be changing the way they do seasonal adjustments. The change should address the issues that have plagued seasonal adjustments during this pandemic.

Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire. Last week was the fourth week of unemployment in this pandemic for which recipients did not get the extra $600. That means people on UI are now forced to get by on the meager benefits that are in place without the extra payment, benefits that are typically around 40% of their pre-virus earnings. It goes without saying that most folks can’t exist on 40% of prior earnings without experiencing a sharp drop in living standards and enormous pain.

Earlier this month, President Trump issued a joke of an executive memorandum. It was supposed to give recipients an additional $300 or $400 in benefits per week. But in reality, even this drastically reduced benefit will be extremely delayed, is only available for a few weeks, and is not available at all for many. The executive memorandum is a false promise that actually does more harm than good because it diverts attention from the desperate need for the real relief that can only come through legislation.

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The Way Out Through State and Local Aid: Bipartisan group of economists breaks down why local governments need aid now

If a bipartisan group of the nation’s top economists were trapped in an elevator with Republican members of Congress, what would they tell them about the need for state and local aid?

Towns across the country are already hemorrhaging red ink, and substantial federal aid is needed now in order to derail the worsening economic shock brought on by the pandemic.

That was the consensus among economists the Economic Policy Institute brought together recently to discuss the urgent need for state and local aid.

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UI claims remain historically high and the president’s sham executive memorandum is doing next to nothing: Congress must reinstate the $600

Last week 1.4 million workers applied for unemployment insurance (UI) benefits. Breaking that down: 892,000 applied for regular state unemployment insurance (not seasonally adjusted), and 543,000 applied for Pandemic Unemployment Assistance (PUA). Some headlines this morning are saying there were 1.1 million UI claims last week, but that’s not the right number to use. For one thing, it ignores PUA, the federal program that is serving millions of workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments.

Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire. Last week was the third week of unemployment in this pandemic for which recipients did not get the extra $600. That means people on UI are now forced to get by on the meager benefits which are in place without the extra payment, which are typically around 40% of their pre-virus earnings. It goes without saying that most folks can’t exist on 40% of prior earnings without experiencing a sharp drop in living standards and enormous pain.

Earlier this month, President Trump issued a sham of an executive memorandum. It was purported to give recipients an additional $300 in benefits. But in reality, even this drastically reduced benefit is only available to recipients in a handful of small states, and only for a few weeks. The executive memorandum is a false promise that actually does more harm than good because it diverts attention from the desperate need for the real relief that can only come through legislation.

This is cruel, and terrible economics. The extra $600 was supporting a huge amount of spending by people who now have to make drastic cuts. The spending made possible by the $600 was supporting 5.1 million jobs. Cutting that $600 means cutting those jobs—it means the workers who were providing the goods and services that UI recipients were spending that $600 on lose their jobs. The map in Figure B of this blog post shows many jobs will be lost by state now that the $600 unemployment benefit has been allowed to expire. We remain 12.9 million jobs below where we were before the virus hit, and the unemployment rate is higher than it ever was during the Great Recession. Now isn’t the time to cut benefits that support jobs.

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Cuts to unemployment benefits harm millions of workers across the country: See updated state unemployment data

The most recent unemployment insurance (UI) claims data released on Thursday show that another 1.3 million people filed for UI benefits during the week ending August 8. Huge swaths of workers in every state are relying on UI for food, rent, and basic necessities. In the face of this economic crisis, Senate Republicans let the extra $600 in weekly UI benefits expire, and now the Trump administration, in a largely unserious stunt, is proposing slashing the benefit in half to $300 through executive order. If implemented, this cut would cause such a huge drop in spending that it would cost 2.6 million jobs over the next year.

Figure A shows the share of workers in each state who either made it through at least the first round of state UI processing (these are known as “continued” claims) or filed initial UI claims in the following weeks. The map includes separate totals for regular UI and Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers.

The map also includes an estimated “grand total,” which includes other programs such as Pandemic Emergency Unemployment Compensation (PEUC), Extended Benefits (EB), and Short-Time Compensation (STC). The vast majority of states are reporting that more than one in 10 workers are claiming UI. Ten states and the District of Columbia report that more than one in five of their pre-pandemic labor force is now claiming UI under any of these programs. The components of this total are listed in Table 1.1

Three states had more than 1 million workers either receiving regular UI benefits or waiting for their claim to be approved: California (3.2 million), New York (1.5 million), and Texas (1.3 million). Five additional states had more than half a million workers receiving or awaiting benefits.

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Millions of workers are relying on unemployment insurance benefits that are being stalled and slashed

Last week 1.3 million workers applied for unemployment insurance (UI) benefits. More specifically, 832,000 applied for regular state unemployment insurance (not seasonally adjusted), and 489,000 applied for Pandemic Unemployment Assistance (PUA). Some headlines this morning are saying there were 963,000 UI claims last week, but that’s not the right number to use. Instead, our measure includes PUA, the federal program that is supporting millions of workers who are not eligible for regular UI, such as the self-employed. We also use non- seasonally-adjusted data, because the way Department of Labor (DOL) does seasonal adjustments (which is useful in normal times) distorts the data right now.

Astonishingly high numbers of workers continue to claim UI, and we are still 12.9 million jobs short of February employment levels. And yet Senate Republicans allowed the across-the-board $600 increase in weekly UI benefits—the most effective economic policy crisis response so far—to expire.

In an unserious move of political theater, the Trump administration has proposed starting up an entirely new system of restoring wages to laid-off workers through executive order (EO). But even in its EO wish list, the Trump administration would slash the federal contribution to enhanced unemployment benefits in half, to $300. This inaction and ongoing uncertainty is causing significant economic pain for workers who have lost their jobs during the pandemic, and for their families. It also causes an administrative hassle for state agencies that have already struggled immensely to process the huge number of claims early in the pandemic and implement the new UI protections in the CARES Act. Since the states with the least stable UI systems also have the highest populations of Black and Latinx people, existing inequalities will likely deepen even further by both the cutoff of supplementary benefits and the increased chaos introduced by having presidential EOs pretend to stand in for the legislative action that is needed.

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Black women workers are essential during the crisis and for the recovery but still are greatly underpaid

Black Women’s Equal Pay Day, August 13, is a day to call attention to the fact that Black women deserve equal pay but are still severely underpaid. It marks how far into 2020—seven and a half months—the average Black woman must work to make the same amount as the average non-Hispanic white man was paid in 2019. On an average hourly basis, Black women are paid just 66 cents on the dollar relative to non-Hispanic white men with the same level of education, age (a proxy for work experience), and geographic location.

While this large pay gap has always been unjust and offensive to the millions of working Black women in this country, it is especially so under the current health and economic crisis. The infographics below take a closer look at average hourly earnings of Black women and non-Hispanic white men employed in major occupations at the center of national efforts to address the public health and economic effects of COVID-19. These occupations include front-line workers in health care and essential businesses like grocery and drug stores, those who have borne the brunt of job losses in the restaurant industry, and the teachers and child care workers who are critical as the economy struggles to reopen and essential to fully reopening the economy when it is safe to do so.

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Trump’s war on the Postal Service helps corporate rivals at the expense of working families

Key takeaways:

  • Postal workers are twice as likely to be military veterans as nonpostal workers, because veterans benefit from preferential hiring in federal jobs and many have skills sought by the Postal Service. One in five postal workers is Black, nearly double Black workers’ share of the nonpostal workforce.
  • Postmaster Louis DeJoy’s recent service cuts, such as eliminating overtime and late trips, leaving mail to be delivered the next day, could harm the integrity of the November elections, which will rely heavily on mail voting.
  • Rival private services like FedEx and UPS will likely gain customers from these cuts, which affect service. The beneficiaries of DeJoy’s actions will likely include low-wage “worksharing” companies that do work outsourced by the Postal Service, such as presorting and transporting bulk mail closer to its destination.
  • Whereas federal law requires federal contractors in the construction and related industries to pay workers the prevailing wage—usually the area’s union wage—nothing prevents the Postal Service from contracting with companies whose only competitive advantage is paying low wages—often as a result of union-busting.
  • Since the Postal Service is required to rebate the full cost savings from outsourcing to the companies doing the work, “worksharing” doesn’t even benefit the Postal Service—but workers definitely lose out.

On June 15, Trump appointed Louis DeJoy, a North Carolina businessman and Republican fundraiser, as the new Postmaster General. DeJoy has wasted no time in ordering major changes to how the United States Postal Service operates. Many have noted that the service cuts he has implemented, such as eliminating overtime and late trips, leaving mail to be delivered the next day, could harm the integrity of the November elections, which will rely heavily on mail voting, due to the pandemic. The slowdown also seems aimed at pleasing President Trump, who makes no secret of his dislike of the Postal Service, which he believes is undercharging Amazon for deliveries. Trump has also lashed out at the Washington Post, owned by Amazon CEO Jeff Bezos, for its news coverage of his administration.

DeJoy, of course, denies that he’s deliberately sabotaging the Postal Service at the behest of the president, claiming service cuts are necessary to keep the Postal Service afloat. Though social distancing measures have boosted online orders during the pandemic, the crisis has reduced the volume of paper mail, which still accounts for about two-thirds of Postal Service revenues. Since the Postal Service is self-funded and has high fixed costs associated with daily delivery and maintaining post offices, it’s an obvious candidate for the same pandemic relief offered to airlines and other businesses affected by the suspension of much economic activity. But the president and Republican-controlled Senate have resisted helping the Postal Service, not just refusing to agree to relief funds included in a House-passed bill, but even holding hostage a loan to the Postal Service in the CARES Act that was signed into law by the president.

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What to watch on jobs day: A stalled recovery

After historically fast job growth in May and June, the jobs report for July is sure to disappoint. Because so many jobs were lost in March and April, the economy remains 14.7 million jobs short of where it was in February, and a full recovery—even with rapid growth—is many months away. As COVID-19 has spread rapidly throughout the country, various other data released since the reference period in mid-June suggest—at best—a stalled recovery. At worst, we could see job losses in July. Whichever is the case, it is clear that the bounceback in May and June is over and that the mammoth jobs gap will take years to claw back unless policy becomes much better on both the public health and economic fronts.

In this preview post, I’m going to take you on a brief foray into the data that predict a very disappointing economic performance for this week’s jobs report. First, let’s start with the weekly unemployment insurance data. As of mid-July, 34.3 million workers—or about 20% of the pre-pandemic workforce—were either on unemployment benefits or had applied and were waiting to see if they would get benefits. Although the continuation of record high levels of unemployment insurance may include some pent-up demand from the difficulty of accessing the system, there has been no measurable improvement in these unemployment insurance numbers in weeks.

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Unemployment insurance claims remain historically high: Congress must reinstate the extra $600 immediately

Last week 1.6 million workers applied for unemployment insurance (UI) benefits. Breaking that down: 984,000 applied for regular state unemployment insurance (not seasonally adjusted), and 656,000 applied for Pandemic Unemployment Assistance (PUA). Some headlines this morning are saying there were 1.2 million UI claims last week, but that’s not the right number to use. For one, it ignores PUA, the federal program that is serving millions of workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments.

Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire. Last week is the first week of unemployment in this pandemic that recipients will not get the extra $600 payment. That means people on UI benefits who lost their job during a global pandemic are now are forced to get by on around 40% of their pre-virus earnings, causing enormous pain.

Republicans in the Senate are proposing to (essentially) replace the $600 with a $200 weekly payment. That $400 cut in benefits is not just cruel, it’s terrible economics. These benefits are supporting a huge amount of spending by people who would otherwise have to cut back dramatically. The spending made possible by the $400 that the Senate wants to cut is supporting 3.4 million jobs. If you cut the $400, you cut those jobs. The map in Figure A shows the number of jobs that will be lost in each state if the extra $600 unemployment benefit is cut to $200.

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UI claims and GDP growth are historically bad: Now is not the time to cut benefits that are supporting jobs

Last week 2 million workers applied for unemployment insurance (UI) benefits. Breaking that down: 1.2 million applied for regular state unemployment insurance (not seasonally adjusted) and 830,000 applied for Pandemic Unemployment Assistance (PUA). Many headlines this morning are saying there were 1.4 million UI claims last week, but that’s not the right number to use. For one, it ignores PUA, the federal program that is serving millions of workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data, which is distorted right now because of the way the Department of Labor (DOL) does seasonal adjustments.

Last week was the 19th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. If you restrict this comparison just to regular state claims—because we didn’t have PUA during the Great Recession—this is the 19th week in a row that claims are more than 1.25 times the worst week of the Great Recession.

Republicans in the Senate just allowed the across-the-board $600 increase in weekly UI benefits to expire. They are proposing to (essentially) replace it with a $200 weekly payment. That $400 cut in benefits is not just cruel, it’s terrible economics. These benefits are supporting a huge amount of spending by people who would otherwise have to cut back dramatically. The spending made possible by the $400 that the Senate wants to cut is supporting 3.4 million jobs. If you cut the $400, you cut those jobs. This map shows the number of jobs that will be lost in each state if the extra $600 unemployment benefit is cut to $200.

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State and local governments have lost 1.5 million jobs since February: Federal aid to states and localities is necessary for a strong economic recovery

June’s national jobs report from the Bureau of Labor Statistics (BLS) showed that there was a 4.8 million increase in jobs, after many states reopened their economies prematurely and accelerated the spread of COVID-19. Despite this uptick in employment, there are still 14.7 million fewer jobs than before the pandemic hit. Of these losses, 1.5 million were in state and local government—a sector that disproportionately employs women and Black workers. In mid-July, BLS released their June state-level jobs report, allowing us to take a closer look at these public-sector losses across the country.

Figure A displays the percent and level change in state and local government employment and private-sector jobs over the course of this recession. In every state and the District of Columbia, with the exception of Tennessee, state and local government employment has fallen since the pandemic took hold. In nine states, more than one in 10 state and local government jobs have been lost since February: Wisconsin (-12.3%), Massachusetts (-11.9%), Connecticut (-11.4%), South Dakota (-11.3%), Hawaii (-10.8%), Minnesota (-10.6%), Illinois (-10.5%), Maine (-10.5%), and Kentucky (-10.2%). Meanwhile, California and Texas have experienced the most public-sector job losses since February: 229,000 (-9.6%) and 112,100 (-6.3%), respectively. Table 1, at the end of this post, displays the state and local employment changes from this map as well as the employment levels in February and June 2020.

These devastating job losses follow a slow and weak recovery for the state and local public sector in the aftermath of the Great Recession. Because of the pursuit of austerity at all levels of government, state and local government employment at the national level only reached its July 2008 level (the prior peak) in November 2019. Just before the pandemic, 21 states and the District of Columbia still had fewer state and local government jobs than in July 2008.

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Protecting workers through publicity during the pandemic

The COVID-19 pandemic has been devastating for many low-wage workers and their families. Workers are risking their health and lives, including in meatpacking plants, grocery stores, restaurants, mass transit, and health care. Black workers, in particular, are experiencing retaliation for raising COVID-19 workplace safety concerns. Millions of workers are struggling to make ends meet after being laid off and need unemployment insurance. Other workers have been deemed essential, but their employers have not provided them living wages or critical benefits like paid sick days. While federal and state laws are in place to protect and support workers during the pandemic in various ways, many workers don’t know about these laws or programs. Similarly, employers may not realize their legal obligations. Using media and strategic communication was a critical tool for labor enforcement agencies before the pandemic—and it is of even greater urgency now.

To help agencies with this aspect of their work, the Center for Law and Social Policy (CLASP) and the Harvard Law School Labor and Worklife Program released a toolkit earlier this month, Protecting Workers Through Publicity: Promoting Workplace Law Compliance Through Strategic Communication. The toolkit shares research showing that media coverage and public disclosure improves policy outcomes, in labor and other contexts. The toolkit can be used by labor enforcement agencies, as well as policymakers who care about worker issues, to help them use media effectively. It will also benefit worker advocates, who can share it with enforcers and policymakers as part of an effort to press for greater use of this underutilized vehicle for driving compliance.

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The Senate’s failure to act on federal aid to state and local governments jeopardizes veterans’ jobs

Yesterday, the Republican-controlled Senate and White House rolled out the HEALS Act, which not only guts Pandemic Unemployment Assistance benefits for millions of unemployed workers, but also completely overlooks critical federal aid to state and local governments. This intentional oversight threatens vital public services just when they are needed most and could result in an additional 5.3 million public- and private-sector service workers losing their jobs by the end of 2021. More than one million veterans—13.2% of all veterans—work for state and local governments and could be severely impacted by the Senate’s failure to provide timely federal aid. Because state and local governments are extremely restricted in how they can borrow, congressional authorization for state and local fiscal support is vital to prevent deep cuts in health care and education.

Black workers, who are heavily represented in the overall public-sector workforce, are even more heavily represented in the share of state and local government workers who are veterans. While Black workers make up 12% of the private-sector and 14% of the public-sector workforces, they make up 17% of public-sector workers who are also veterans.

The map in Figure A provides a state-by-state overview of the number of veterans serving in state and local governments around the country. Table 1 provides a list of the top 10 states with the highest numbers of veterans employed by state and local governments. Table 2 provides the list of the top 10 states with the highest shares of veterans employed by state and local governments. California has the largest number of veterans working in state and local governments, while Montana has the largest share.

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Congress has failed to extend additional unemployment benefits as millions of workers across the country file new UI claims

The U.S. Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data last Thursday, showing that another 2.3 million people filed for UI benefits during the week ending July 18. Huge swaths of workers in every state are relying on UI for food, rent, and basic necessities. There are 14 million more unemployed workers than jobs. In the face of this economic crisis, Congress has let the extra $600 in weekly UI benefits expire, and now Senate Republicans are proposing reducing the increase to $200, which would cause such a huge drop in spending that it would cost 3.4 million jobs. These benefit cuts will directly harm the workers and their families who need these benefits to weather the pandemic and will cause further economic harm over the next year.

Figure A shows the share of workers in each state who either made it through at least the first round of state UI processing (these are known as “continued” claims) or filed initial UI claims in the following weeks. The map includes separate totals for regular UI and Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers.

The map also includes an estimated “grand total,” which includes other programs such as Pandemic Emergency Unemployment Compensation (PEUC) and Short-Time Compensation (STC). The vast majority of states are reporting that more than one in 10 workers are claiming UI. Thirteen states and the District of Columbia report that more than one in five of their pre-pandemic labor force is now claiming UI under any of these programs. The components of this total are listed in Table 1.1

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What can we learn from the CFPB’s Spring 2020 Unified Agenda entries?

The week, Director Kathleen Kraninger of the Consumer Financial Protection Bureau (CFPB) is slated to appear before the Senate Banking Committee and the House Financial Services Committee in connection with the CFPB’s semiannual report. As we go into these hearings, it’s worth reviewing what we know about the CFPB’s current regulatory agenda. As a reminder, the CFPB is the regulator that oversees all of the consumer financial regulations in the marketplace—everything from credit cards to payday loans to mortgages to debt collection to credit reporting. If you have a bank account, a credit card, a student loan, or a mortgage, the CFPB’s rules impact you.

At the end of June, the CFPB, along with all of the other federal agencies, released its rulemaking agenda on the rulemaking that the agency plans to undertake through April 2021. As we at the Consumer Rights Regulatory Engagement and Advocacy Project (CRREA Project) discuss in Decoding the Unified Agenda, everything is in the Unified Agenda—what an agency is working on, what it plans to do next, and when it anticipates taking that next step. Rules are characterized as significant or nonsignificant, the agency contact for the rule is listed (in the CFPB’s case, this is almost always the attorney designated as the team lead on the rulemaking), and the history of the rulemaking project are all laid out.

Looking at an agency’s Unified Agenda also tells the reader something about the agency’s current priorities and rulemaking philosophy. The CFPB, in addition to its agency rule list, issues a blog post that updates the Unified Agenda to reflect what the CFPB has done between when it submitted its Unified Agenda entries and when the Unified Agenda was released. It also issues a preamble; the CFPB is unique among agencies in doing this twice a year.

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Why we still need the $600 unemployment benefit

One of the most crucial provisions of the last coronavirus relief act was to provide an extra $600 weekly increase in unemployment benefits to the tens of millions of Americans who are currently out of work. Now the White House and many Republican policymakers want to let it expire or reduce it dramatically. But that would be a terrible mistake, and here’s why.

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Cutting UI benefits by $400 per week will significantly harm U.S. families, jobs, and growth: 3.4 million fewer jobs will be created over the next year as a result

Last month, we estimated the effect of allowing the $600 supplement to weekly unemployment insurance (UI) benefits to lapse at the end of July, as is currently scheduled. We found that this would strip away enough aggregate demand from the economy to slow growth in gross domestic product (GDP) by 3.7% over the next year. This slower growth would result in 5.1 million fewer jobs created over the next year.

Currently Senate Republicans are offering a proposal to reduce this weekly $600 supplement to closer to $200. This is better than allowing the $600 benefit to go all the way to zero, but this would still lead to GDP that was lower by 2.5% a year from now and would lead to 3.4 million fewer jobs created over the next year.

These are huge numbers—but they are driven by the fact that the support this extra $600 has given tens of millions of working families is huge. The economic shock of COVID-19 was enormous, but the large expansions to the UI system included in the CARES Act of March were incredibly effective in blunting the effect of this shock. The only problem with these expansions was that they begin running out next week—while the job market remains fundamentally damaged.

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Joblessness remains at historic levels and there is no evidence UI is disincentivizing work: Congress must extend the extra $600 in UI benefits

Last week 2.3 million workers applied for unemployment insurance (UI) benefits. This is the 18th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. Many headlines this morning are saying there were 1.4 million UI claims last week, but that’s not the right number to use. For one, it ignores Pandemic Unemployment Assistance (PUA), the federal program for workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data for regular state UI, which is distorted right now because of the way the Department of Labor (DOL) does seasonal adjustments.

Of the 2.3 million workers who applied for UI last week, 1.37 million applied for regular state unemployment insurance (not seasonally adjusted), and 975,000 applied for PUA.

A disaster of Congress’s making is looming for those who have lost their livelihoods during the global pandemic and are now depending on UI to provide for their families. If Congress doesn’t act immediately, the across-the-board $600 increase in weekly unemployment benefits will expire at the end of this week. That would not just be cruel, it would be terrible economics. These benefits are supporting a huge amount of spending by people who would otherwise have to cut back dramatically. That spending is supporting more than 5 million jobs. If Congress kills the $600, they kill those jobs. Figure A shows the number of jobs that will be lost in each state if the $600 is allowed to expire.

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Ambitious investments in child and elder care could boost labor supply enough to support 3 million new jobs

Key takeaways:

  • Today, the Biden campaign released a plan calling for $775 billion of investments in child and elder care over the next decade, a large increase over current levels.
  • Based on our research, such an investment would support 3 million new jobs and substantially help stem the erosion of women’s labor force participation in the United States relative to our advanced country peers.
  • These public investments would provide support that makes child and elder care more affordable for families while also providing a needed boost to the pay and training of the care workforce.

It has been apparent for years that the United States could benefit enormously from a large public investment in care work—including early child care education and elder care. A substantial investment in children would lead to a more productive workforce in the future, spurring large income gains. Investments in seniors would ensure that a decent and dignified retirement is available to all, a commitment that the United States has so far failed to sustain.

Crucially, both sorts of investment would greatly expand the opportunities for working-age adults to seek paid employment. It is well documented by now that the employment rate of prime-age (between 25 and 54 years old) U.S. adults (particularly women) has stagnated relative to our advanced country peers, and it is equally as well documented that the failure to invest in child and elder care is a key reason why.

This morning, the Biden campaign released a plan calling for a broad set of investments in child and elder care. Their plan would invest $775 billion over the next decade, a large increase over current levels. Such an investment would substantially help stem the erosion of women’s labor force participation in the United States relative to our advanced country peers. In 1990, for example, women’s prime-age labor force participation in the United States ranked 7th of 24 among the advanced economies with available data from the Organisation for Economic Co-operation and Development (OECD). By 2000, the United States had slipped to 16th of 35 OECD countries, while in 2019 our ranking was 30th of 35.

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Recovering fully from the coronavirus shock will require large increases in federal debt—and there’s nothing wrong with that

The economic shock of the coronavirus has been as sudden and jarring as any in U.S. history. Even if policymakers did nothing to respond to it, the income losses generated by the shock and the automatic expansion of some safety net programs would have led to large increases in the federal budget deficit. But the correct policy response to a shock like the coronavirus is to push deficits even larger than they would go on their own by providing expansions to relief and recovery efforts.

As always, there are some who seem more concerned about the rise in federal budget deficits and public debt than by the rise in joblessness and losses of income generated by the shock. But prioritizing the restraint of debt in coming years over the restoration of pre-crisis unemployment rates is bad economics.

We must prioritize the restoration of pre-crisis unemployment rates over restraint of debt. Anything else is bad economics.

Joblessness and income losses in the wake of the coronavirus shock really are large enough to spark an economic depression that lasts for years. A rising ratio of debt to gross domestic product (GDP), on the other hand, will be mostly meaningless to living standards in the next few years. If baseless fears about the effects of adding to debt block this effective response, then it will cause catastrophic economic losses and human misery. It is often said that economics is about making optimal decisions in the face of scarcity. But we need to be clear what is and what is not scarce in the U.S. economy. The federal government’s fiscal resources—its ability to spend more and finance the spending with either taxes or debt—are not scarce at all. What is scarce is private demand for spending more on goods and services. We need to use policy to address what is scarce—private spending—with what is not.

In this blog post I attempt to answer a few of the many questions I hear about the deficit and debt in light of the current economic crisis. We have created an ongoing web feature here to answer these questions and new questions that come up. A common root to the answers of many questions about the effects of deficits and debt concerns whether the economy’s growth is demand-constrained or whether it is supply-constrained (i.e., at full employment). Because this distinction is so important to so many questions about deficits and debt, we provide this background first.

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