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.
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
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.
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.
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.
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.
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.
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.
Joblessness remains at historic levels: The extra $600 in UI benefits expires next week—Congress must extend it
Last week, 2.4 million workers applied for unemployment insurance (UI) benefits. This is the 17th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. Of the 2.4 million workers who applied for UI, 1.5 million applied for regular state unemployment insurance (not seasonally adjusted), and 0.9 million applied for Pandemic Unemployment Assistance (PUA).
Many headlines this morning are saying there were 1.3 million UI claims last week, but that’s not the right number to use. For one, it ignores PUA, the federal program for workers who are not eligible for regular UI, like gig workers. It also uses seasonally adjusted data for regular state UI, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments.
Before I cover more of the details of today’s UI release, I want to take a moment to note that the across-the-board $600 increase in weekly unemployment benefits is set to expire next week.
Many are talking about the potential work disincentive of the extra $600, since the additional payment means many people have higher income on unemployment insurance than they did in their prior job. The concern about the disincentive effect has been massively overblown. First, it ignores the realities of the labor market for working people, who will be unlikely to turn down a permanent job—particularly in a time of extended high unemployment—for a temporary boost in benefits.
Extending the $600 weekly unemployment boost would support millions of workers: See updated state unemployment data
The U.S. Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data yesterday, showing that another 1.4 million people filed for regular UI benefits last week (not seasonally adjusted) and 1.0 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers. As of last week, more than 35 million people in the workforce are either receiving or have recently applied for unemployment benefits—regular or PUA.
Figure A and Table 1 show the total number of workers who either made it through at least the first round of regular state UI processing as of June 27 (these are known as “continued” claims) or filed initial regular UI claims during the week ending July 4. Three states had more than one million workers either receiving regular UI benefits or waiting for their claim to be approved: California (3.1 million), New York (1.7 million), and Texas (1.4 million). Seven additional states had more than half a million workers receiving or awaiting benefits.
While the largest U.S. states unsurprisingly have the highest numbers of UI claimants, some smaller states have larger shares of the workforce filing for unemployment. Figure A and Table 1 also show the numbers of workers in each state who are receiving or waiting for regular UI benefits as a share of the pre-pandemic labor force in February 2020. In four states and the District of Columbia, more than one in six workers are receiving regular UI benefits or waiting on their claim to be approved: Hawaii (19.7%), Nevada (19.3%), New York (17.8%), District of Columbia (17.6%), and Oregon (17.0%).