Yahoo Finance '$1,200 isn't enough': what a $2tn relief bill means for American workers
Advocates for American workers praised a “historic” increase in unemployment benefits included in an emergency $2tn relief package approved by the US Senate, which will offer special “pandemic unemployment” to gig workers, self-employed workers, and some people forced to leave their jobs because of the coronavirus crisis.
But although the unemployment payments will offer months of support to many vulnerable Americans, advocates said that the bill threatens to leave too many people out. Even $2tn in emergency aid, experts said, is probably too little for the size of the crisis.
As part of the unprecedented relief package approved by the Senate on Wednesday night, millions of Americans would get an individual, $1,200 check to help them weather the economic crisis caused by the pandemic. The bill would also create a $500bn lending program for businesses, cities and states and a $367bn fund for small businesses, which would focus on helping small businesses to pay their employees’ salaries through the next weeks of pandemic-related shutdowns, rather than laying them off.
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The bill’s major benefit to American workers is not that single cash payment, but the sweeping expansion of unemployment benefits, labor experts said. The bill offers laid-off workers an additional $600 a week for four months and extends unemployment benefits to gig workers, independent contractors, and others who have not previously been eligible for unemployment, including people forced to leave their jobs to care for family members with coronavirus, or to care for children whose schools have closed.
Despite some flaws, the emergency bill offers “the largest expansion of unemployment benefits in history”, Senator Bernie Sanders, a candidate for the Democratic presidential nomination, said on Wednesday night before the bill’s passage. About $250bn in federal funds would go to expanding these benefits, Sanders said.
For many workers, the $600 added to their weekly state unemployment checks would mean that the checks would come close to matching their original salaries, labor experts said, and the measure would increase most unemployment payments to around the median weekly income of $936.
A worker who files for unemployment in New York, for example, would typically get just $435 a week. Under the new emergency relief bill, that amount would increase to $1,035 a week, said Andrew Stettner, a senior fellow at the Century Foundation, a progressive thinktank. This was a “major boost of benefits”, he said, and would ensure that most workers filing for unemployment during the pandemic “don’t experience an economic catastrophe”.
“These are, by historic standards, probably the most generous unemployment benefits we’ve given,” said Michael Madowitz, an economist at the Center for American Progress, a leading liberal thinktank.
So generous, in fact, that a small group of Republican senators made a last-minute effort to try to change the benefits Wednesday night, arguing that the bill as written would temporarily give some laid-off workers benefits larger than their pay on the job.
Senators Lindsey Graham, Ben Sasse, and Tim Scott called this a “strong incentive for employees to be laid off rather than going to work”.
Sanders lambasted his Republican colleagues for trying to reduce unemployment benefits, an attempt which failed in the senate late Wednesday night.
During “an unprecedented economic crisis”, Sanders said, “they’re very upset that someone who is making $10, $12 an hour might end up with a paycheck for four months more than they received last week.
“How absurd and wrong is that?”
The boost in unemployment insurance comes as the US labor department announced that 3.3 million Americans filed unemployment claims last week, the largest number the department had ever recorded. Millions more are expected to file for unemployment in the coming weeks. In California alone, more than a million people filed unemployment claims in recent weeks.
The relief bill offers other lifelines to workers, including $367bn to help small businesses cover their employees’ salaries and keep afloat. An estimated 94% of Americans who file taxes will also get the one-time emergency payment: $1,200 for most individuals, $2,400 for couples, plus $500 per child in the household, with the payments reduced or eliminated for people at higher income levels.
Most Americans will be able to receive these emergency payments through direct deposit in their bank accounts, and the payments will go out “within three weeks”, the US treasury secretary, Steven Mnuchin, said on Wednesday.
Many could be left out
Experts said that allowing self-employed and gig workers to receive unemployment checks was a crucial step forward, since these workers make up growing portion of the national workforce and have not previously been eligible for federal unemployment insurance.
But the emergency relief bill still threatens to leave many people out, they said, including domestic workers paid in cash, undocumented workers, homeless Americans, people who do not have bank accounts, and some people who have not filed taxes recently.
Even people who are eligible for unemployment may face delays in actually getting their checks. State unemployment systems have been overwhelmed by an unprecedented number of applicants. New York’s online unemployment application website reportedly crashed multiple times this week. So did Oregon’s.
In addition, people who do not have direct deposit accounts on file, or who have moved since last filing their taxes, may face delays in getting their emergency payments. Some Americans who have not filed taxes recently may be entirely left out. The Internal Revenue Service estimates that about 30 to 40 million American adults, or about 15% of the population, do not file tax returns, Garrett Watson, an analyst at the conservative Tax Foundation, said.
Some experts said there was also a more fundamental problem: even though the senate’s $2tn coronavirus package is being hailed as the largest emergency relief bill in American history, it may still not be enough to match the scale of the problem.
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Dedicating roughly $350bn to small businesses for a paycheck protection program “sounds like a lot”, but the total cost of payroll alone for American small businesses is $1.5tn every three months, said Ernie Tedeschi, an economist who worked in the treasury department during the Obama administration.
Offering loans to small businesses to help them cover a few weeks of employee payroll was good, Tedeschi said, but the amount in the current bill “is probably not going to be enough for a lot of small businesses to keep their lights on throughout the crisis”.
The Senate bill includes funding that will allow the Federal Reserve to make trillions of dollars in loans to shore up the economy, Tedeschi said. Some of that money could also go to supporting small businesses, but it’s not clear how much. The Fed “has to divvy up that money in a lot of different ways”, Tedeschi said. “There are a lot of different fires to put out.”
Political protests
Experts and advocates also said that a single direct payment of $1,200 for individual adults was unlikely to be enough to help Americans weather a crisis that has no clear end in sight.
“$1,200 is the average rent for most Americans,” said Natalie Foster, the co-chair of the Economic Security Project, which advocates for a guaranteed income for all Americans. “This first check is eaten up, and what are they supposed to do after that?
“It’s hard when you look at overall numbers to see how much is going to shoring up big corporations, compared to how little is going to Americans,” she added.
While “$1,200 per adult is very meaningful, no matter who you are”, Tedeschi said, “it’s not going to be this ongoing safety net that is going to keep families afloat”.
If the crisis continues past the short term, “a one-time payment may not be sufficient,” said Watson, of the Tax Foundation.
Some Democratic lawmakers had proposed making larger, more continuous direct payments to individual Americans, to provide support throughout the crisis.
A group of progressive state Democratic lawmakers and other progressives led a rallying cry on Twitter on Wednesday, repeatedly sharing the same message: “$1,200 isn’t enough.” They pointed to the vast benefits the emergency bill offers to large corporations.
Some libertarians took a similar view, arguing that individual direct payments in a crisis were more efficient, and would be more effective, than government welfare for big corporations.
“Just ten years after the Tea Party movement, Republicans in Congress are defending a $500 billion corporate welfare fund for a select group of large companies,” Justin Amash, a Michigan congressman who left the Republican party in 2019 to become an independent, wrote on Twitter.
He called the Senate compromise a “raw deal” for Americans and said bigger direct payments “would be far more helpful to the people”.
“For $2 trillion,” he wrote on Twitter, the government could “give every family of four $7,000 per month for three months”.
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The New York congresswoman Alexandria Ocasio-Cortez said on Wednesday that the Senate’s compromise bill offered relief that would not come fast enough for most Americans: “I just don’t understand how it’s reasonable to expect what could be millions of people and small businesses, who suddenly had their incomes cut off, to pay rent, mortgages, & major bills on Apr 1st without any payment moratoriums or immediate relief,” she wrote on Twitter.
Despite public objections from some House members, the House speaker, Nancy Pelosi, said on Thursday that she was “certain” that the Senate bill would also pass the House and be signed into law by Donald Trump. But she also said that lawmakers would need to pass an additional round of legislation offering more aid to those who had been left out of the current plan. The current bill is “just not doing enough for state and local government”, she said. Future legislation should also include additional funding for food stamps, she said.
Some labor experts and economists said they believed further emergency aid bills would be necessary unless the coronavirus pandemic is resolved in just a few weeks. State and local governments are likely to face their own financial crises in the next months, as unemployment insurance payments and other emergency payments soar.
“It’s hard to believe this is going to be anywhere near enough,” Madowitz, the Center for American Progress economist, said. “While $2tn is a big number, it’s not going to last that long.”
