Aid for workers laid off by the coronavirus
THE CORONAVIRUS is first and foremost a public health crisis, requiring a public health response. It is also an economic problem, potentially a severe one.
With increasing numbers of people in quarantine, millions of Americans avoiding certain kinds of businesses, the canceling of large gatherings, and investors obviously worried about the future, a coronavirus recession seems almost certain. Moreover, the historically high economic inequality that characterizes our economy has created fragilities that exacerbate any shocks to our society.
The most urgent economic and health priority for Congress is to ensure that sick workers are able to stay home without fear of losing their jobs or their paychecks. Millions of workers lack access to paid sick days. Yet new research shows that paid sick days can reduce the transmission of flu by 40%.
The workers least likely to have paid sick leave are low-income workers who may have a lot of contact with the public, such as deli workers and retail clerks. If they’re only “a little” sick, they might go to work because they can’t afford not to, increasing the risk of infecting their fellow workers as well as customers. At the same time, they are also employed by businesses that are likely to feel the economic downturn immediately.
The most straightforward way to provide sick pay is for Congress to require that all employers provide it to their employees — and the program needs to be permanent so we’re not scrambling the next time a catastrophe hits. This won’t help gig workers, but Congress can — as House Democrats have proposed — offer emergency extended leave to those who need it, paid for by the federal government, which will cover everyone.
Beyond that, we need to take action to avoid or mitigate a painful recession. That job is made much harder by two factors that have nothing to do with coronavirus.
First, because of high economic inequality there is less money in the hands of the people who do most of the consuming; a recession weakens consumption even more, with potentially disastrous results. We know from past experience that President Trump’s proposal for a payroll tax cut would not be spent as quickly as other ways of getting money to people — and certainly won’t help those thrown out of work.
Second, the Federal Reserve has traditionally played an outsized role combating recessions, but now has a limited toolbox, one that is largely designed to support financial market liquidity and lower interest rates, both of which it’s already used amid the current market meltdown to little effect.
During the last recession, which began in December 2007, the interest rate was lowered to just above zero. Over the course of the most recent recovery, policymakers were able to raise the rate to just under 2.5 percent, and that is now again edging toward zero. Further lowering of interest rates isn’t a path available at this point.
With limited options for monetary policy, we have to rely on fiscal policy — spending and tax policies that can shore up depressed demand so that customers have money to spend and manufacturers have buyers for their products. Truth is, we should have been relying more on fiscal policy in prior recessions, too. When a recession is likely, we need to get money directly and quickly into the hands of people lower on the income ladder and we need to make sure those programs are calibrated to ramp up quickly as the recession begins.
This week, countless people are being laid off — think of the food service workers furloughed from college campuses closed down because of the coronavirus. A first step is to ensure that the Unemployment Insurance system covers all those who need it.
With states having made cutbacks in recent years, this will require an infusion of federal funds. Further, Congress should make it easier for people to access the system so that those out of work have some financial security.
We also need to expand the nation’s nutrition assistance program. Especially with schools closing, state and federal agencies need to make the process for getting supplemental nutrition simpler and faster.
In the last two recessions, Congress and the White House sent direct payments to everyone in 2001 and 2008. We should plan to do this again and we should implement an automatic trigger so that these payments happen so long as the economy remains in a recession.
The front line of the recession happens in the states. And, this time, it’s not just state budgets but state healthcare systems that are or will soon be stressed. To avoid having cash-strapped states cutting their health budgets, Congress should put in place a plan to increase the federal matching subsidies for Medicaid and the Children’s Health Insurance Program. Here, too, there could be a trigger that raises federal support during the economic downturn but then falls back as the economy improves.
Economic research over the past decade has shown us what policies can work to mitigate a recession. A vaccine for COVID-19 won’t be ready for at least a year. We need to put in place emergency measures to get money to millions who will soon have trouble paying rent and buying food. Congress and the president need to act now, as we confront a devastating threat to our economy.