Responding to an “Unprecedented” Crisis: A Conversation with Thea Lee
The COVID-19 pandemic, and the corresponding economic downturn, have obvious and dramatic implications for all Americans. But as is often the case, the repercussions for those dealing with economic insecurity are especially severe. Spotlight spoke with Economic Policy Institute President Thea Lee to discuss the economic impact of COVID-19, the strengths and weaknesses of the pending congressional bill (CARES Act), and what actions are still needed to support the most vulnerable. This conversation has been lightly edited for clarity and length.
What do you see as the consequences of this economic downturn, particularly in what it means for the poor and vulnerable?
This will be a devastating economic crisis. Unprecedented in scope. And unlike many previous recessions, this particular crisis will hit hardest for low-wage workers.
The early numbers we are seeing in terms of job losses are staggering. We saw more than three million unemployment filings announced on Thursday. Recessions often hit construction and manufacturing first. In this case, comparatively low-wage retail, hospitality, and other frontline work is taking the initial brunt. The other piece is that there is a stark divide between professional workers who have the ability to transition to working from home verses others who don’t have that luxury.
This crash, unlike previous recessions, is largely intentional. How does that effect things?
We have never had a self-induced recession or depression. The speed of the recession is unique here. Normally, recessions build on themselves. For instance, auto workers are laid off and then other businesses begin to experience the impact of the decline. Here, it’s all at once.
That also means the policy response should be different. We aren’t trying to get people back to work. We are actively discouraging it. The immediate goal should be to make sure people are whole.
What does an adequate fiscal response look like to you?
My team has been working on forecasts and the situation is dire. Something like 14 million jobs lost by June and we will be probably be lucky if it is that little. For something like this, you need immediate stimulus of at least two trillion.
The priority has to be the most vulnerable. Providing households with enough money that they can stay at home and care for their kids. There also needs to be support for businesses but structured in a way that requires them to keep workers on payroll. Then, you need to be sure that frontline health workers and hospitals can get the supplies they need. To that end, we have called for the President to invoke the Defense Production Act, because we have seen an emergency shortage of masks, ventilators, and other equipment.
Can you provide an overview of the pending federal legislation? What does it do well and where should it be strengthened?
Josh Bivens and Heidi Shierholz of our team had a great piece on this the other day. But I’ll try to do the shorter version.
A major piece here is the expansion of unemployment insurance. It ensures that a lot of people who would typically be left out are covered and provides an extra $600 a week on top of the state benefits through July.
There is also about $350 billion in small businesses support in the form of no interest loans— which can be converted to grants if the business can prove they are preserving their workforce. There is $100 billion for hospitals and healthcare supplies and $150 billion in aid for state and local governments which are going to experience massive drops in revenue.
Then there’s a one-time payment to households of $1,200 per adult and $500 per child. Although we would have liked to see this support continue monthly until economy is out of danger. This support is also not available for undocumented workers and there’s questions as to how quickly that money will go out to people who don’t usually file tax returns.
One of the last big chunks of the bill is the half a trillion dollars in industry bailouts. We have mixed feelings on this. Obviously, providing liquidity to businesses so they can keep people on payroll is important. But we wanted to see stricter regulations to ensure that those funds don’t go to companies that are laying off workers or outsourcing jobs. This is an area where people need to apply a lot of pressure to ensure that we know how the money is spent.
There were also some very important things left out of the bill. For instance, expenditures for childcare were only about $3.5 billion. Far too little.
If Congress were to pass another bill in the near future, what are some components you think should be included?
Increased support for childcare, more support for vulnerable immigrant workers, and key provisions (such as the extension of unemployment insurance) shouldn’t be one-time payments but rather be contingent on the state of the economy and state of the labor market. It’s really important that these kinds of support and aid are continued as long as needed and we don’t make the same mistake we did in 2009 of withdrawing support too soon.
Assuming we address people’s immediate needs, more broad-based stimulus focused on things like renewable energy that can lay the groundwork for a stronger future economy would be valuable as well.
You’ve talked about the impacts of the downturn especially on the most vulnerable. What are your reactions to President Trump’s public comments about reopening the economy by Easter? I know you’re not an epidemiologist, but from an economic perspective does that make sense?
We cannot solve the economic problem if the public health crisis is raging. We absolutely have to put public health first. Until the experts say the worst has passed and we have the capacity to begin to reopen, sending people back to work too soon will undermine everything we are working towards. We don’t want to see our elderly die because our healthcare system becomes overburdened.
We have the resources to make people whole, we just need to find the will as a country to do the right thing and to mobilize the necessary resources to stem the economic damage to the most vulnerable. The public health side of this remains somewhat of an unknown. But the economic damage and the needs of all Americans is something we have control over.
Thea Lee is president of the Economic Policy Institute.