This is the best American policy in 50 years
The United States is in the pit of the deepest recession since the 1930s. And yet, a recent study from the University of Chicago using Census data found that the poverty rate actually decreased from 10.9 percent in early 2020 to 8.6 percent in April and May. That's not just unusual and highly welcome, it is the lowest rate ever recorded since the government began keeping official poverty figures in the 1960s.
The reason is two parts of the CARES Act, passed back in March: the one-off economic rescue payment (which gave $1,200 to most individuals, and $500 to children) and the huge expansion of unemployment benefits. Despite ongoing administrative difficulties, these programs are certainly the most progressive policy America has seen in over half a century — nothing else since Medicare, Medicaid, and various civil rights laws from the mid-1960s can compare in impact.
Yet the stimulus payment is long past, super-unemployment is set to expire at the end of July, and few members of Congress are stepping up to fight for these programs. Republicans hate them and even some Democrats are queasy about paying people more for not working. It's a ridiculous situation.
First, a bit of history. These two programs originated in the March scramble in Congress to do something as the economy started to collapse. Nearly-universal payments seemed like a good way to get money out the door as quickly as possible, probably helped by Andrew Yang's advocacy of a universal basic income during the Democratic presidential campaign.
The expansion of unemployment insurance was much bigger and more interesting — indeed, it changed U.S. unemployment from a typically stingy program to by far the most generous one in the world for lower-income folks. The original idea was to boost up benefits so that people would get 100 percent of their prior earnings, in line with generous European states. But because unemployment is administered by the states, and because state-level unemployment systems are so janky and old, this couldn't be done in the pinch. Thus Democratic senators, led of all people by the moderate Michael Bennet (D-Colo.) proposed slapping on an additional benefit across the board such that the average worker would have a roughly 100 percent income replacement, or about $600 extra per week. Treasury Secretary Steven Mnuchin agreed and helped push the idea in the Senate.
That's pretty good for that average worker. But for laid-off people who made less than the average, they get more than their previous income. For the lowest-income workers, it is a lot more — easily double or more what they were previously making. Six hundred dollars a week is $2,400 a month — well over twice the poverty line income for an individual, and on top of their normal benefit. Super-unemployment has been a godsend to tens of millions of people, allowing them to pay their bills easily for once, feed their families, pay off strangling debts, or even build up a little nest egg for the future.
Even granting all the technical foul-ups that are still plaguing the program (and the people like undocumented immigrants who are largely left out), never in its history has the United States been so broadly solicitous towards its low-income residents. Even the Nordics are not nearly that generous. Imagine that: America, a progressive trailblazer! Despite the fact that the most progressive aspect of the program was an accidental product of America's crummy administrative state, leaders like Bennet and Sen. Bernie Sanders (I-Vt.) still deserve enormous credit for pushing it through.
This benefit for the working class is, of course, why most Republicans hate super-unemployment. Conservative ideologues think the main activity of the state should be forcing people to work making profits for capitalists. Super-unemployment is set to expire at the end of July, and it will be extended "over our dead bodies," says Sen. Lindsey Graham (R-S.C.) It "makes it very difficult for many small businesses in Ohio and around the country to bring their employees back," says Sen. Rob Portman (R-Ohio). "We should never pay people not to work," says Sen. John Cornyn (R-Texas). By this view, unemployment should be miserable so that people will be desperate for work, and rich business owners can make the largest possible profit by keeping wages low.
Super-unemployment thus carries a grave moral risk for Republicans — that the working class might stop simply accepting the political domination of the business class. People living comfortably on state benefits might start demanding higher wages or better working conditions before they will go back to work, or horror of horrors, start making other political demands. Championing super-employment would probably be the most effective single step President Trump could take to raise the chances of his re-election, but a beaten-down and quiescent working class is more important for many conservatives.
Yet while most Democrats are at least nominally in favor of continuing the program, few of them are loudly defending it. House Speaker Nancy Pelosi (D-Calif.) refused to include an automatic extension of super-unemployment and other benefits in a messaging bill because the Congressional Budget Office would have said it cost a lot. Other Democrats even share Republicans' worries. A "handful of Democrats have expressed concern in private to the Senate Finance Committee that the $600 amount might reduce incentives to work," reports The Washington Post.
Now, in normal times it is probably a bit weird to pay people dramatically more when they get laid off. In general, it would be more sensible to make those jobs pay better (with mass unionization and wage compression policies), set up other benefits like a child allowance, and treat unemployment as something to smooth the transition between jobs.
But these are not normal times, and the U.S. is not a normal rich country. Millions of jobs in fact pay horrible wages, and changing that will take years. We have basically none of those other benefits, and there is no sign they are in the cards. We are also — it may be necessary to remind policymakers of this — in the middle of a gigantic recession which has destroyed tens of millions of jobs. There are currently about 4.6 job seekers for every job opening, meaning it is literally impossible to force the whole unemployed population into work. There is also, you know, the ongoing coronavirus outbreak that has become a galloping epidemic in several states. We don't want people going back to work if we can possibly help it, and there are not remotely enough jobs even if we did.
Even on narrow business grounds there is every reason for Congress to keep its foot to the floor on unemployment and other stimulus until the crisis has passed. Keeping super-unemployment going polls at 75 percent approval. Once the pandemic is over and there are once again more job openings than job seekers, we can think about gradually dialing unemployment back to a normal European level. (That is actually a recent proposal from Bennet.) If the June economic data shows an economic stall-out, as I suspect it will, Democrats better be ready to ditch their anxieties and fight for their greatest achievement in decades.
Want more essential commentary and analysis like this delivered straight to your inbox? Sign up for The Week's "Today's best articles" newsletter here.