What can and cannot “rescue” the economy: Economic Update – Sat Oct 24

Some of you might have noticed a Vox.com story by economics reporter Dylan Matthews with an especially incendiary headline: “A new paper finds stimulus checks, small business aid, and ‘reopening’ can’t rescue the economy.” Ignore the headline — it’s designed to get clicks.

The underlying paper, from Harvard’s Opportunity Insights team, finds that small businesses took a large hit when lockdowns began earlier this year and reopening can’t rescue the economy. It also found that stimulus payments haven’t had a tremendous impact on low-income employment levels (even if it might have helped them stave off poverty). Put another way: we are mostly doing this wrong.

This is an indictment of how the first stimulus package was designed and distributed, and a roadmap of where future stimulus packages should be directed: toward the income insecure Americans and small businesses that need it most. This report finds what we all know: consumer spending of the wealthiest just doesn’t trickle down to everyone else in ways that can drive an economy. Rather, we know from countless studies that average workers spending benefits everyone. That’s where our attention should go first, before we undertake the many other necessary steps required to rebuild our economy. The road ahead is long, and the task is huge, but we have to begin by focusing our attention on those who need our help the most.

Here’s what we are watching this week:

  • The latest numbers on the scope of the economic crisis
  • The local reaction to the economic crisis
  • The need for an investments-first statewide response
  • The public response as measured by public opinion research

I’ll continue to share what we are thinking, reading, and talking about in short, occasional updates like this.

The regional economic update is from Zach Silk of Civic Ventures, sent regularly each week and posted with permission.  You can find more content by the team at Civic Ventures at their blog, Civic Skunkworks.

The Latest on the Impacts of Covid-19

  • Washington unemployment insurance claims during the week of October 11-17:

    • 16,890 Washington workers filed new regular unemployment insurance claims (down).
    • 11,770 workers filed new Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation claims (down).
    • 2,627,970 initial claims have been filed since the start of the pandemic from 1,398,520 unique individuals.
  • Initial regular unemployment claims in Washington remain 172 percent higher than last year’s weekly new claims.

  • Nationally, another 1.13 million Americans filed new unemployment insurance claims last week – a slight dip. That’s 787,000 new regular unemployment claims and nearly 350,000 new Pandemic Unemployment Assistance claims. For reference, the peak of weekly jobless claims during the Great Recession was in March of 2009, when numbers topped out at 674,000.

    • This marks 30 consecutive weeks where new single-week jobless claims were higher than any week during the Great Recession.
    • Some 23.1 million Americans are still unemployed as of early October.
  • Heidi Shierholz at EPI explains why the Senate’s inaction is terrible economics: “Blocking more stimulus is not just cruel, it’s terrible economics. For example, the spending made possible by the extra $600 in UI was supporting millions of jobs. Letting the $600 expire means cutting those jobs.”
  • Nancy Pelosi told the New York Times that a stimulus deal is close, but that ”It takes time” to pull a spending package together. Pelosi warns that it’s unlikely that any stimulus package will pass through Congress before the election. When asked about the barriers to passing a stimulus package, Pelosi told the Times that “I can’t answer for the disarray on the Senate side.” This Vox story about how “a Senate vote on stimulus has failed, again” offers a good overview of how this process gets stopped up so easily.

  • “The longer the pandemic goes on, the more permanent the changes in the US economy become, and the hole Americans are in gets bigger and harder to dig out of,” Vox’s Emily Stewart writes in this great explainer summing up where we are in the economic downturn right now. “Companies that tried to hold out finally lay off workers (Disney, Allstate, the airlines), small businesses that could handle a couple of months of uncertainty close their doors. Once eviction moratoriums end, people who haven’t been able to make rent still face the prospect of losing their homes — not to mention debt.”

  • EPI has had a busy week: Josh Bivens lays out an explanation of  how the Trump administration was ruining the economy in the years before COVID-19 — they were just ruining it “more slowly.”

  • The Center for American Progress has billed this economic downturn as a “she-cession,” noting that women are bearing the brunt of job losses for the first time in history: “In economic terms, the failure to suppress the coronavirus is creating both supply-side and demand-side pressures against women in the labor market. On the demand side, an inability to safely perform face-to-face jobs reduces demand for workers who have experience in these occupations. Given the number of businesses that have closed and significant budget cuts on the table from state and local governments—entities that employ women in large numbers of good jobs—these demand-side pressures will likely persist for some time even after the public health crisis is addressed.”

  • The New York Times’s Neil Irwin examines the failures of the Obama-era stimulus Could Guide a Biden Administration, and discusses how a Biden administration could learn from the mistakes of the past when it comes to getting the most money to the most Americans who need it. In short, “aim big, because there may be only one chance.”

  • “More than 4 in 10 children live in households that struggle to meet usual household expenses,” finds the Center for Budget and Policy Priorities. “An estimated 42 percent of children live in households that reported it was somewhat or very difficult to cover expenses such as food, rent or mortgage, car payments, medical expenses, or student loans… Between 7 and 11 million children live in a household where children didn’t eat enough because the household couldn’t afford it.”

  • While there’s a lack of comparable data from before the pandemic, those numbers have definitely increased from last year: “In Pulse data released today for the period September 30 to October 12, up to 15 percent of adults living with children reported that the children didn’t have enough to eat sometimes or often in the last seven days due to lack of money. By contrast, in a December 2019 survey, only about 1 percent of adults with children reported similar problems in the last 30 days.”

  • The pandemic, especially in the early days, highlighted a number of problems with the American supply chain. And then, just as paper towels and laptops started reappearing on store shelves, workers in slaughterhouses across America started getting sick. A new report warns that throughout the pandemic, the USDA has placed corporate profits over the lives of workers.

  • At any other time, a federal court striking down a White House attempt to cut 700,000 Americans off SNAP benefits in the middle of a pandemic and economic downturn would have been huge news. In the current media environment, it’s barely even a blip.

Local Reaction to the Crisis

  • Please pass along the South Seattle Emerald’s call for applications to a new COVID-19 immigrant relief fund in Washington state, which offers “up to $1,000 for individuals [and] up to $3,000 per household.”

  • In her Crosscut column, Katie Wilson examines the public safety net in Washington state. “The Self-Sufficiency Standard, developed by University of Washington professor Diana Pearce, aims to define the income necessary to meet basic needs without public or private assistance. This year, a family of two adults, one preschooler and one school-age child living in King County needed just over $86,000 to cover basic expenses — more than triple the federal poverty level.”

  • The South Seattle Emerald profiles marginalized Seattle-area essential workers, some of whom work in the healthcare industry, who have been put at high risk of COVID-19 and its attendant difficulties.

  • It’s good that Amazon and other employers are allowing workers to stay at home whenever possible. But the Seattle Times looks at the consequences of that decision for small businesses who rely on more traditional office culture to get by: Specifically, “what will 9 more months without Amazon workers mean for Seattle’s downtown?” This isn’t about the nonsense that the “Seattle Is Dying” crowd likes to gin up—it’s a real problem: What happens when your small business depends on a steady flow of customers but all those customers have to stay home to keep everyone safe and healthy? And what happens when the federal government refuses to take the necessary steps to protect your small business from that cratering of consumer demand? Too many small businesses downtown are being forced to answer that question on their own right now.

Real-time Analysis of the Economic Crisis

We are providing regular commentary on our content channels including analysis of the trickle-down policies that fueled the disastrous federal pandemic response, explorations of the system-wide economic fragility that the downturn has exposed, and explanations of policies that will build a stronger and more inclusive economy.

  • “Over the last few months, as the Community Lead for the Governor’s Safe Work and Economic Recovery Advisory Group,” Jessyn writes on our Civic Skunk Works blog, “I have had the opportunity to sit down with small business owners all across Washington. From these conversations, a set of clear themes have emerged about the types of policies our elected officials should be pursuing.”

  • On Facebook Live this week, Jessyn and former state representative Kristine Reeves talk about the corporate hostile takeover of the Supreme Court and what we can do to stop it. And of course, the debate.

  • In the latest episode of Pitchfork Economics, Nick and Goldy talk with Rebecca Henderson, a Harvard Business School professor whose new book reimagines what capitalism might look like if businesses were more sustainable and less sociopathically focused on maximizing shareholder value above all else.

  • Paul pulls apart the latest trickle-down argument from a fauxgressive who is already arguing on behalf of Democrats against essential policies like the $15 minimum wage and the Green New Deal in the Biden/Harris platform.

  • And in his Business Insider column, Paul looks into what a more purpose-driven business model might look like. Can capitalism save the world?

Public Opinion

  • In an interesting Financial Times-Peterson poll published this week, Americans are fairly evenly split on whether or not Trump’s policies have hurt the economy, with a slight lead for “hurt.”

Closing Thoughts

Every week, we see more and more clear indications that this economic downturn offers completely different experiences for those at the top and bottom of the economic spectrum. In Washington State between January and September, the employment rate among workers who earn $60,000 or more per year has dropped by just one percent. For those earning between $27,000 and $60,000, the employment rate dropped by nearly six percent over the first nine months of the year. And for those workers below $27,000, the employment rate dropped by a staggering 14.5 percent. Bear in mind that if consumer spending disappears in the bottom third of the economy, the lack of consumer demand will eventually kick the legs out of the economy for everyone—in other words, the economic downturn is only deferred for the top third.

Unless our policies specifically address the mass unemployment of low-income workers, this recession will likely last years. Early in the crisis, when the size and shape of the economic downturn was still unknown, universal policies were both smart and necessary. Now, we understand who is suffering the most, and we know that unless we get money into their hands and inflate consumer demand, we will soon all be in the same boat.

Be kind. Be brave. Be vigilant. Mask up.

Zach Silk
Civic Ventures

Sign up for our newsletter: