Tales from the Doomscroll : Economic Update – August 26

The following is a reprint of the regional economic update email 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.

There’s so much news right now that it’s almost impossible to discern good news from bad–there’s only the monolithic News, a wall of happenings that hits you every time you check your phone. (One of my favorite neologisms of the last six months is “doomscrolling,” which is the act of continually refreshing Twitter just to see what new horror will appear the next time you refresh.) However, I’ve been heartened by one signal in the midst of all this noise that I wanted to share with you: policymakers and politicians are on the march against austerity cuts in response to this economic crisis.

The latest development in the fight against budget cuts comes in the form of a paper from the Roosevelt Institute, in which economist Joseph Stiglitz makes a compelling case that “austerity budgets as responses to revenue shortfalls could send our economy into a deeper recession, making a robust and timely recovery all but impossible.” 

Here’s a link to the full report for you wonks out there, but this one pager does an excellent job of rounding up his research. Stiglitz’s findings offer the best dimensionalization to date of the exponentially growing disaster that budget cuts would create: If states lay people off, those people don’t spend money in local businesses, and more people will go out of work. If the austerity coalition has their way and we lay off 1.5 million state employees around the nation,  that could cause a total of 5.5 million Americans to lose their jobs. It might seem silly to get excited about a white paper in the middle of all this chaos, but it’s through the hard work of economists like Stiglitz that we all find a way to articulate what we know to be true: invest in our people, and those investments will pay out exponentially over time.

Now onto other news. 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

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


The Latest on the Impacts of Covid-19

  • Washington unemployment insurance claims for the week of August 9-15:

    • 21,942 Washington workers filed new unemployment insurance claims.
    • 11,020 workers filed new Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation claims.
    • 2,405,641 initial claims have been filed since the start of the pandemic from 1,302,868 unique individuals.
  • More than 1 million Washingtonians have received almost $10 billion in benefits since the start of the pandemic.

  • New federal unemployment claims unexpectedly rose during the last reported week ending on Aug. 15, climbing back over 1 million. This marks 22 weeks in a row where jobless claims were larger than any single week during the Great Recession.

 

 

  • The stock market has had every neoliberal economist abuzz, closing last week at a record high, despite the fact that more than 5.8 million Americans have been infected by COVID, more than 170,000 have died, and millions of Americans are still out of work. If this doesn’t convince you that the stock market is not even remotely a barometer on the real health of our economy, I don’t know what will.

  • According to reporting from multiple outlets, two federal health officials with the CDC said they were given a directive from the White House this week to modify testing guidelines to exclude people who do not have symptoms of COVID, even if they had been exposed to the virus.

    • The administration and its supporters have championed a slight decline in new daily cases in the U.S., which experts attribute to both more mask-wearing as well as a significant lag in testing, resulting in false hopeful news.

  • According to new CDC data, about twice as many Black children (<18) and about three times as many Latinx children have been hospitalized with COVID than white children since March.

  • As college dorms reopen and classes resume in-person at some universities, a Times survey shows that COVID cases are “turning up by the thousands” at higher ed institutions.

  • COVID has been a much smaller theme at the RNC this week, unsurprisingly, and when it is mentioned it’s significantly downplayed. Chief White House economic advisor Larry Kudlow even referred to the COVID pandemic in the past tense, as if it were over, despite the fact that we’re still averaging more than 40,000 new cases and more than 900 deaths every day.

  • According to an AP source, Senate Republicans are reportedly working on a slimmed down $500 billion stimulus package, following a failure to extend unemployment benefits or any other CARES Act provisions earlier in the month. The initial Senate plan was $1 trillion, while House Democrats were initially at $3.4 trillion and reduced their proposal to $2 trillion to compromise with the Senate GOP. All that is to say this supposed new plan, which we don’t have any details for yet, is a Republican retreat from their own proposal while Congress was still in session.

  • Another concern education experts are raising with virtual learning: the “learning cliff.” As millions of students prepare to or have already started a virtual school year, there’s a fear that many will miss critical academic milestones that will lead to falling behind whole grade levels or dropping out of public education entirely. Of course, this will also have massive social and economic impacts for an entire generation of Americans. A June McKinsey report estimated that the average K-12 student in the U.S. could lose $61,000-82,000 in lifetime earnings as a result of learning losses this year.

  • With the expiration of federal unemployment bonuses and weekly new unemployment claims still higher than even the worst point of the Great Recession, millions of people are down to their last dollar. In any society, there’s a point where things can’t get any worse, and something breaks. In a stark and jarring oped for The Week, Ryan Cooper asks, “Are bread riots coming to America?

  • Right before midterm elections in 2010, Sen. Mitch McConnell famously said, “The single most important thing we want to achieve is for President Obama to be a one-term president.” It was his defense for Senate Republican’s utter refusal to pass a much-needed stimulus package and failure to articulate a plan of their own. It didn’t matter – Democrats were in the White House, so this was their crisis. Fast forward to today – Republicans are in the White House, but the crisis mismanagement and generally feckless attitude is the same. So, what gives? Ezra Klein tries to find a motive.

  • As the U.S. spent the summer losing what little ground we may have gained in the spring over the virus, we know that COVID actually spreads better in colder weather. John M. Barry, author of The Great Influenza: The Story of the Deadliest Pandemic in History, warns in a New York Times column that as we enter the fall and winter with COVID still out of control, the devastation is going to get much, much worse.

  • As America reports more COVID cases than any other country in the world, the WHO has issued a new warning that recent infection data indicates that young people – ages 20-40 – have emerged as the main spreaders.

Local Reaction to the Crisis

  • The Institute for Disease Modeling in Bellevue has released new recommendations that when public schools do begin to reopen for in-person learning, districts should start with the youngest learners first.

  • Boeing announced last week that the company is moving forward with more “voluntary layoffs” – buyouts of employees – slashing its workforce beyond the 10 percent target originally announced in April. Worse news for Washington, the Times reports the company is also considering relocating its 787 Dreamliner production to South Carolina. A decision could come as early as next month.

  • With or without Boeing’s potential relocation, Seattle and the greater region will experience a steep economic decline, likely into 2022. But blame the rich, not the left, for the coming disaster, Charles Mudede writes in The Stranger.

  • While many of us have been fortunate to spend the pandemic working out home, hundreds of thousands of people in our region are still relying on public transit every day. But with fewer riders and no fare collection, some are worried whether or not public transit can survive COVID without significant government aid.

  • Last week King County handed out $2 million in grants to arts, science, and heritage organizations impacted by COVID. The relief – which came from the CARES Act and is the only relief so far specifically targeted for the arts sector – is both intended to help keep cultural institutions open and help them institute public health measures to allow them to reopen.

  • Washington’s foster homes and foster care advocates are warning about the difficult position they’re in with the state during COVID, sounding alarms about a home that lost state funding after turning away four kids who had tested positive for COVID. It’s a difficult position for everyone involved – most of all, the kids – as foster homes try and prevent their care facilities from becoming the newest virus hotspots, but kids still need a place to go, even if they have COVID.

  • Only a few cases have popped up on Washington’s higher ed campuses recently, but as Wahsington’s universities are on the quarter system most students and faculty aren’t back until September. Four of Washington’s five universities as well as Evergreen are moving to online learning this year – Central Washington is the only university that will attempt a hybrid model. Two private colleges in Spokane County – Whitworth and Gonzaga – plan to try and return to fully in-person learning at the end of this month. But as we saw at UNC, it’s very possible those plans might have to be abandoned.

Washington State’s Budget Crisis

  • In another painfully misguided missive from The Seattle Times, the editorial board called for legislators to return to Olympia immediately to make massive budget cuts to address this unprecedented crisis, claiming cuts now will prevent bigger cuts later. Putting aside the fact that all that is budget double-speak that doesn’t actually make sense, all the best data from the Great Recession shows us that states that led with austerity budget cuts actually worsened their economies and prolonged the recession. Whether or not you choose to ignore it, the data doesn’t change – the best and fastest way to save our economy is to actually increase spending, provide direct support for workers and small businesses, and make new infrastructure investment to kickstart our economic recovery.

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.

  • Last week on Facebook Live, my friend and veteran campaigner Cristina Uribe joined me to reflect on the 2020 Democratic Convention and answer listener questions on the election. What’s the most impactful way to fight back against Trump’s fascist attacks on our democracy? What will happen if trickle-downers successfully disrupt USPS? How much stake should we put in polls? What is the point of a party convention?

  • Recessions are inevitable—but the complete economic catastrophe that we’ve experienced for the last five months was not. In  last week’s episode of Pitchfork Economics, Nick Hanauer and Jessyn Farrell interviewed economics Professor Trevon Logan, who explains where we went wrong, debunks myths about the federal unemployment benefit (no, it doesn’t disincentivize people from returning to work!), and calls on Congress to steer us away from this economic cliff.

  • In this week’s episode of Pitchfork Economics, Goldy interviews HuffPost reporter Zach Carter about his bestselling book on economist John Maynard Keynes. You likely only know Keynesian economics as a pro-deficit-spending philosophy, but the truth is much more nuanced, and much more fascinating: Keynes understood that economics was about more than just numbers in a spreadsheet–his economic understanding made room for love and art and humanity.

  • In Business Insider, Civic’s Annie Fadely dives into the interview with Dr. Logan and the need for policymakers to realize that we’re in a flood and the water isn’t receding anytime soon. The CARES Act stimulus was predicated on a robust public health plan to combat the pandemic by summer – a plan that never materialized. We need to build another ark, or we’ll all drown together

Public Opinion

We also wanted to share with you some recent polling.

  • A majority of Americans believe Trump’s attempts to underfund or block new funding for USPS are motivating by reelection concerns, and a majority don’t trust him to leave the agency alone before election day – though responses are disappointedly divided among party lines.

  • However, 4-in-5 Americans still view the USPS favorably, including Republicans.

Closing Thoughts

This week saw another major milestone in the anti-austerity movement I described at the top of this email. Our friends at the Economic Policy Institute hosted a bipartisan panel of economists moderated by The Washington Post’s excellent economic reporter, Heather Long. Each of the economists were asked to concisely pitch to a hypothetical anti-austerity politician why it is important to invest in state and federal spending right now. Their answers were impassioned, informed, and useful for all of us who are in the business of building a better future.

There’s a great writeup and video recording of the elevator pitches that’s well worth your time, but some of the highlights could practically fit on a bumper sticker:

  • The best time to pass state and local aid was three months ago, when we saw millions of jobs being lost. The second best time is right now.
  • We should learn the lesson of what happened after the Great Recession, when state and local governments—once the Recovery Act aid to states ran out—their spending became a tremendous drag on growth, made that recovery take far longer than it should have.
  • For every dollar we spend on state and local assistance, it adds probably $1.70 to the size of the overall economy.

You might not hear it now over all the doomscrolling, but the fight against budget cuts is growing. With this kind of passion, intelligence, and experience on our side, I believe that we can win.

Be kind. Be brave. Wash your hands. And wear a mask.

Zach Silk
President
Civic Ventures
civicskunk.works
PS: stay cool. It’s hot out there.

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