More Economic Aid Needed Now To Avert America’s COVID-19 Jobs Crisis

The economy could accomplish a full recovery within a few years, but policies to address the COVID-19 have been shortsighted. Emergency federal jobless benefits are scheduled to run out this month, and without another stimulus bill a double dip recession is possible.

Early on, President Trump had lots of help from House Speaker Nancy Pelosi, New York Gov. Cuomo and Mayor Bill de Blasio denying the dangers posed by the virus, but as events unfolded he continued to eschew good public health advice. We lack a coherent national framework similar to those in Europe for testing, contact tracing and social distancing.

European governments were more patient about reopening than the U.S. states, infections peaked on the continent in early April and have fallen steadily. Here, new cases fell initially and then accelerated up to new highs. We are getting the second wave continental Europe avoided.

This time, governors are more inclined to tough it out, but what they decide may not matter much. In the seven states that did not enforce stay-home orders in April, visits to retail and recreational businesses fell almost as much as in those with lockdowns.

With the second wave — after reckless behavior in Texas bars and elsewhere — Americans will become more cautious about crowded stores and restaurants, and continue to redirect spending. Home improvement, RV and bicycle sales are rising.

Shutting the economy temporarily effectively shut many businesses for good. Although 7.5 million workers returned to work in May and June, the Bureau of Labor Statistics reports 1.6 million jobs have been permanently lost since February, 4.6 million adults have quit the labor force altogether and state and local governments have released 1.5 million workers.

Democrats in Congress and Secretary Steven Mnuchin approached COVID-19 as a temporary emergency. Like union leaders imposing a strike, they assumed businesses would reopen and look much as they did before the shutdowns were imposed.

Households received a single stimulus payment, the Paycheck Protection Program initially required that 75 percent of the money be spent on wages and within eight weeks, and federal supplemental unemployment benefits were funded for only four months.

With infections cresting again — and the fall likely a more friendly season for COVID-19 — more aid is needed. And in the post COVID-19 economy, more Americans will still work at home more, fly less, eat more delivered meals, require less office space in cities and visit crowed amusements less.

During the economic expansion, African-Americans, Hispanics, the handicapped and others stuck in low wage jobs finally saw opportunities and incomes improved as unemployment slipped below 5%. The patterns of previous recessions indicate those gains could be lost for many years.

Cultural disaffection and economic displacement of working-class Whites in the Midwest elected Donald Trump. Now the focus on social justice and unrest among minorities in our cities have as much to do with unacceptable economic conditions as police practices.

The jobs problem has become structural and will endure after COVID-19 is conquered. Brick-and-mortar retailing, airlines and many other businesses have permanently lost even more customers, and states face significant income and sales-tax shortfalls through 2021. Simply sending money to businesses to keep workers on payrolls will fail — once the money runs out, more permanent layoffs will follow.

Nearly half of all households in America lost income during the shutdowns, and means-tested stimulus payments, PPP and supplemental unemployment benefits didn’t reach many of them.

Better to send every adult $1,000 a month plus $500 for each child each month until the crisis passes. Let the progressive income tax enforce fairness instead of cumbersome income tests. Consumer demand would pull employment to the industries with stronger growth prospects.

Send every unemployed worker $325 a week until unemployment falls to 5%. Along with state benefits, most unemployed would not be paid more to stay home than they could earn working. Those who returned to work would still receive the household payments plus their pay, creating an incentive to take a job.

Send every business $1,000 per full-time equivalent employee until unemployment is 5% — no matter what they are paid — if they pay each worker a minimum of $10 an hour.

Finally, honor the National Governors’ Association request for $500 billion to cover lost state and local revenue over the next two years.

It would be a lot less complex than the CARES Act, to maintain vital public services and provide clear incentives and rewards to create and seek jobs.

• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.