Rubin: Trump Needs To Listen To The Fed

By Jennifer Rubin

President Donald Trump, for reasons that are not clear, refuses to provide a meaningful response to the House-passed Heroes Act.

As House Speaker Nancy Pelosi, D-Calif., said in her Thursday news conference, Republicans' offer on major issues (a pittance for food support; discontinuation of the $600 weekly unemployment income subsidy without a feasible replacement; no eviction protection; no support for state and local government) is irresponsible and unserious.

You do not have to believe Pelosi or any other Democrat. Ask the Federal Reserve bank presidents who have a bird's-eye view of economic activity in each of their 12 districts.

"As long as the virus poses significant threats to public health, a full economic recovery will be very difficult as individuals, often voluntarily, avoid activities that place their health at risk," Boston Federal Reserve chief Eric Rosengren said this week. "Indeed, the trajectory of the economic recovery will be determined more by the path of the virus than by the path of policymaking." He noted that this fall the slowdown in economic activity "is likely to continue."

The Federal Reserve of San Francisco contradicted the administration's claim that the $600 unemployment insurance subsidy encourages people not to seek jobs.

"Early studies into the effects of the expansions to UI under the CARES Act have found little impact of the increased generosity on exit rates out of unemployment. ... [S] tates with more generous UI systems have not experienced weaker labor market rebounds during the initial phase of reopening." The additional unemployment income support has not affected employment, but it has helped prop up the economy by acting "as an effectively targeted fiscal stimulus to support aggregate demand throughout the economy."

This month the head of the Federal Reserve Bank of Cleveland cautioned that, while unemployment has come down, "the current level is still above its peak in the aftermath of the Great Recession. And there are still almost 18 million unemployed workers in the U.S., compared with 6 million in February.

This means one in 15 Americans over the age of 16 is unemployed, about the same as at the height after the Great Recession." She added, "In other words, the economy is still down about six years' worth of job growth."

Initial fiscal action helped relieve distress, but it is not enough. "[M]ore fiscal support is needed to provide a bridge for households, small businesses, and state and local municipalities that have borne the brunt of the economic shutdown until the recovery is sustainably in place."

The White House and Senate Republicans are operating in a parallel economic universe. They seem utterly unmoved by several realities that Federal Reserve bank presidents, business leaders, investors, consumers and workers all understand.

First, since the pandemic is still not under control, we cannot expect a swift or complete recovery. Second, additional benefit payments to individuals do not discourage work; they keep families and hence the economy afloat.

Third, claiming that we have gained back jobs in the past few months willfully ignores how terrible is the current status of the job market, especially for those at the lower end of the pay scale (thus, a disproportionate number of Blacks and Hispanics). ("Nearly half of the net private-sector job losses since February have been in the leisure and hospitality and the retail trade sectors, the two sectors ranked lowest in terms of average hourly earnings.

Three-quarters of the job losses are in the sectors that pay below-average wages," according to the head of the Cleveland Fed.) Fourth, unemployment remains at historic levels, which in turn will squeeze consumer demand, raise the risk of evictions and drive more Americans into poverty.

Meanwhile, Trump and Republicans do not want to do much of anything. The human and financial tragedy that will unfold will be on their heads.

Jennifer Rubin writes reported opinion for The Washington Post.