The Stakes in the Administration’s Problematic Unemployment Plan

David Super

      A fair amount of my writing for this site consists of updates on the development of major federal legislation affecting the budget, health care, and human services.  My two posts earlier this week on President Trump’s weekend executive actions served that purpose.  Implicit in those posts was the belief that the lawlessness of the Administration’s solitary, poor, nasty, brutish, and short unemployment program matters.  This post explains why that is so. 

     To review, the “lost wages assistance (LWA)” program that the President announced on Saturday is supposed to be a substitute for new coronavirus relief legislation that will lift the political pressure Republicans were feeling to negotiate with Democrats.  If it works as claimed – which it surely will not – it would deliver $44 billion in aid to the unemployed.  As such, it would provide just over one percent of the $3.4 trillion offered by the House-passed HEROES Act.  It does nothing about the continuing shortages and delays in coronavirus testing, it provides no food or housing assistance, and it actually worsens the $555 billion state fiscal crisis that threatens deep cuts in health and education spending at the time when those are most needed.  With most of the effects of the prior relief bills largely dissipated, this solitary $44 billion – which could and should be spent instead on housing assistance, state fiscal relief, or improving testing – is grossly insufficient to prevent a rapid escalation of hardship, including many families losing their homes.  (Contrary to what the Administration has suggested, the executive order on evictions and foreclosures provides no actual protection to anyone; if the Administration was prepared to do anything substantial, surely it would have included that action in the President’s announcement.) 

     The benefit the President originally announced was $400 per week, already a one-third reduction from the $600 per week unemployed workers were receiving under the Federal Pandemic Unemployment Compensation (FPUC) program that expired in late July.  Because states’ fiscal crises prevented them from coming up with the statutorily mandated 25% match, the Administration subsequently reduced the benefit further to $300 per week, half of what workers had received previously.  Low- and moderate-income families that had calibrated their household expenses to what they were earning cannot absorb cuts of this magnitude without considerable hardship. 

     On-going chaos in the Administration’s efforts to settle on ground rules for the program and the difficulties many states will have reprogramming their computers to the Administration’s specifications will delay the provision of this modest benefit still further, likely until the end of August or some time in September.  Because the Administration only set aside enough money for five or six weeks of aid, many families may receive only a single retroactive check. 

     Yet although the program will be extremely short, it may be just long enough to dissipate the political pressure on the Administration and congressional Republicans to agree to new coronavirus relief legislation.  If it does, that will have huge implications. 

     This $44 billion is grossly insufficient to prevent a collapse of consumer spending that could tip this severe recession into a full-blown depression. 

     Without substantial fiscal relief, states will have to make massive cuts in basic services.  To get a sense of how large states’ gross $555 billion three-year budget shortfall is, that is slightly more than the amount of state money states were estimated to spend on education at all levels – primary, secondary, and higher education – in 2019.  With escalating and unpredictable costs as schools try to resume instruction, these cuts impact would be devastating.  Obviously states will not take the full amount of their cuts from aid to education, but the shortfall is so great that they cannot shield any major components from deep cuts.  And history tells us programs eliminated during recessions often are not revived when the crisis passes. 

     The future of out democracy is very much at stake.  One of the major sticking points in negotiations over new coronavirus relief legislation reportedly was the House’s provision of more money to the Postal Service to offset its steep decline in revenues and ensure it has the capacity to administer mail voting.  The President largely admitted that he is blocking this funding to prevent mail-in voting.  It likely is no coincidence that his negotiators walked out on negotiations with Congress the same day the Trump mega-donor recently installed as postmaster general removed twenty-three senior Postal Service administrators from their positions amid substantial reductions in services.  

     To be clear, this program is unlawful.  It is purportedly established under a section of the statute allowing kinds of aid “other” than those listed in the Stafford Act when disaster unemployment assistance is a listed benefit (but with conditions that do not serve the President’s purposes).  Also, the Administration is paying the full cost of the benefit with federal funds in defiance of the Stafford Act’s unwaivable requirement that states pay one-quarter of the cost.  (Allowing states to double-count their regular unemployment benefits as their match when they are already counting those benefits to meet requirements of unemployment law is expressly prohibited by longstanding fiscal integrity rules.) 

     And the program is unworkable, to the point that many if not most states likely will not participate either because they cannot complete the necessary extensive reprogramming of their computers in time or because they are afraid that the Government Accountability Office or Inspector General will note the illegality of the plan and cause the states to be billed for the cost of the FEMA money they received.  (Executive officials cannot make binding commitments of federal funds not approved by Congress.) 

     The biggest problem with this program, however, is its deceitfulness.  If enough of the public is deceived into thinking that this is viable and substantial to the point that they accept Republican obstruction of new relief legislation, tens of millions of desperate people will face severe hardship, our economy will decline even further, and our democracy may not recover. 

     @DavidASuper1