Monday, December 28, 2020

Evaluating the Omnibus’s Anti-Poverty Measures

David Super

                Now that the President has deigned to sign Congress’s massive year-end opus, it seems appropriate to comment on how it responds to the impoverishing effects of the pandemic and recession. 

At the outset, I should note that one test commonly applied in popular media articles – stimulative effect – is largely inappropriate.  Job losses have been heavily concentrated in sectors that are now unsafe, such as travel and entertainment.  Bringing those jobs back is not primarily an economic challenge; it is a public health one.   To be sure, increasing aggregate demand by putting money into the hands of people likely to spend it should prevent additional job losses not necessitated by the public health crisis.  That effect, however, depends more on the size of the legislation than on its particular design. 

The economy will be slower than it needs to be in coming months because the strong anti-spending faction in the Republican Party insisted that the legislation stay well below the symbolic $1 trillion mark and because the (heavily overlapping) pro-tax-cut faction diverted a large share of the $900 billion to subsidies that are likely to stay on corporate balance sheets or to be distributed to high-income shareholders here and abroad, who will simply bank the gains. 

As relatively insignificant as the legislation’s design is for macro-economic purposes, however, from a micro-economic perspective its composition is quite important.  In particular, a large number of valuable assets are in imminent danger of destruction, resulting in waste and long-term hardship for those losing them.  These include homes, with evictions inevitably resulting in the loss of valuable personal property and the disruption of personal networks providing everything from job leads to spot child-care.  The undervaluation of these networks is a persistent failure in the design and appraisal of anti-poverty policy.  The continuation of the eviction moratorium, with language that will allow the Biden Administration to extend it further, will stave off many of these losses.  The inclusion of substantial, although woefully inadequate, rental assistance will allow many of these losses to be avoided altogether.

Another threatened long-term loss is education.  The same underfunded, over-populated schools that struggled most to serve their students in the best of times have had the least ability to help them during the crisis.  With the recession hammering state and local revenues from sales and income taxes, many of these schools have faced devastating additional cuts.  The legislation’s omission of significant state and local relief funding, beyond a very modest education aid package, squandered the chance of preventing these losses.  The pandemic’s legacy thus will include a further largely preventable widening of our education gap.

A third area of preventable long-term harm is from the coronavirus itself.  The expiration of enhanced unemployment benefits in late July, and the expiration of expanded eligibility for unemployment aid over the weekend, likely have forced many desperate low-income people to take jobs where they face a high risk of infection.  Some will become ill themselves and will bring the disease home to high-risk household members.  Lost in the debates over Republican claims that unemployment benefits discourage work – a claim with little empirical support in ordinary times – is the fact that we should want to discourage work in a pandemic where available jobs pose undue risks.  Employers can and should be pressed to compete for workers with safer working conditions.  Although the benefits’ duration is disturbingly short, and the halving of enhanced benefit levels from what the CARES Act provided in the Spring may induce some low-wage workers to endanger themselves and their families, rescuing these programs is a major accomplishment.  So is the rejection of Senate Majority Leader McConnell’s insistence that employers and others be immunized from litigation over unsafe working conditions.  On the other hand, the failure to extend workers’ right to take paid sick leave likely will force some workers exposed to the coronavirus to stay at work, endangering others.  Low-wage workers tend to work with other low-wage workers; forcing them to work while they may be sick likely will increase the disease’s spread within vulnerable communities. 

Beyond the macro- and micro-economic effects of the package, how it distributed the dollars it made available for low- and moderate-income people is important.  More so than in many relief packages, this legislation targeted aid on the most vulnerable.  Having set a grossly inadequate cap on the overall size of the package, Republicans tried to crowd out well-targeted unemployment benefits with larger scatter-shot economic impact checks.  This effort had only limited success, as evidenced by President Trump’s last-minute tantrum demanding much larger checks. 

Despite their mass appeal, rebate checks distribute a great deal of money on those in stable albeit not affluent circumstances.  This leaves much less for those in dire need who face the risk of losing housing, utility service, or food.  Many of the poorest of the poor were completely ineligible; many others had insufficient connection with the tax system to receive checks without making additional filings.  Herculean outreach efforts by many non-profits and state and local governments only helped a modest number of these people to make the necessary filings to receive checks.  Moreover, because the tax system depends on prior years’ data, it mismeasures current need:  income in pre-pandemic conditions is a deeply flawed indicator of unemployment and need during the crisis. 

The checks-versus-unemployment benefits debate also exposed a latent tension within the movement against income inequality.  One set of inequality critics, largely from the Left, focuses on the concentration of wealth at the top – the “one percent”, “the billionaires” – and redirecting some of that wealth to improve the lives of the middle class.  Many in this group are motivated by the corrosive political influence of such great wealth.  The other set focus on the growth of severe need at the bottom of the income spectrum, seeking to reduce the ranks of the poorest of the poor.  This group’s motivation is primarily humanitarian rather than political, and it draws adherents from a much wider range of the ideological spectrum. 

Although these two views of inequality are not irreconcilable in the abstract, in practice they represent competing claims on limited financial and political resources.  The acrimonious argument between Senator Joe Manchin – the chamber’s most conservative Democrat – and Independent Senator Bernie Sanders illustrated this split.  Sen. Manchin insisted that putting as large a share as possible of the available funds into unemployment assistance was the best way to target resources on those facing the greatest hardship; Sen. Sanders preferred giving a broader segment of the middle-class another taste of redistribution.   Like others, I found myself in the unaccustomed position of rooting Sen. Manchin on.  My sense is that many intellectual and political leaders on the Left take for granted the support of low-income people and their allies for the movement against income inequality and are puzzled when it is not forthcoming.  The movement’s future depends on its ability to overcome that myopia.

Nonetheless, the legislation is striking for several initiatives to reach the poorest of the poor.  Expanded eligibility for unemployment benefits focuses on many of the most marginalized workers, including those unable to find full-time work and those in the “gig economy.”  The enhanced unemployment benefit levels are most significant to the lowest-wage unemployed workers.  The 15% increase in the maximum benefit in the Supplemental Nutrition Assistance Program (SNAP) reaches the  poorest of the poor; by contrast, the Trump Administration’s contorted and unlawful interpretation of the SNAP increase in the Families First Coronavirus Relief Act completely excluded the poorest 37% of recipients and gave very little to other extremely low-income households.  The extension of the eviction moratorium and the allocation of additional funds to rental assistance also benefits many of the poorest of the poor.  On the other hand, Democrats failed to win an increase for the Temporary Assistance to Needy Families (TANF) block grant to provide for emergency grants to those in greatest distress whose needs other programs do not meet. 

Finally, the long battle over this legislation reflected the growing realization that state and local government finance is an important front in anti-poverty law.  This is not to say that state and local governments are reliably sympathetic to low-income people:  far from it.  But the federal government’s difficulty administering programs for low-income people, especially for the poorest of the poor, leave state and local governments the only hope for many.  (In a concession to those limitations, the omnibus legislation prevents earned income tax credits and child tax credits from dropping this year for laid-off workers:  workers can receive credits based on their 2019 earnings instead of those in 2020.)  State and local governments also fund non-profit community groups to help those that government refuses to aid directly.  And when state and local governments’ budgets deteriorate, the resulting cuts hit low-income people disproportionately hard.  Many state and local employees – 1.3 million of whom have lost their jobs since February – are themselves a few paychecks away from poverty.  The failure to include substantial new state and local aid in the omnibus legislation is a failure of anti-poverty law as well as of fiscal federalism more generally. 

The chaotic handling of expanded unemployment assistance, the failure to help state and local governments avoid mass lay-offs, and the Trump Administration’s forcing Congress to act a second time to get increased food assistance to the poorest of the poor all highlight the inadequacy of the ad hoc to economic crisis relief.  Although recessions do differ from one another, those differences are not so great that they require separate, individually tailored legislation each time.  A key argument against enacting permanent structures to address the effects of recessions is that Congress will inevitably come through when it is needed.  This is at least the third recession in a row when Congress’s inability to act caused great hardship for millions of unemployed workers and fell far short of preventing disastrous state and local government lay-offs.  The reforms in the major coronavirus relief laws should be enacted into permanent law with triggers that bring them on line automatically during a serious economic downturn. 


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