The continuing impasse over pandemic relief is threatening to plunge the country into a depression so deep it could take years to recover.
The most immediate issue is to help unemployed workers and their families because of the loss of the $600 a week in supplemental benefits.
President Trump signed an executive order promising $300 a week, but only if states agreed to kick in another $100 a week, and to set up a separate payment system because the money he wants to divert from other programs has not been approved by Congress. It is not likely that states, which are drowning in debt because of the pandemic recession, will do either of those things.
The larger failure is the lack of significant aid to state and local governments. That represents a mortal danger to Maryland and all its local governments.
We are going to give you a lot of numbers here, but stick with us. This is important.
Maryland’s Bureau of Revenue Estimates projected in May that tax collections in Fiscal Year 2021, which started on July 1, would decline by $2 billion to $2.6 billion, on top of the $1 billion shortfall in the last fiscal year.
The national Center on Budget and Policy Priorities said in early July — before the new wave of COVID-19 cases and deaths caused further economic slowing — that budget shortfalls for all of the states from the pandemic would total $555 billion over fiscal years 2020-2022.
In just four months, the Center said, state and local governments have furloughed or laid off 1.5 million workers — twice as many as in all of the Great Recession.
Without a massive injection of federal aid, we are going to see widespread layoffs and furloughs of government employees. Unemployed workers do not have money to spend, and that will further weaken the economy.
The Democratic-controlled House passed a bill in May that would provide an additional $3 trillion in aid to the unemployed, small businesses, state and local governments and other spending. The Republican-controlled Senate ignored the bill until mid-July, then offered $1 trillion. But there would be less money for the unemployed and nothing for state and local governments.
The Trump administration has started negotiations with Democrats, but the sides are far apart.
Jennifer Rubin, an opinion columnist for the Washington Post, wrote last week:
“If the economy is in a rut, the party in power usually tries to maximize the power of incumbency to improve conditions before an election … This White House and the current Senate Republican majority, however, are doing everything in their power to minimize or even prevent a stimulus deal while the party out of power insists on doing something big to prop up the economy before November. Go figure.”
It looks as though President Trump and the Republicans just cannot take yes for an answer.
News came out Thursday that the number of Americans filing for state unemployment benefits fell below one million last week for the first time since March. But layoffs remain exceptionally high by historical standards, and the pace of rehiring has slowed.
In Maryland, new unemployment claims hit almost half a million in just eight weeks in the spring. New claims during the Great Recession did not hit half a million until week 74.
Worse, economists told the New York Times that, unlike the temporary layoffs and furloughs that dominated in the first weeks of the crisis, most new job losses are likely to be permanent. Employers brought back 4.8 million workers in June, but only 1.8 million in July.
The Times said data from private-sector sources suggests that the slowdown has continued in August, and economists warn that it could worsen now that key federal programs to help households and businesses weather the pandemic have expired.
Frederick County Public Schools plans to lay off hundreds of bus drivers and cafeteria workers in the coming weeks. Board of Education President Brad Young said the layoffs are not budget-related, but because the employees are not needed when most students are attending classes remotely.
But that means several hundred Frederick County families will have less money to spend shopping or dining out. They will not be paying income taxes or as much in sales taxes, and their loss is another drain on our weakened economy.
We don’t pretend to know the right size of the relief package, but we do know that in this case, less is definitely not more.
Congress needs to help the unemployed, struggling small businesses and most especially endangered state and local governments.