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Critics say Trump, Congress fumbling economic response to COVID-19

The Hill logo The Hill 6 days ago Mike Lillis
a woman standing in front of a mirror posing for the camera: Critics say Trump, Congress fumbling economic response to COVID-19 © Greg Nash Critics say Trump, Congress fumbling economic response to COVID-19

Ten weeks after President Trump signed the first coronavirus relief bill into law, many economists, business groups, lawmakers and labor advocates contend the multi-trillion-dollar response has been insufficient, misguided or both.

Despite nearly $3 trillion in emergency spending, much of the economy appears to be in freefall, and there are warnings of a long and painful road to economic recovery.

"From a jobs perspective it is as if we have done nothing," Damon Silvers, policy director of the AFL-CIO, commented on the unprecedented actions taken by Congress, the White House and the Federal Reserve.

Fed Chairman Jerome Powell warned last week that unless lawmakers adopt additional emergency measures, the downturn will deepen - and could last for years to come.

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"Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery," he said.

Yet policymakers in Washington are badly divided over what steps to take next.

President Trump is urging that businesses reopen across the country, despite reservations from health experts in his own administration who have expressed fears that opening too quickly could lead to a resurgence of the COVID-19 disease that would cost lives and impose further damage on an already weakened economy.

GOP leaders on Capitol Hill have voiced concerns about the debt and say they must gauge the effectiveness of the trillions of dollars already allocated.

"I think we all believe that another bill probably is going to be necessary," Senate Majority Leader Mitch McConnell (R-Ky.), who has called for a pause on spending, told Fox News last week. "But I'm not prepared today to put a precise date on when that will be."

Democrats, for the most part, want to spend more now.

The House on Friday approved a new $3 trillion relief measure championed by Speaker Nancy Pelosi (D-Calif.) that would funnel money to state and local governments, workers, businesses and families.

"Time is of the essence," Pelosi said Sunday in an interview with CBS's "Face the Nation" program. "We cannot take a pause."

But Democrats are themselves somewhat divided on the next steps.

While only one House Republican broke with his party to back the measure, there were 14 Democratic defections, including 13 centrists, some of whom argued the bill was too big or included provisions that weren't directly linked to the pandemic.

The other Democrat who voted against the legislation was Rep. Pramila Jayapal (Wash.), the co-chairwoman of the Progressive Congressional Caucus (PCC). She said the bill didn't go far enough.

There are complaints across the country that Washington has failed to live up to an informal pact it offered to workers and businesses that locked down for the sake of public health and were told they'd get a financial lifeline from the government to weather the storm.

Now a number of businesses aren't sure they will reopen, and many of the 36 million people who have officially joined the ranks of the unemployed have no guarantee to come back to work.

Silvers argues that many of the mechanisms Congress created to counteract the economic devastation were underfunded and poorly designed.

The fundamental mistake, he said, was not paying companies directly to keep workers on board - a paycheck guarantee pushed by lawmakers from both parties on Capitol Hill, and adopted with some success by a number of European countries where unemployment remains a fraction of what it is in the United States.

"What we should be doing here is what every other advanced developed country has done, more or less, which is very broad-based payroll support for companies that have to furlough people," Silvers said. "And we haven't done it."

Congress did buck up unemployment insurance with a $600 per week boost, a controversial move that could allow some low-paid workers to earn more from unemployment than they would earn from working.

The bill passed Friday by the House would extend that increase from July 31 to the end of January.

But the cornerstone of the earlier $2.2 trillion relief measure signed into law in March was a small-business effort called the Paycheck Protection Program (PPP), which funnels loans to companies through commercial lenders.

Managed by the Small Business Administration (SBA), those loans are forgivable for businesses that keep workers on the payroll, but its effectiveness has been hampered as many shops have struggled to decode the obscure and evolving rules. Others said they simply don't trust the government to make good on its loan forgiveness pledge.

Ron Busby, president of the U.S. Black Chambers, which advocates for thousands of black-owned businesses around the country, ticked off a host of issues preventing the group's members from obtaining the emergency help. For one, a vast majority of those businesses are tiny operations with little credit and no relationship with lenders, he said, making it impossible to compete with larger firms in a program catering to those with as many as 500 employees.

"A 500-man shop is not a small business," he said.

For another, those small shops don't have the resources to process the esoteric applications. Busby said roughly 80 percent of his members found the PPP "so complicated, confusing and took too long that people didn't continue the process." The effects, he predicted, will be devastating.

"We anticipate losing somewhere between 35 and 40 percent of all black-owned businesses because of the pandemic," he said.

Douglas Holtz-Eakin, president of the American Action Forum, a conservative policy group, acknowledged problems with the implementation of programs like the PPP, but said that this just reflects the sheer enormity of economic collapse caused by the pandemic.

"What they tried to do was literally throw enough cash at the problem to keep everyone afloat for two-and-a-half months. I think that was the right thing to do," said Holtz-Eakin. "Was it big enough and perfect enough to offset the biggest economic downdraft we've ever seen? No. But it sure had to help - had to."

Outside the PPP, the federal response has been thwarted by structural hurdles distinct to Washington, according to other experts.

Andres Vinelli, vice president for economic policy at the liberal Center for American Progress, said the United States was uniquely unprepared for a global pandemic, both medically and economically, since it has never adopted systems of universal health care and federal paid leave. Without the former, he said, people are discouraged from seeking coronavirus tests and treatments, for fear of the costs; without the latter, certain workers have been forced to shrug off safety concerns and continue on the job out of financial necessity.

"Those people kept on working because they had to," he said.

Additionally, the federal government lacks a mechanism to trigger an automatic uptick in certain emergency programs when the economy turns south, insulating that extra help from partisan stalemates on Capitol Hill. Without automatic "stabilizers" governing initiatives like unemployment benefits, food supplements and Medicaid, Congress is forced to respond to downturns on a case-by-cases basis, with no guarantee it will be proportionate to the crisis at hand.

"We're in a system where things don't happen automatically, and we're always at the mercy of people on the Hill. ... So it's almost by design that we're stuck in this," Vinelli said. "This is like kryptonite, and it hit us in the weak spots."

Still other stakeholders and economists are warning that the problem is also one of scope: Congress, they maintain, simply hasn't provided enough emergency aid to counter an economic collapse of this magnitude.

Congress has already pumped almost $2.8 trillion into the shattered economy - an unprecedented figure - and the Federal Reserve has taken a series of steps that have effectively provided trillions more.

Yet the two-month lockdown saw a plunge in consumer spending - which represents roughly 70 percent of the U.S. economy - creating a domino effect: retail sales sank by more than 16 percent in April, the worst month on record, collapsing the demand for labor that sparked the historic unemployment claims. The combination has threatened to shutter countless businesses permanently and create a jobless crisis into the foreseeable future.

"The real shock has been something on the order of $4 trillion or $5 trillion, so there is the issue of just basically being underpowered," said Silvers, of the AFL-CIO. "As a practical matter, to avoid a depression, the government needs to keep the economy functioning as if everybody was working."

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