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The coronavirus economy is exposing how easy it is to fall from the middle class into poverty

The Washington Post logo The Washington Post 5/8/2020 Heather Long
a group of people in a car: Volunteers give out groceries at a drive-through Three Square Food Bank emergency food distribution site at Boulder Station Hotel & Casino in response to an increase in demand amid the coronavirus pandemic on April 29, 2020 in Las Vegas, Nevada. (Photo by David Becker / AFP) © David Becker/AFP/Getty Images Volunteers give out groceries at a drive-through Three Square Food Bank emergency food distribution site at Boulder Station Hotel & Casino in response to an increase in demand amid the coronavirus pandemic on April 29, 2020 in Las Vegas, Nevada. (Photo by David Becker / AFP)

Louise Lara apologized for crying as she told her story. The 54-year-old single mom had just listed her home in the Florida Panhandle as “for sale by owner,” the latest sign that her middle-class life is slipping away amid the nation’s worst economic crisis since the Great Depression.

Lara’s saga, like that of so many other Americans, began March 20 when she was furloughed from her longtime job at a spa. The furlough was supposed to be temporary, but it doesn’t look that way now. The resort she worked for just notified her that her health insurance will terminate at the end of the month. She has spent hours on Florida’s deeply flawed unemployment website. She hasn’t received any money despite six weeks of calls and daily log-ins. She even mailed in a paper application. With money running short, she’s putting her home on the market and applying for food stamps.

“It’s a terrifying, terrifying situation,” said Lara, who tried to get a grocery store job but was told there’s a hiring freeze. “I am at the end of my finances.”

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Lara’s situation is not unique. For years, many economists and advocates have warned that a large share of Americans are living paycheck to paycheck and that it would take only a slight downturn to devastate their lives. Many of the fastest-growing jobs pay less than $30,000 a year, making it hard to save. Meanwhile, the U.S. safety net developed giant holes. Gig and self-employed workers rarely qualified for aid, and many states, often at the urging of GOP leaders, had made it harder to get unemployment or other benefits.

“The U.S. was so fundamentally unprepared for a recession,” said Claudia Sahm, an economist and an expert on the causes and cures of downturns.

Perhaps the biggest red flag was a Federal Reserve report last year that warned that nearly 40 percent of Americans couldn’t come up with $400 for an emergency. Some analysts found it hard to believe that this was the case at a time when the nation’s unemployment rate was under 4 percent. But the emergency has now hit, and millions of people are lining up at food banks, pleading for help on social media and going to work in the midst of a pandemic because they need the money.

“The burdens are falling most heavily on those least able to carry them,” Fed Chair Jerome H. Powell said last week. “As a society, we should do everything we can to provide relief to those who are suffering for the public good.”

As job losses skyrocket, Columbia University’s Center on Poverty and Social Policy warns that it’s only a matter of time before tens of millions fall out of the middle class and into poverty.

Hillborough County Library service worker Stephen Duran passes out unemployment forms to a motorist at the Jimmie B. Keel Regional Library in Tampa on April 17, 2020 (Chris O'Meara/AP Photo). © Chris O'meara/AP Hillborough County Library service worker Stephen Duran passes out unemployment forms to a motorist at the Jimmie B. Keel Regional Library in Tampa on April 17, 2020 (Chris O'Meara/AP Photo).

In an effort to prevent this, Congress has passed $3 trillion to aid struggling businesses and laid-off workers. Some worry that too much help has gone to the unemployed and might dissuade them from returning to work. But many economists like Sahm say there’s a bigger problem: That aid still isn’t reaching a lot of people.

Linda Lee wakes up most days to a pounding on her door. She’s been living in a low-cost motel with her son, and she’s behind on the payments. The manager is trying to force her out. She believes she’s days away from living in her car or a shelter.

The year 2020 wasn’t supposed to be like this for Lee, one of America’s many “gig” workers. She started the year making pretty good money as a backup singer for an Elvis Presley impersonator and doing short-term stints as an art teacher in schools around Plano, Tex. She was booked solid through April. That plus money from her ex was enough to send her teenage son to college on a scholarship.

But it all fell apart in March as schools and entertainment venues closed. Her ex stopped paying. Her son came home from college and they moved into the motel. By early April, she was struggling to come up with the $320 a week to stay. Texas is normally warm in April, but temperatures dipped into the 30s mid-month.

“If I’m forced to leave this hotel, I don’t have anywhere to go and it’s too cold to sleep in my car,” Lee told The Washington Post at the time. “This has caused me so much stress.”

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In an interview this week, Lee, said the $1,200 relief check from the government arrived just in time to save her from a shelter. But that money has gone to rent and is almost out. Despite repeated attempts to apply for unemployment benefits, she has been unable to get approval, even though Congress allotted extra funds for gig workers. She finally managed to get food stamps, but she only received $12 for April.

“It’s been a nightmare. I’ve never seen anything like this in my lifetime,” said Lee, 58. “I don’t know what is going to happen in the next few months.”

The biggest lifeline for most struggling Americans now is unemployment insurance and the $1,200 relief payment from the Internal Revenue Service. But numerous hiccups have prevented many from receiving that aid. A recent Washington Post-Ipsos poll found that 38 percent of laid-off workers were still waiting for a relief payment, and only half had been able to successfully apply for unemployment benefits in their state.

Many states like New Jersey and Florida are running their unemployment systems on technology that’s decades old. Lara, the spa worker, tried at different hours of the day and night to submit her application, but the system kept sending her back to the home screen. Despite her having lived in Florida since 1996, the system also couldn’t verify her identity.

“It’s been six weeks since I was furloughed. I presumed Florida would have the unemployed system up and running by now, but it’s not. It’s set up to fail,” Lara said. She has called numerous state lawmakers and even started a Twitter account to try to tweet at Florida Gov. Ron DeSantis (R) and U.S. Sens. Rick Scott (R-Fla.) and Marco Rubio (R-Fla.).

As many still struggle to get this round of aid, economists warn that some of the relief is set to expire at the end of July even though the unemployment rate is still likely to be at a scary level. Workers like Lara and Lee say they want to get back to work, but they can see that industries like hospitality, education and entertainment aren’t going to return to “normal” anytime soon.

Many economists have urged Congress to approve additional relief soon, given how long it takes to get money to firms and businesses. Some, like Sahm, advise structuring it in a way that would automatically trigger more benefits if unemployment remains high and fewer benefits if it drops back down. So far, negotiations are moving slowly.

“Politicians say in the news they keep us in mind, but I don’t think so. They don’t understand because they are not having to go through [unemployment],” Lee said. “I wish they would just find a better way to help people that are going through this.”

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