1. Yes, the coronavirus recession has a supply-shock component, but it has a larger demand-shock component, and a social insurance component. We should be fighting all three. Read Heather Boushey, “Testimony Before the Joint Economic Committee on the Coronavirus Recession,” in which she writes: “Addressing the administration’s failure to contain the coronavirus and COVID-19, the disease caused by the virus, is the only way to fully restore confidence and put us on the path to economic recovery. The United States is experiencing the most uncontrolled and deadly outbreak of any high-income country in the world. Compared to the European Union, we now record 10 times as many daily coronavirus cases and COVID-19 deaths. Until the virus is contained, however, there are key actions that can bolster economic confidence and rein in uncertainty. Specifically: Immediately renew the $600 Pandemic Unemployment Compensation payments. Set economic assistance programs, such as Unemployment Insurance, to continue automatically until objective economic conditions improve. Pass generous aid for states and localities, which have already shed 1.5 million jobs and are bearing the brunt of responding to the pandemic, on the order of the $900 billion in the HEROES Act. Resist enacting corporate liability immunity and instead release workplace health standards that protect workers’ lives and give employers evidence-based guidance. Enact other policies to stabilize demand and help those most affected.”
2. This is very good and very important. My grandfather always mourned that, when he got his Ph.D., he thought he was getting a Ph.D. in “public administration” but found, instead, during his career that his discipline had turned into “political science.” Here Amanda Fischer and Alix Gould-Werth try to fill in this gap, and largely succeed. Read their “Broken plumbing: How systems for delivering economic relief failed the U.S. economy,” in which they write: “We detail four delivery systems tasked with providing relief during the coronavirus recession— relief targeted to small and large businesses, Unemployment Insurance, direct payments to consumers, and paid leave programs—each of them emblematic of a different plumbing problem. Looking at business rescue programs, we see pipes well-designed to flow easily to people with power, while the taps of the less powerful remain dry. Looking at Unemployment Insurance, we see the failure to invest in pipes, preventing these benefits from flowing smoothly to people who need them the most. Looking at direct payments, we see who profits when the plumbing is routed through costly private systems that twist and turn, enabling the powerful to siphon off of the plumbing. And looking at paid leave, we see what happens when policymakers build no pipes at all and suddenly need to turn on a spigot when the economy hits a drought.”
Worthy reads not from Equitable Growth:
1. The first estimate of the level of national income in the second quarter of 2020 arrived, and was as bad as economic forecasters had anticipated. Numerically, the third-quarter will look somewhat better: there will be an uptick as the end-of-June base out of which the third quarter evolves includes substantial relaxation of lockdown against the coronavirus in May and June. Unfortunately, that relaxation was premature: the United States still has major episodes of uncontrolled spread. Forecasting future levels of national income in the United States requires forecasting the future spread of the coronavirus and the reaction of Americans to uncontrolled spread. The current forecast is that control over the pandemic is not coming to the United States anytime soon, and substantial recovery is not possible without control over it. Read Alex Hickey, “U.S. GDP Contracts 9.5% in Q2,” in which she writes: “The situation is still, as IHS Markit Chief Economist Nariman Behravesh delicately put it, “horrific.” It’s not just us. European economic powerhouse Germany reported a record 10.1% quarterly drop in GDP yesterday. U.S. economic activity began improving in May, and unemployment fell from nearly 15% in April to 11% in June. But recent surges in COVID-19 cases are threatening that momentum … the Labor Department reported more than 1.4 million first-time jobless claims—the second weekly rise. While the CARES Act offset some of the hardest impacts of the shutdown, the relief bill’s 600/week in extra unemployment benefits formally expires today for around 20 million Americans … Negotiations over a third COVID-19 relief bill stalled … with those $600 payments being the main point of disagreement. Democrats want benefits to continue as is, while Senate Republicans want to cut them to $200/week until states make plans to replace 70% of workers’ lost wages. There are also disagreements about an eviction moratorium extension, aid for state/local governments, and liability protections for businesses, schools, and healthcare providers.”
2. Yes, the coronavirus can be beaten. Schools are reopening and the economy is back to normal in Taiwan. We could beat it too with a nationwide, no more than one-month lockdown. But it would have to be nationwide, and it would have to be enforced. Whether a country is able to figure out how to do this is, as Paul Krugman has said, is an example of the marshmallow test: Read Christina Farr and Michelle Gao, “How Taiwan beat the coronavirus,” in which they write: “Taiwan has been praised for its highly effective Covid-19 response. Taiwan, which has nearly 24 million citizens, has had only 451 cases and seven deaths. Taiwan had a plan in place for years, which involved quarantines, contact tracing and wide availability of masks, among other things … When Catherine Chou arrived in Taipei after flying from Los Angeles, authorities told her she would need to quarantine for two weeks. For Chou, a citizen, that meant booking herself into a hotel at her own expense, although subsidies are available and the government has paid stipends for some stays. When she first arrived, she got a welcome package including dish soap, nail clippers and laundry detergent. Food was delivered to her doorstep. Several times a day, a representative of the local district’s office phoned her to check in and thank her for doing her part. She’s now almost wrapped up her hotel room stay. Once she’s officially cleared of Covid-19, she’ll be free to go. After living in the United States, which is still partially closed in various states, she’s looking forward to simple pleasures like visiting her family at home or sitting in a coffee shop with a good book. Taiwan allowed many of its restaurants and bars to reopen in May. “We have this phrase in Taiwan that roughly translates to, ‘This is your country, and it’s up to you to save it,’” she said. “I’m really glad that they’re taking this quarantine seriously.”
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
With more than 4.3 million confirmed cases of the novel coronavirus and more than 150,000 deaths from COVID-19, the disease spread by the virus, it’s clear the pandemic is moving very quickly throughout the United States. Policymakers must also move fast to get much-needed aid passed and distributed to those in need. Heather Boushey testified in front of the Joint Economic Committee this week to make the case for urgent action to address the Trump administration’s failures to contain the coronavirus and put the United States on a path to stable and equitable economic recovery. She also reviews how the past 50 years of policy choices created underlying fragilities and inequalities that put our economy in a more vulnerable position going into this recession, and how these trends are manifesting during the pandemic and downturn. Her testimony also lays out several key actions policymakers can take to bolster economic confidence and rein in immediate economic uncertainty.
Claudia Sahm echoes the call for swift action from Congress to help U.S. families facing an income crisis on top of a public health crisis. Not only must policymakers extend the enhanced Unemployment Insurance benefits that have been keeping many families afloat over the past 4 months, Sahm continues, but they also should pass another round of direct payments for individuals and families, send funds to state and local governments, target small business loans to those companies hardest hit by the pandemic, boost support for public health efforts to contain the virus, and enact policies that will help families in need, such as paid child care and rent and mortgage forgiveness programs. Urgent action is needed, Sahm concludes, in order to ensure workers can return to work safely, small businesses will survive, children will have teachers, and families can keep food on the table and a roof overhead.
Not only is action required quickly, but the systems for delivering this economic relief also need attention. Amanda Fischer and Alix Gould-Werth use an apt plumbing analogy to show why investment is needed in the delivery systems of four different economic relief programs to ensure that aid successfully reaches those who need it most during the coronavirus recession. Fischer and Gould-Werth run through the various issues that have come up with relief targeted to small and large businesses, Unemployment Insurance systems, direct payments for individuals, and paid leave programs. They also propose several ways to fix the “broken plumbing” of each of these areas to improve efficiency and make sure that those who are hardest hit during these unprecedented times are able to access the aid designed to help them get through it.
Housing and homeownership are essential for wealth building and wealth equalizing in the United States. But a recent increase in house values—nearly 60 percent between the end of 2012 and the end of 2019, according to Federal Reserve Board estimates—did not end up equalizing wealth as would be expected. In fact, these gains were disproportionately received by higher-income and White families, reinforcing increasing inequality in other types of wealth, write John Sabelhaus and Austin Clemens. The two authors explore recent trends in homeownership across income, race, and generation cohorts, and find growing inequality, largely attributable to the failure of lower-income households and households of color to switch from renting to owning a home over generational lifecycles. As policymakers consider actions to address the coronavirus pandemic and recession, Sabelhaus and Clemens conclude, these findings show that any response must ensure that the economic recovery is equitable for all homeowners in the United States, not just the richest Americans.
Check out Brad DeLong’s latest Worthy Reads column, where he looks at recent must-read content from Equitable Growth and around the web.
Links from around the web
Dion Rabouin of Axios writes that the fight over what to include in the next coronavirus stimulus package probably isn’t going to end anytime soon—and that is bad news for the economy, the stock market, and American families. The bill was supposed to be put to a vote this week, but a deal remains elusive, as disagreement on what to include and how much to spend prevails. Rabouin breaks down the most important points into a brief summary of the debate on Capitol Hill, why it matters, and the main data points—including that more than 32 million Americans are currently receiving unemployment benefits and that the expanded Unemployment Insurance benefits increased incomes by $842 billion in May (on an annual basis). Equitable Growth’s Claudia Sahm is also quoted, explaining that a stimulus in the range of $4 trillion is closer to what’s needed than the current $1 trillion package proposed in the Senate.
The $1 trillion plan put forth in the recently unviled Health, Economic Assitance, Liability protection, and Schools, or HEALS Act, would scale back weekly unemployment benefits for U.S. workers by an average of 44 percent. Under the proposed legislation, the weekly $600 boost in unemployment benefits that were included in the Coronavirus Aid, Relief, and Economic Security, or CARES, Act in March would be reduced to $200. Business Insider’s Joseph Zeballos-Roigcovers a recent analysis by the Century Foundation, which shows how much this change would affect these enhanced benefits in each state. Many of the states currently experiencing a surge in coronavirus cases could see the largest reduction in benefits. Oklahoma, for one, would see an almost 60 percent cut in weekly benefit amounts. The expanded benefits have been shown to have helped many lower-income households stay afloat despite job losses, Zeballos-Roig writes, and have not been a deterrent for people to go back to work if they can do so safely.
As Congress continues to debate the next coronavirus relief package, policymakers must think big and consider the long-term needs of the country. Another stop-gap, temporary measure is not going to be enough to ensure a full, equitable, and fair recovery, writes Vox’s Matthew Yglesias. He summarizes recent advice from economists to policymakers on what’s needed in the next coronavirus legislation and how much they should spend on it. He reviews the debate over Unemployment Insurance expansion and how it relates to the “output gap”—the gap between how much the nonpartisan Congressional Budget Office thinks the U.S. economy could produce, given the available supply of workers, and what it will actually produce.
Friday figure
Figure is from Equitable Growth’s Twitter thread on this week’s release of unemployment benefits claims.
Heather Boushey Washington Center for Equitable Growth Testimony before the Joint Economic Committee, Hearing on “Reducing Uncertainty and Restoring Confidence During the Coronavirus Recession”
July 30, 2020
Thank you, Vice Chair Beyer and Chairman Lee, for inviting me to speak today. It’s an honor to be here.
My name is Heather Boushey, and I am president and CEO of the Washington Center for Equitable Growth. We launched in November 2013 with the goal of advancing evidence-backed ideas and policies in pursuit of strong, stable, and broad-based economic growth. We do this through a unique institutional strategy: We fund academics to investigate whether and how economic inequality—in all its forms—affects economic growth and stability. We have an open and competitive academic grants program that now, in our seventh cycle, has given away about $6.5 million to more than 250 scholars nationwide.
What the research now shows is that there are many ways that inequality hurts both families and the long-term trajectory of our economy. These long-term trends are inimically tied up in the current coronavirus pandemic and resulting recession.
The most important economic uncertainty facing your constituents and our nation is: When will the administration and Congress address the public health crisis caused by the coronavirus pandemic?
Addressing the administration’s failure to contain the coronavirus and COVID-19, the disease caused by the virus, is the only way to fully restore confidence and put us on the path to economic recovery. The United States is experiencing the most uncontrolled and deadly outbreak of any high-income country in the world. Compared to the European Union, we now record 10 times as many daily coronavirus cases and COVID-19 deaths.
Until the virus is contained, however, there are key actions that can bolster economic confidence and rein in uncertainty. Specifically:
Immediately renew the $600 Pandemic Unemployment Compensation payments
Set economic assistance programs, such as Unemployment Insurance, to continue automatically until objective economic conditions improve
Pass generous aid for states and localities, which have already shed 1.5 million jobs and are bearing the brunt of responding to the pandemic, on the order of the $900 billion in the HEROES Act
Resist enacting corporate liability immunity and instead release workplace health standards that protect workers’ lives and give employers evidence-based guidance
Enact other policies to stabilize demand and help those most affected by the crisis, including:
Food assistance
Rental assistance and the extension of the eviction moratorium
Direct payments to a broad swathe of low- and moderate-income Americans
Investments in communities of color hit so hard by the coronavirus
Funding to ensure safe and secure elections in November
Help for small businesses
Premium pay to our essential workers
Fixes to the long-term fragilities detailed below that have made us so susceptible to this shock
Build the data tools to know how this crisis and recovery are affecting families up and down the income ladder by enacting GDP 2.0 measures
The HEROES Act, which was passed by the House more than 2 months ago, contains many of these priorities. The Senate should immediately consider passing this bill or a similar bill that includes a recently introduced bill from Sens. Schumer and Wyden to peg expanded unemployment benefits to the economic conditions in each state. This would allow aid to automatically adjust based on objective criteria. Vice Chair Beyer has authored a similar proposal.
The coronavirus pandemic abruptly ended of the longest economic recovery in U.S. history. But before we get to the current situation, we need to acknowledge that even in those good years, the gains from that economic growth weren’t shared. This created systemic fragilities that left us less economically resilient and set us up for the multiple failures we are now experiencing.
The Roots of this Failure
This immediate failure is the result of a series of decisions made by this administration. But it also is the result of decisions made over the past 50 years that have created underlying fragilities in our economy and society. These decisions have made our economy less effective in good times and less resilient to shocks.
Even as the topline economic markers signaled to policymakers that our economy was growing last year—indicators such as a historically low unemployment rate and annual Gross Domestic Product growth of around 2 percent—wages were not growing commensurate with a tight labor market or at a pace to close our country’s unconscionable longstanding racial income and wealth divides.
The fruits of our economic growth, in terms of both income and wealth, were diverging sharply.
The Federal Reserve Board’s new Distributional Financial Accounts and the latest research by University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman document that income inequality remained historically high, and wealth inequality was outpacing it.
Inequality hurts economic growth and mobility. Growth has slowed since 1980, and average people no longer share in the growth we do have. The bottom 50 percent of the population has the same inflation-adjusted pretax income that they did in 1980, and lower absolute mobility means that people born in 1980 now have only a 50 percent chance of surpassing their parents’ income.
Obstructing the supply of people and ideas into our economy and limiting opportunity for those not already at the top, which slows productivity growth over time
Subverting the institutions that manage the market, making our political system ineffective and our labor markets dysfunctional
Distorting demand through its effects on consumption and investment, which both drags down and destabilizes short- and long-term growth in economic output
As a country, we have put ideology over evidence. We have chosen tax cuts and deregulation over investments such as paid family leave, robust social insurance programs, and public institutions. We have put our faith in the idea that markets can do the work of governing.
Instead, we should put our economy—and society—on a path where growth is strong, stable, and broadly shared. To do that, we need to enact policies that constrain inequality at the top, not allowing it to spiral out of control, and giving the beneficiaries of that inequality the power to subvert our markets, politics, or economy. And we need to provide counterweights to concentrated economic power. As we consider the economy we had at the onset of the pandemic, we can see clearly how failures to ensure workers and families, especially Black, Latinx, and Native American workers and families, have access to the tools to be healthy and safe—policies such as paid sick time, access to affordable healthcare, and well-enforced workplace safety standards—made our nation less resilient to this shock.
There are six key factors that made the United States and the U.S. economy particularly susceptible to the coronavirus pandemic and COVID-19. Each of them have contributed to the current crisis. And if they are not corrected, the United States is likely to experience a slow and inequitable economic recovery.
Too many people lack the basic protections that would have slowed the spread of the coronavirus
The gaps in our social insurance systems exacerbated the spread of the coronavirus. The United States is behind its peer nations in labor market regulations to protect workers and families, including on paid leave, stable schedules, and access to child care. Compounding the problem is the lack of health insurance and fear of high medical bills, both of which kept—and are still keeping—those who feel sick from seeing a doctor, placing a serious burden on these individuals as well as raising rates of transmission.
Research is already showing the significant economic and psychological toll this pandemic is taking on workers. These stresses are heightened for people of color and immigrants, who face institutional discrimination and are often forced by their already precarious economic straits to succumb to workplace abuses at the hands of their employers.
Workers lack the power to share in the gains of the economic expansion that would have given them protections and security
Civic institutions—especially labor unions, which once served as voices for many wage-earning workers (though never representing all workers)—have suffered a long decline. Now, only 1 out of every 16 private-sector workers belongs to a union. On top of this, labor laws and policies have failed to reflect the growing role of the fissured workplace in our modern-day economy, where firms subcontract pieces of their work so they can avoid responsibility for workers and working conditions.
These two debilitating trends in our labor market mean that corporations that are ultimately in charge of labor practices and that make the largest profits are not liable for maintaining 21st century workplace standards. The coronavirus pandemic exposed the failure of these labor market inequalities and the need for workers to manage health crises and family care, as well as protect workers against layoffs and the loss of these key health and family benefits.
Decades of stagnant wages and meager workplace benefits leave many families without enough savings to weather the coronavirus recession
At the onset of the coronavirus pandemic in the United States, millions of people across the country were one paycheck away from financial catastrophe, even after a decade of economic expansion and historically low unemployment. Case in point: Four in 10 adults in the United States said that if they had a $400 emergency expense, they would have to borrow, sell something, or would not be able to pay it.
As the coronavirus recession continues, more and more workers and their families are robbed of buying power, which will undermine one of the key drivers of economic growth—the stable incomes that drive consumer spending.
Policymakers starve public goods of investments that would have enabled better protections from the coronavirus pandemic and ensuing recession
Decades of tax cuts, culminating in the sharply regressive Tax Cuts and Jobs Act of 2017, have fueled a long-term decline in federal revenue that has starved resources that can be used to fund critical public investments and basic governmental functions, including in public health. High concentrations of income and wealth hamstring our political system because the wealthy dictate the legislative agenda and shape news headlines.
Yet these same wealthy elites don’t prioritize investments in public health infrastructure or other public goods. Early in this crisis, our neglected Unemployment Insurance system was unable to handle millions of Americans losing their jobs. Millions have waited weeks or months as decades-old computer systems struggled to process their claims. This dearth of investment is a systemic problem in the United States. (See Figure 1.)
Figure 1
States and localities don’t have the resources to deal with a pandemic or a recession
State and local governments are experiencing sharp drops in their capacity to provide the services needed to cope with the coronavirus recession. Already, state and local governments have shed 1.5 million jobs. A continuing recession will induce further cuts to health and education and exacerbate the ongoing weaknesses. Austerity in state governments likewise disproportionately harms people of color, as public-sector jobs form the basis of a strong middle class for Black and Latinx workers.
Business concentration across markets increases consumer and small business vulnerabilities just when those threats are most dire
Wealthy and powerful corporations use their status to maintain dominance in the marketplace. Large businesses and monopolies muscle competitors out of business, suppress wages, and hobble innovation. These companies are also precisely the ones that will thrive after the coronavirus pandemic passes. Strong cash reserves combined with political influence allow entrenched businesses to swoop in when asset prices are low and reshape rules of entire markets in the aftermath. The collapse of small businesses will disproportionately hurt people of color for whom business ownership is an especially important route to wealth creation and to closing the racial wealth gap.
The failure to prevent coronavirus infections and deaths and the ensuing recession
President Donald Trump’s focus is and always has been on the stock market rather than conceiving of and effectively implementing a comprehensive and fully thought-out federal plan to address the coronavirus pandemic and its economic effects. Case in point: Though the administration knew about the threat of the coronavirus in early January and took an early effort to limit the transmission into the United States by halting travel from China, where the coronavirus first emerged, it did not use that time to prepare sufficient stockpiles of medical and protective supplies.
Despite the months that have passed, the administration also has not set up a nationwide system to contact trace confirmed COVID-19 cases or given states the resources to do it themselves. And tests for the general population still can take a week or more to process and access too often varies by race.
Addressing the Immediate Economic Uncertainty
Unemployment Insurance
The largest economic uncertainty facing the United States is whether the Senate will renew the $600 increase in weekly unemployment benefits, known as Pandemic Unemployment Compensation, or PUC. The Senate majority has refused for months to act to renew this critical lifeline despite dire circumstances in the labor market.
There is a racial component to the Senate’s refusal to renew the $600 PUC benefit. States with a higher share of Black workers tend to have less generous jobless benefits. For Black workers, an estimate shows, the average maximum weekly benefit is $40 short of that received by White workers. (See Figure 2.)
Figure 2
We risk a cascade of economic damage that could be uncontainable if Congress does not act immediately to extend the $600 unemployment benefit boost. Families need this benefit to sustain them. Their landlords need them to pay their rent, and their local small business owners desperately need them to keep ordering take-out and popping by for socially distanced shopping.
Like a virus out of control, high unemployment spreads economic pain throughout the entire community.
Unemployment benefits accounted for 14.6 percent of all wage and salary income in May. Failure to extend the $600 boost alone would contract GDP by a rate of 2.5 percent in the second half of this year, per an analysis by Harvard University’s Jason Furman. As a percentage, that is more than the economy grew in 2019.
Allowing the $600 boost to remain expired would devastate local economies.
Our communities rely on the temporarily unemployed being able to continue spending. States where unemployment benefits replace a greater percent of workers’ wages experienced the smallest drop in work hours in March—and, as of early June, had the strongest recovery.
There have been unfounded concerns that the $600 boost might be a meaningful disincentive to work during this crisis, perversely causing the very economic ailment is it meant to alleviate. This is not the case. The ongoing failure to be able to get back to business-as-usual due to the out-of-control pandemic, the absence of safe working conditions, a sharp drop in consumer spending, and lack of support for parents and caregivers are preventing millions from working, not Unemployment Insurance payments.
People are eager to get back to work when they have the opportunity, but there are not enough jobs in our labor market. The Job Openings and Labor Turnover survey shows that there were four unemployed people for every job opening in May. Lack of opportunities to work, not a lack of eagerness to work, are keeping unemployment elevated.
We can also see this in the population of people who returned to work in May and June after being laid off in April. Nearly 70 percent of those who returned to work in May and June did so despite the fact that they were making more from Unemployment Insurance than at their job, according to analysis by Ernie Tedeschi, an economist at Evercore ISI and former Treasury economist. (See Figure 3.)
Figure 3
In short, Americans want to work, and they know that a permanent job is more valuable than a temporary Unemployment Insurance check. This is one reason why employers are filling their scarce open positions faster than at any point since February 2012, as shown in the U.S. job vacancy yield.
Automatic Stabilizers
Nobody knows for sure how long the coronavirus recession will last or exactly how severe it will be. The uncertainty that would exist when confronting any recession is compounded by the uncertainty about the nature and consequences of the coronavirus itself, including the number of people who will die from COVID-19 now and in the future, the short- and long-term health impacts of the virus on those who recover, the pace at which treatments and vaccines will be developed, and the quality of the public health response.
Enhanced unemployment benefits should end when objective conditions show they are no longer needed. An unemployment-rate-based “trigger” that only turns off when a stable recovery is underway would allow this program to wind down automatically.
Sens. Schumer and Wyden have introduced a bill that would extend the $600 increase in weekly UI benefits beyond July 31, 2020 until a state’s 3-month average total unemployment rate falls below 11 percent. The benefit amount then reduces by $100 for every percentage point decrease in the state’s unemployment rate, until the rate falls below 6 percent. Vice Chair Beyer has sponsored a similar bill in the House. These bills follow the best evidence in research-driven policy design, inspired by research on automatic stabilizers from Equitable Growth and the Hamilton Project’s book Recession Ready.
State and Local Government Aid
The next priority, if Congress wants to create economic certainty, is to pass fiscal relief for states and localities with around $900 billion in aid in the HEROES Act.
States and localities are bearing the brunt of responding to this virus in light of federal inaction. They are losing tax revenue and, as a result, have shed 1.5 million jobs so far—even as their services are more necessary than ever. These job losses make up a significant portion of the overall 12 million jobs permanently lost since February.
With state and local general fund revenues in freefall due to needed increases in spending on healthcare and related spending amid plummeting tax revenue, these governments’ budgets are on the precipice. State budget shortfalls could total more than $550 billion over the next 3 years, nearly double what it was estimated states missed out on in the entire decade following the Great Recession more than a decade ago. Fiscal requirements that states balance their budgets are already forcing governors to propose cuts in spending that will harm already struggling communities. Local governments are, if anything, in an even more challenging economic situation.
During the previous recession, these budget cuts proved seriously harmful to the economy. Shrinking state and local government budgets during the Great Recession reduced Gross Domestic Product by more than three times the size of the cuts themselves, according to estimates.
Other Crucial Policies
Other policy priorities include food assistance, rental assistance and extension of the eviction moratorium, investments in communities of color hit hard by the virus, funding to ensure safe and secure elections in November, help for small businesses, and premium pay to our essential workers. And I urge you not to support enhanced liability protections for big corporations facing lawsuits if they put their workers at risk. Federal policymakers need to provide evidence-based guidance so firms open safely, not shift risks onto workers.
Finally, Congress should also implement new data tools to measure how the recession and recovery will affect people differently up and down the income and wealth ladders. The GDP 2.0 measure Equitable Growth has proposed, and which I have previously discussed before this Committee, will tell us whether families are recovering from the crisis and which need more help. We can lay the groundwork now to make sure we understand who benefits from a future recovery and what other action is needed.
We can see clearly that markets cannot perform the work of government. Americans need public institutions that can protect them from threats to their lives and livelihoods, and provide leadership in times of crisis. Our economy and society have a long way to go to get back to full health. We have even further to go to implement fixes for our long-running systemic fragilities. I thank you for the chance to submit this testimony on how you can do just that.
We now have 4.3 million confirmed cases of the novel coronavirus in the United States. The virus moves fast, and policymakers in Washington move slow. Families across the country face a wide array of individual income crises and need federal fiscal support, yet policies to address public health and economic hardship are backsliding. Families, unemployed workers, small business owners, and communities need more money, and only Congress has the means to help.
Congress must deliver a multitrillion-dollar package. One-fifth of families have lost a breadwinner and twice as many have lost income, according to surveys by the University of Michigan and Google. Black, Hispanic, and Asian families, as well as young adults and less educated workers, are being hit much harder than others. This is a clear income crisis, larger than any since the Great Depression.
Early on, when the pandemic first crashed the U.S. economy, policymakers had to act with limited information. Key indicators on public health and the economy were not keeping up with quickly changing conditions. Recessions normally build over months or even quarters. This crisis arrived in days and weeks. In addition, huge disagreements among professional forecasters, including me, and massive uncertainty about the path the coronavirus would take hindered the federal response.
None of those excuses prevail today. Official statistics, administrative data, and new research all have caught up. There is no rapid bounce back in our economy. And there will be no solid economic ground until the coronavirus is under control.
Congress, in those first few months, designed the first relief packages for a crisis they hoped would be over by the summer. They were wrong. It is not over, which means they must do more—even more than in March. Coronavirus cases spiked this month, and the U.S. economy worsened. Deaths from COVID-19, the disease caused by the virus, are consequently on the rise. Policymakers must face this harsh reality. They must go bigger and better. They must move faster.
Workplaces must make it safe enough for workers to return to their jobs. Congress must invest aggressively in public health, testing, contact tracing, and personal protective equipment. They must get money out to make up for lost paychecks and reverse cuts in hours and wages of the employed. Families must have paid health insurance, sick leave, and child care. Renters and homeowners behind on their monthly obligations must get help. As many small businesses as possible must avoid bankruptcy. And Congress must get grants to state and local governments to avoid laying off more teachers and essential workers. Congress must get more money out now.
Do what worked again, and keep it simple
Better jobless benefits are the big success story of the relief provided by Congress so far. In March, Congress made more workers eligible for unemployment benefits, including independent contractors and gig workers, and added an extra $600 per week to those benefits while extending the number of weeks someone could receive benefits. By April, the unemployment rate hit its highest level since the Great Depression, and those enhanced unemployment benefits prevented that joblessness from translating into mass human suffering and a macroeconomic collapse. Currently, around 30 million people are receiving jobless benefits, including those who suffered big cuts in hours or wages. Helping the unemployed is crucial to getting us through this income crisis.
New research by the JP Morgan Chase Institute shows that the better jobless benefits worked. Using bank account data, the researchers find these benefits allowed these families not to pull back on their spending. In fact, their spending in July was somewhat higher than before the start of the coronavirus recession. Keep in mind, lower-income families have been twice as likely as the national average to lose jobs in this crisis. Even before losing their jobs, many could not buy what they needed. One-quarter of families, for example, went without medical care because they could not afford it in 2019. Avoiding medical care now is disastrous.
The extra $600 per week in Pandemic Unemployment Compensation will expire on Friday. The last $600 extra went out last weekend. A lapse in this benefit will mean a delay in payments of weeks. Congress must renew the extra $600 per week now and taper it down only when it is safe to go out and the unemployment rate falls.
Another way to fight the income crisis is one-time payments to all families—referred to as recovery rebates. The first round worked well: Most U.S. families got $1,200 per adult and $500 per child. It came within weeks. Nearly all $300 billion arrived by the end of May. In my forthcoming research with University of Michigan economists Matthew Shapiro and Joel Slemrod, one-fifth of families told us they would mostly spend their rebates, mainly within weeks or a few months. We know from a prior study that families said they will mostly save or pay off debt and will spend some too—the cumulative result of which is for every dollar of rebates, 50 cents was spent quickly.
That’s $150 billion—or 4 percent of all consumer spending in the second quarter. These rebates softened the freefall some. And other researchers confirm the sharp upturn in spending when those rebates arrived. The rebates worked. Do it again.
Congress also must extend the enhanced jobless benefits. Again, my forthcoming research shows that half of the unemployed workers in our nation had not yet received any of these benefits by June. Relief packages are pointless if they do not get into the hands of those who need it.
One last piece of the income crisis is employee wage cuts—a hardship not seen since the Great Depression. This income loss comes on top of the layoffs, the lost overtime, and the fewer hours. Many of these workers are employed by small businesses. Congress must get money to small businesses to keep paying employees. Another round of rebates will help, but it cannot make up for less money in every paycheck.
Fix what did not work, and make it simple
Congress left state and local governments to fend for themselves. It is a disaster. States face rising public health costs from the pandemic at the same time that their revenues have plummeted. As a result, state and local governments had laid off or furloughed 1.5 million workers by June, disproportionately harming women and Black workers. Congress increased its share of Medicaid expenses, but not enough to make up for massive budget shortfalls. State governors are calling on Congress repeatedly to send help. We know from the Great Recession more than a decade ago that our communities need support, or the recovery will be slow and painful. Congress must generously support these fiscally embattled state and local governments.
In the private sector, some businesses have rehired some workers, but that uptick in re-employment is unsustainable amid an unabated public health crisis. Most importantly, Congress must find a better way to get money to small businesses—they are the bedrock of U.S. employment. The Paycheck Protection Program was well-intended but failed to get relief to the hardest hit of these firms. Banks gave loans to their most well-connected customers and those faring relatively well, such as construction businesses that continued operating in the shutdown. But the administration of the loans was confusing and too risky for many businesses. Business owners had to use the funding largely for payroll, but many businesses have other big expenses to overcome to stay afloat.
Then, the rules kept changing. As a sign of the mess, even after Congress put more money into the program, businesses did not borrow. Amanda Fischer, my colleague at Washington Center for Equitable Growth, argues that Congress must do better at targeting smaller businesses. They must expand eligible uses for funding and improve incentives for short-term wage compensation, or work-sharing arrangements. Congress must get relief to business owners of color who are serving low-income neighborhoods and hire workers in those communities who need jobs to come back to and earn living wages.
Finally, Congress cannot rely on the Federal Reserve to prop up Main Street. The Fed stabilized Wall Street this spring, and bond and equity markets soared. But the indirect effects are not enough to help small businesses and Main Street communities. Loans from the Fed, to date, are not widespread enough to save enough businesses and keep municipalities from laying off more teachers and other frontline public servants. Congress must instruct the Federal Reserve to fully use its Main Street and Municipal Lending Facilities, even if it means making some loans that may not be repaid. The Fed has made only a handful of loans so far, even as tremendous need exists for more financial support.
Next relief package from Congress
Congress must do what works and commit to doing whatever it takes to support an economic recovery that is strong, stable, and broadly shared. Congress should spend $6 trillion in its next coronavirus relief package. Specifically:
$2 trillion to continue enhanced jobless benefits until people are safely back to work
$1 trillion for grants to state and local governments
$1 trillion in payments to the hardest-hit small businesses
$500 billion for public health efforts to contain the pandemic and keep essential workers safe
$500 billion for another direct payment to all families now and again at the end of the year
$1 trillion for other efforts to support families in need, such as paid child care and sick leave; and rent and mortgage forgiveness
The cost of doing too little now will be enormous in the coming years. No matter what Congress does next, so many families will never get their loved ones back and will never get the chance to say goodbye. But if Congress acts now and commits to stay the course, our workers will get the dignity of work back, our small business owners will succeed, our essential workers will be kept safe, and our children will have teachers. Congress must fight for our future.
Sudden economic contractions are dangerous. Individuals experience income shocks that leave them hungry, sick, and frightened. And if left unchecked, these shocks spread. When people lose income, they stop spending, businesses lose customers, layoffs begin, more people lose income, and more people stop spending. This cycle sends hardships rippling through the population.
Well-crafted economic delivery systems to absorb these shocks are crucial to stopping this cycle, but some policymakers in the United States construct them poorly on purpose. They design systems well that transfer cash to the powerful but use faulty delivery systems as a backdoor way to tamp down aid and assistance to everyday people.
To understand how economic delivery systems can stop the cycle of economic contraction, it’s instructive to look back over the past two decades. Economists drew a clear lesson from the Great Recession a decade ago—delivering money to the hardest-hit individuals and families is one of the best tools to break the cycle of economic contraction. When people have money to buy essential goods and services, businesses maintain their customer base and don’t need to lay off staff. And, as Harvard University economist and Equitable Growth Steering Committee member Karen Dynan and her co-authors’ research found, delivering money to working- and middle-class Americans is the best way to create a virtuous cycle to stabilize the U.S. economy amid an economic downturn.
In the early days of the coronavirus recession, Congress realized this and acted, appropriating more than $2.3 trillion to halt the sharp economic downturn. But earmarking money for individuals and families is not enough. Money needs to actually reach consumers for them to spend it and stabilize the economy.
What are the steps between policymakers acting and families having money to spend to meet their needs? A metaphor can be instructive here. Think of the appropriated resources as water, stored in an aquifer. When resources are delivered effectively, a consumer will turn on the tap at her bathroom sink, and the water will flow. To get from the aquifer to the tap, the water flows through a plumbing system. When there are problems with the plumbing, consumers find their taps empty.
Well-functioning delivery systems, like plumbing systems, are essential to stopping the cycle of economic contraction. At the onset of the coronavirus recession, Congress decided to deliver money to consumers using a variety of programs. Each program has its own set of plumbing systems, beset with its own challenges. As economist Esther Duflo at the Massachusetts Institute of Technology notes, economists have a responsibility to not just create theoretical models but also engage in the messy, complicated work of ensuring that our economic “plumbing” is effective.
It is tempting to look at our broken plumbing and feel resigned that it has to be this way. Fixing delivery systems is a relatively boring and decidedly challenging task. But that perspective misses an important fact: For some people and businesses, delivery systems do work well. In fact, they tend to be incredibly effective for the most powerful members of our society. It’s not that good plumbing is too hard to build or that it naturally breaks down over time. Rather, our policymakers intentionally underresource the systems that deliver aid to everyday people, while quietly maintaining systems that efficiently funnel resources to the powerful.
Using faulty plumbing is a discreet way to cut off aid from those with great need but little political power. It can also be a way to deliver aid through channels that provide profit-making opportunities to private plumbing systems that pop up to fill gaps left open by absent or rusty public plumbing. In good times, the burdens of this system are borne primarily by the very vulnerable. In bad times, economic shocks spread more widely, and the plumbing problems affect more people.
Below, we detail four delivery systems tasked with providing relief during the coronavirus recession— relief targeted to small and large businesses, Unemployment Insurance, direct payments to consumers, and paid leave programs—each of them emblematic of a different plumbing problem. Looking at business rescue programs, we see pipes well-designed to flow easily to people with power, while the taps of the less powerful remain dry. Looking at Unemployment Insurance, we see the failure to invest in pipes, preventing these benefits from flowing smoothly to people who need them the most. Looking at direct payments, we see who profits when the plumbing is routed through costly private systems that twist and turn, enabling the powerful to siphon off of the plumbing. And looking at paid leave, we see what happens when policymakers build no pipes at all and suddenly need to turn on a spigot when the economy hits a drought.
To summarize this research brief’s conclusions, policymakers must invest in our economic infrastructure if our economy is to emerge from the COVID crisis more resilient. This includes:
Re-engineering plumbing to deliver aid to those who need it most in a manner just as quick as our most sophisticated plumbing for the well-connected and well-resourced. This problem comes into stark relief with regard to business rescue programs.
Fixing broken plumbing that has been degraded by years of deliberate neglect. An example of this rusty plumbing is embodied with the degradation of our Unemployment Insurance systems.
Re-routing plumbing to deliver aid directly to the most vulnerable and eliminate costly detours that happen along the way. This brief discusses how a public payment system has been supplanted by private delivery channels that are both slower and costlier to our most vulnerable individuals and families.
Building new plumbing for new programs that invest in an equitable economy. The absence of a paid leave delivery infrastructure has hobbled our ability to quickly and efficiently set that up in the midst of the coronavirus pandemic.
Business rescue programs—unequal plumbing
Challenges in small business rescue systems
Previous writing from the Washington Center for Equitable Growth discusses how mechanisms to aid small businesses are ad hoc, unfamiliar, and difficult to scale up to reach all impacted firms, while mechanisms to aid medium- to large-sized businesses are efficient, well-practiced, and can be deployed at scale. In other words, the economic plumbing to help our small businesses is rusty and degraded, while the plumbing that serves medium- to large-sized businesses is sturdy and resilient.
How is this playing out during the coronavirus recession? News articles declare that “the small business die-off is here,” notwithstanding the $670 billion approved by Congress to save small businesses via the Paycheck Protection Program. Reporting shows that small business owners did not feel confident that they could meet PPP requirements in time for loans to convert to grants, and that even for those who did receive small business loans, the support may not be enough to cover expenses during periods of mandatory lockdown or partial business closures. A survey of research on the Paycheck Protection Program shows that the loans were not properly targeted to the geographic areas hit hardest by the pandemic or its economic effects, and were not designed in a way to prevent avoidable layoffs. Because the assistance provided by the PPP was relatively shallow in comparison to the shock faced by most small businesses, the program ended up serving as a liquidity backstop for small businesses that needed a temporary boost, rather than a lifeline for the most devastated businesses.
The funding also likely arrived too late for many businesses. Recent research from Opportunity Insights, led by former Equitable Growth Steering Committee member Raj Chetty, finds that small businesses providing services that require face-to-face contact in certain ZIP codes saw an 80 percent drop-off in revenue largely before government rescue money was even available. Moreover, early survey research is showing that small businesses owned by Black and Latinx entrepreneurs are suffering particularly acutely.
The story is different for medium- to large-sized businesses, whose aid came largely via lender-of-last resort interventions by the Federal Reserve rather than through appropriations by Congress. The Federal Reserve’s stated commitments to support the economy across a number of interventions had the effect of bolstering these businesses’ ability to raise capital, even before most policy actions were undertaken. So, it doesn’t even much matter when the Fed starts to lend to companies or buy their bonds because the mere reassurance that the Fed will step in is enough to soothe the markets that serve medium- to large-sized businesses. Investment-grade, or the most creditworthy, U.S. companies issued record-breaking amounts of debt during the first few months of the coronavirus recession and have continued to do so. Junk bonds, or those that are backed by less creditworthy but still medium- to large-sized companies, are strongly rebounding too.
The gap between the efficient business rescue programs for medium- to large-sized businesses and laggard small business rescue programs was known to policymakers well before the coronavirus pandemic caused the latest recession. After the global financial crisis of a decade ago, the stock market and bank profits rebounded quickly, while small businesses recovered much more slowly. While the Federal Reserve at that time was able to calm markets with monetary policy interventions and bail out large financial firms over the course of mere days, small business rescue programs never received a needed revamp.
Fast forward to today. Markets rightly believe Fed Chair Jerome Powell when he says that the Federal Reserve is “not going to run out of ammunition,” largely because the Fed took extraordinary actions a decade ago when faced with the previous crisis.
Small businesses do not hear the same reassurances and would have no reason to believe such statements even if they were declared. In fact, multiple government oversight reports and pieces of journalismdocument how small business aid was slow to arrive for eligible firms after natural disasters over the course of the past decade. This pattern was replicated on a larger scale during the current crisis, when the U.S. Small Business Administration was tasked with deploying funding provided via the Paycheck Protection Program to ailing small firms.
There certainly are success stories for small businesses due to the Paycheck Protection Program, yet the small business aid also was beset by administrative chaos at its inception. The Small Business Administration website crashed on its first day of launching and many times thereafter, and many small businesses remain in grave danger. One survey of small business owners shows that more than half of them expect to be out of business in the 6 months after the survey was taken in April 2020.
Profit-seeking in private rescue systems
In the case of both programs—both the insufficient small business rescue efforts and the efficient medium- to large-sized business rescue efforts—it should be noted that the government lacked the infrastructure to administer programs directly. In fact, each was administered by agents in the financial sector, rather than through the direct public provision of assistance.
This means that certain private firms, usually the most advantaged and well-connected, profit from the taxpayer-directed deployment of rescue aid. That profit represents funds that reinforce existing political power and that could otherwise be channeled back into helping those suffering.
In the case of small business rescue programs, the Small Business Administration, lacking staff or technical capacity to loan hundreds of billions of dollars using in-house capacity, relied on financial institutions to intermediate the delivery of financial aid from taxpayers to eligible small firms. In exchange for these services, lenders received more than $18 billion in fee income from processing Paycheck Protection Program loans—money that was deducted from the pool of funding available for small businesses.
By intermediating aid through the banking sector, the program also reinforced existing inequities in small business credit, at least according to anecdotal reports. The New York Times reported that a large small business lender established a “concierge service” for VIP business clients, allowing them to bypass call center wait times and avoid online portal snafus. As stated earlier, other stories documented the troubles faced by Black- and Latinx-owned small businesses in accessing funds, repeating longstanding discrimination in small business funding from the banking sector.
Again, this policy choice is not inevitable. Congress could have found ways to directly compensate businesses using systems similar to best practices from abroad. Denmark’s business rescue program, for example, had businesses apply directly to the Danish Business Authority for rescue aid. Denmark is now on track for a much less dramatic collapse in GDP this year, compared to peer countries, due both to the success of public health measures and economic rescue programs in the country. An efficient and already well-developed U.S. Small Business Administration, with pre-existing relationships with the IRS or payroll processing companies, could have worked to release aid in a more efficient and equitable manner.
One natural experiment in the United States is the state of North Dakota, which led the nation in small business rescue funding received per small business worker in the state. Observers credit the Bank of North Dakota, a public bank, for the state leading in the deployment of small business funds. In the words of Robert Hockett, a Cornell University law professor and alumnus of the Federal Reserve Bank of New York, in a comment to The Washington Post, “there was no leakage—the sort of ridiculous fee-charging that tends to happen when you do it through larger banking entities.”
He added that the North Dakota model “isn’t really designed to maximize revenue lines by finding as many places to assess fees or brokerage charges as possible.” Though the bank offers few retail services or direct loans, it did serve as a clearinghouse to community banks, educating them about the new program, coordinating across the state, and buying slices of loans from local lenders where needed. The amount and type of help available in North Dakota was clearly well-practiced and scaled to the extent of the crisis in the state.
In the case of large business rescue programs, profit-seeking firms also sit at the center of aid programs. The Federal Reserve is being supported by asset management firms BlackRock, Inc. in the purchase of corporate bonds and Pimco Company in the purchase of commercial paper. Both are programs designed to boost large businesses’ financial health. All told, BlackRock and Pimco are under contract to purchase hundreds of billions of dollars’ worth of financial investments on behalf of the Fed, with BlackRock, for example, slated to earn around $40 million in profit from the services it’s providing.
This raises significant conflict of interest concerns, as each company is also a large shareholder or bondholder in many of the companies whose financial investments they may buy on behalf of taxpayers. In the case of BlackRock, the company was also tasked with purchasing exchange-traded funds, and early reports show that BlackRock ETFs were the primary beneficiaries of BlackRock purchases as an agent of the Federal Reserve. Other observers point to relatively lax conflict of interest standards in place within Federal Reserve financial agent contracts, allowing potentially unfair access to market-moving information. And while these contracts will come up for a bid by the summer, they were initially granted by the Fed on a no-bid, temporary basis in response to the coronavirus recession emergency.
The use of these firms to administer rescue programs on behalf of the Federal Reserve is not a new phenomenon. The same approach was used in response to the 2008 financial crisis, underscoring that the Fed and policymakers have had time to consider alternative approaches to responding to a financial emergency and chose not to build public plumbing, but instead to rely merely on private plumbing. This represents a missed opportunity, as the Federal Reserve System employs almost 23,000 individuals, including sophisticated lawyers, economists, and market experts, and its budget authority is unlimited and set outside the congressional appropriations process. Given that this is the second major rescue program in more than 12 years, it stands to reason that it may be in the public’s best interest to develop this expertise in-house.
Alternatively, scholars such as Saule Omarova and Robert Hockett, both from the Cornell School of Law, suggest that Congress create a National Investment Authority that could serve as an institutional bailout manager, with democratic governance, to manage taxpayer investments in private enterprises with a fiduciary duty to the public. Similar proposals have been floated in major news outlets, harkening back to the Great Depression’s Reconstruction Finance Corporation, and in a piece by Todd Tucker, the director of governance studies at the Roosevelt Institute.
The plumbing that serves our least well-resourced constituencies—small businesses—is rusty, compared to the plumbing that serves medium- to large-sized businesses. Compounding that imbalance is the fact that the very firms that benefit from the efficient plumbing also manage to profit from the laggard plumbing available to others, reinforcing inequities in a feedback loop that accelerates during times of crisis.
Unemployment Insurance—rusty plumbing
At a moment when nearly 1 in 4 U.S. workers is not receiving a paycheck due to a pandemic that is clearly beyond their control and taking place in a country with no paid leave social insurance program, Unemployment Insurance is an obvious choice for delivering income to those who lose work due to the pandemic and its economic fall-out. Indeed, Congress recognized this when they gave states the ability to modify rules affecting the receipt of Unemployment Insurance to suit the conditions of the pandemic, and again when they established three pandemic-specific Unemployment Insurance add-ons: one increasing the benefit amount, another lengthening the benefit duration, and a third expanding the group of people eligible for benefits to include independent contractors, those with low earnings, and independent contractors.
Yet when people went to access the benefits they were entitled to under the law, many were greeted by crashed websites, jammed phone lines, and even instructions to line up in person to receive paper applications. The $600 weekly increase took weeks to implement, and in some states, the program expanding benefits to new groups of claimants took months. While some policymakers try to pass off this state of affairs as an unexpected tragedy—a sad coincidence that the system was out of shape just when benefits were needed most—the difficulties with benefit delivery are the result of decades of conscious choice by policymakers to starve the system of the resources it needed most. With computing systems that are hard to navigate for claimants and challenging to update for administrators, and without adequate resources for staffing and system updates, the plumbing for delivering Unemployment Insurance benefits is broken from years of neglect.
Unemployment Insurance program administration is funded through federal taxes based on employee payroll—referred to as FUTA taxes after the Federal Unemployment Tax Act. Taxes are collected at a rate of 0.6 percent (the FUTA tax rate is 6 percent, but a 5.4 percent credit is applied for state taxes paid) and are levied on the first $7,000 of earnings for each worker on an employer’s payroll. For a full-time, year-round employee, the FUTA tax is $42 per worker per year.
These taxes are technically charged to employers, but research finds that employers pass the cost on to workers by paying them less. This revenue is tasked with not only maintaining more than 50 administrative systems but also funding half the cost of the extended benefits that workers receive in times of economic contraction. In 1939, the taxable wage base was $3,000, equivalent to $55,000 in 2020 dollars. Because this amount can only be raised by law (and has only increased three times over the past 80 years), its value has eroded by nearly 800 percent. In contrast, the taxable wage base for Social Security benefits was indexed to inflation in 1977. The chart below shows their divergent histories. (See Figure 1.)
Figure 1
This trend has been labeled fiscal constriction by Columbia University scholar Alexander Hertel-Fernandez, and it means that by starving the Unemployment Insurance program of resources, policymakers effectively bind their own hands and purposefully prevent themselves from establishing a modern and efficient system for disbursing benefits. During the Great Recession, we saw the consequences of fiscal constriction clearly. Yet federal policymakers left the taxable wage base at the same level it has been stuck at since 1983, unmoved by the hardship of millions of members of the U.S. labor force and unwilling to risk even a small amount of political capital by modestly nudging tax levels upward.
Bringing the Unemployment Insurance taxable wage base back to the same level as the Social Security taxable wage base and then indexing it to inflation would provide states with the resources they need to deliver unemployment benefits efficiently and effectively.
Looking to 2017 as an example and conducting a simple back-of-the-envelope calculation that keeps the FUTA tax rate at 6 percent and applies a 5.4 percent state credit reduction to the $7 trillion of taxable earnings under the Social Security wage base indicates that using this tax base would generate $41 billion. This is a $33 billion increase over the $8 billion in FUTA taxes that were actually collected in 2017. Similar to other social insurance programs, Unemployment Insurance has an elegant design—small taxes in good times ensure smooth delivery of benefits in hard times. By allowing the pay-for to erode over time, policymakers shirk their fiscal responsibility, and workers and families pay the price. Following the Social Security model and indexing the wage base is a small investment that will yield large dividends.
In fact, this additional revenue would provide sufficient funds for Unemployment Insurance system modernization efforts (past grants to states have ranged from $50 million to $200 million), ongoing maintenance, and appropriate staffing. These funds also could be used to provide grants to states to partner with community-based organizations serving vulnerable workers to raise awareness of Unemployment Insurance benefits and provide assistance in the application process. Additional revenue would cover the increased use of the Extended Benefits program and could be used to provide grants to states as they standardize the amount and length of benefits, as detailed below. Any change to the taxable wage base could be scheduled—for example, occurring when unemployment rates return to pre-pandemic levels with revenue advanced prior to that time.
Without this type of policy change, policymakers won’t have the resources that are so badly needed to repair our broken plumbing and efficiently deliver benefits to people who are entitled to them under law. The case of Unemployment Insurance shows that it’s not enough to build a system to disburse benefits—that money needs to be spent over the long haul to maintain that system. This type of continued investment is necessary to deliver the benefits that provide relief to individuals and stabilize our economy when crisis hits.
Direct payments to households—plumbing that twists and turns to allow siphoning off along the way
Most Americans live on razor-thin budgets, even in good times. One study from the Federal Reserve has found that only 40 percent of Americans could cover a $400 emergency expense.
So, when Congress authorized emergency direct payments to households as part of the Coronavirus Aid, Relief, and Economic Security, or CARES, Act, the efficiency of the plumbing was nearly as important as the amount of water unleashed from the aquifer. The degradation of our public plumbing systems—namely, the IRS as an agency tasked with locating all U.S. taxpayers and building a channel to allow payments between individuals and the government—was laid bare.
While around 6 in 10 people who file taxes received a direct deposit refund from the IRS in 2018 or 2019—the filing years the IRS used to track bank account information for these payments—4 in 10 filers, representing almost 64 million filers, did not (the vast majority of those 64 million filers was eligible for CARES Act payments, which phase out for higher-income earners). These individuals and families had to wait weeks for paper checks to be mailed, with one estimate suggesting that certain filers may have to keep waiting until September, about 20 weeks after the direct payments were authorized by Congress. While the IRS rightly prioritized mailing checks out sooner for those with the lowest adjusted gross income, mailing paper checks still took weeks longer than for those with direct deposit numbers on file.
Those who don’t file tax returns with the IRS faced an even more complex situation. Social Security recipients who didn’t, in the recent past, file tax returns received unclear information about whether they had to file a supplementary tax form to get a direct payment check and had to meet a deadline if they wanted to claim dependents. While the IRS set up an online portal for nonfilers to report direct deposit information and avoid the check-mailing process, the deadline for such submissions was May 13, and many less-tech-savvy individuals probably didn’t know where to enter that information or were unable to do so.
While the IRS worked as quickly as possible to deploy money in a timely manner, there are consequences to this lack of preparedness. Those who receive paper checks may have needed, or may still need, to get expensive payday loans to tide them over until checks arrive. Others still may overdraft on their bank accounts, leading to fees. Others who don’t need an advance on their checks may need to go to expensive check cashers to convert checks into money once they arrive. And because policymakers allowed creditors to “eat first” once checks arrived, stories surfaced showing that banks garnished the checks deposited into peoples’ accounts, both to repay bank debts and on behalf of debt collectors.
All told, direct coronavirus-payment challenges replicate our existing understanding of the high cost of being poor, with low- to moderate-income households spending far more than other households on fees as a percentage of their income, averaging a whopping 10 percent of income, using data from before the coronavirus.
These expenses reflect a lack of public economic infrastructure. And while they represent burdensome budget items for some, they represent profit to others. Banks made an estimated $11.68 billion in overdraft fees in 2019, with an average fee of around $35 per overdraft. These fees fall particularly hard on the working class, with only 9 percent of account holders (typically those with low account balances) representing 84 percent of the total fees charged. Check cashers and payday lenders made a similar amount in fees, totaling around $11.4 billion in 2019.
Further, the tax preparation company TurboTax, owned by Intuit Inc., created a proprietary website where individuals could go to enter direct deposit information, calculate anticipated check amounts, and check on the status of their payments. While the website services are offered at no charge, TurboTax has, in the past, used the promise of free services to steer filers into more expensive proprietary and add-on products, even when they qualified for free filing. TurboTax made $1.6 billion in income in the most recent filing year.
Solutions for quicker direct payments
All of these frictions were avoidable had other public policy choices been made. Just as fiscal constriction has hobbled state Unemployment Insurance systems, federal policy has deliberately underinvested in technical capacity and potential delivery systems for the IRS. While the IRS staff had an unenviable task of accomplishing the massive technical and logistical challenge of deploying millions of direct payments in a matter of weeks during a global pandemic, the snafus experienced by the agency were undoubtably made worse by sustained budget cuts over the past decade. As the Center on Budget and Policy Priorities documents, the IRS has lost nearly 15 percent of its staff and 21 percent of its budget since 2009. A more well-resourced IRS would have been better prepared for this moment.
Policymakers also missed an opportunity to build out the IRS’s technology infrastructure by not considering legislation to direct and support the IRS in establishing a free file online portal system for annual tax returns. Though envisioned as a tool for routine annual filings before the pandemic, such a system run by a well-resourced IRS could have been quickly repurposed to meet direct payment needs and could have supplanted TurboTax.
Moreover, policymakers could have advanced other actions to strengthen payment delivery mechanisms to individuals and households. The United States has one of the slowest payment systems in the world, compared to peer countries. This means that it can take days after funds are deposited in private bank accounts for those funds to actually be available to spend. Again, in the case of the coronavirus recession, this adds yet more frictions to the delivery of aid. But this slow system is not inevitable.
In the United States, the Federal Reserve both regulates the private payment system and operates its own system. The private payment system, which is the dominant system, is operated by The Clearing House, a consortium of 24 large banks. The Fed has long had the goal of modernizing its own payment system, which hasn’t been updated in decades, releasing a proposal to bolster payment infrastructure in 2013 and then committing in 2019 to finalize an upgraded payment infrastructure by 2024.
Such moves to modernize our public payment infrastructure have been opposed by The Clearing House. The bank association argues that large banks have already invested substantial time in building their own system, that the Fed cannot act as both a regulator and a competitor, and that further investments would be needed to ensure interoperability with the new Fed system. Below the surface are the obvious concerns that this public system would undercut The Clearing House’s market dominance, would reduce profits on payment transactions, and would dampen the use of overdrafts, thereby further reducing bank fees.
In the case of the deployment of coronavirus rescue funds, a public, faster payment system would have clear benefits. One estimate from Aaron Klein, policy director for the Center on Regulation and Markets at The Brookings Institution, finds that implementing the Fed’s real-time payment system could save low-income families $7 billion a year simply by helping money to arrive faster and allowing families to thereby avoid intermediaries such as check-cashing services and payday lending companies to access their money.
Further, a public payment system also would help small businesses to manage incoming and outgoing payments, as these businesses are now operating on thinner margins during the recession. Lastly, a faster digital payment system is essential during a highly transmissible pandemic. While the use of cash to make payments has been declining for years, public health concerns and social distancing have increased the need to more quickly mediate money electronically.
In addition to building a quicker public payment system to deliver funds to private bank accounts, policymakers also could build accounts that are themselves public. Legislation based on the work of Washington Center for Equitable Growth Board member Mehrsa Baradaran has, for years, been introduced to allow the U.S. Postal Service to provide basic banking services to customers—bank accounts that could be available in every community across the country and could allow for a functioning economic system that equitably serves all individuals and families.
In this way, policymakers could eliminate or reduce costly fees and stop garnishments through this public system. And it wouldn’t be a new or untested approach. The U.S. Postal Service has done this in the past, providing banking services for 50 years starting in 1911. This would have the benefit of both expanding access, reducing costs to consumers, and shoring-up the finances of the postal system, which stands in a precarious position due to both the pandemic and congressional legislation that has required the service to pre-pay 75 years’ worth of healthcare and retirement benefits for workers. The Postal Service could offer these accounts either through a congressional authorization or via administrative action, with its Board of Governors authorizing the measure.
Paid leave—when plumbing does not exist
If ever there were a moment that called for paid leave, the coronavirus crisis is it. The term “paid family and medical leave” refers to social insurance programs in which a small payroll tax is collected while people work and then—when the need arises to care for a new child, seriously ill loved one, or one’s own serious medical need—workers can take weeks or months away from work with partial wage replacement. In some thoughtfully designed paid leave programs, workers are guaranteed to be able to return to their job when their leave is complete.
Most paid leave programs were not designed with a pandemic in mind, but they are built to deliver paid time away from work for health reasons while maintaining attachment to one’s employer. If you are scratching your head and wondering why policymakers chose not to deliver payments through a small modification to the eligibility criteria associated with our federal paid leave system, the answer is simple: We do not have a federal paid leave system. Legislation has been introduced for many years that proposes the adoption of a federal paid leave program. Yet political obstacles have prevented us from establishing a federal system, despite the research that suggests doing so would strengthen the economy and benefit the finances and health of paid leave claimants and those who receive care from them. A lack of a federal system leaves us scrambling to provide paid leave solutions when workers need them most.
Congress eventually passed legislation in response to the employment crisis caused by the COVID pandemic. But the “paid leave” program it enacted bears little resemblance to a strong social insurance system that provides adequate time away from work to care for oneself or a loved one. This is a temporary stop-gap, not an investment in permanent plumbing. This stop-gap system provides a fraction of the workforce with 80 hours of leave at full pay for those with symptoms or the need to quarantine due to one’s own COVID-19, the disease caused by the coronavirus, 80 hours at two-thirds pay for to care for someone subject to quarantine or a child subject to COVID-19-related school or childcare closure, and another 10 weeks of leave at two-thirds pay to provide childcare for one’s own children who are subject to COVID-19-related school or childcare closure. These benefits don’t provide the support that social insurance programs offer and that people whose families are affected by COVID-19 need: weeks, not days, of leave to attend to one’s illness or the illness of loved ones.
While the benefit is not generous enough, the real problem is program administration. The first problem is the glaring issue of the program coverage. Despite the largest firms having the greatest financial and staffing flexibility to allow for leave, no person who works at a firm with 500 or more employees is eligible for leave. Employers with fewer than 50 employees, too, can easily opt out, as can firms that employ healthcare workers or emergency responders.
What’s more, the interpretation of the healthcare carve-out is broad—anyone who works at a healthcare facility, from janitors to accountants, can be carved out. Sarah Jane Glynn at the Center for American Progress finds that as few as 1 in 5 private-sector workers may end up eligible for paid leave.
Then, being eligible for a benefit does not mean that a person can access it. Many factors influence what social scientists call the “take up” of benefits. Key factors include program knowledge, the ease or difficulty of applying for or being granted access to a program, and—in many cases—employer behavior that encourages or impedes claims. When it comes to the newly implemented federal paid leave program, there is a perfect storm of factors that create leaky plumbing. Money that Congress intended to channel to men and women who need time off from work due to COVID-19 is not reaching them in part, it appears, because of the lack of a robust public awareness campaign. Given that most people in the United States do not have access to state-provided paid time off and thus are unfamiliar with the concept, raising awareness of the new program is extremely important—and extremely difficult in the context of the pandemic.
To extend the plumbing metaphor: If people don’t realize that new taps have been installed, they can’t access the water that flows from them. It’s best to install the taps at times when people’s attention is not divided, so that they are aware of them well in advance of when they need to access them.
There is another major reason that we hypothesize depressed paid leave take-up rates: the confusing process of benefit reimbursement. Employers are required to cover the cost of the leave upfront and then are reimbursed quarterly for these costs. This complex way of paying for benefits means that employers who do not want to deal with paperwork or who cannot afford to front the cost of paid leave have an incentive to discourage employees from accessing their right to paid leave and may confuse employees who would otherwise hope to access the benefit.
When workers come to states with questions about their right to access paid leave, state labor departments are hamstrung: They don’t enforce the law, even though state residents come to them with issues. Good state-federal coordination is difficult to develop quickly, but it is crucial to ensure that workers can access the benefits they need. In the absence of a pre-existing plumbing system, workers were left with a temporary and unsatisfactory fix.
State paid leave systems provide a clear illustration of what a federal paid leave system could have provided, had it been established. When the coronavirus pandemic hit U.S. shores, residents of five states had access to state paid leave programs. In Rhode Island, shortly following Gov. Gina Raimondo’s (D) declaration of a public health emergency, the governor worked with the state’s Department of Labor and Training to ensure that people affected by the pandemic could access paid leave. The result: Paid leave claim rates in Rhode Island shot up in the early days of March. (See Figure 2.)
Figure 2
Because an existing social insurance program was already in place, Rhode Islanders were able to access paid time off when they needed it most. The plumbing was in place to deliver the needed assistance. In contrast, residents of the 45 states that lack paid leave programs waited as Congress debated how to best deliver aid, ultimately receiving a program that missed the mark for effectively delivering paid leave to those who needed it most.
If the federal government had had a strong benefit delivery system in place before the coronavirus pandemic hit, then the benefits that are needed would be flowing much more easily and efficiently. In the wake of this catastrophe, some policymakers are calling for a permanent fix—a federal social insurance program—so that our nation is not caught off-guard the next time a crisis hits.
Conclusion
To break the current cycle of economic contraction and prepare to do so again in the future, policymakers need to deliver benefits to workers and families so that they can pay their rent, fill their prescriptions, and keep food on the table—setting into motion the virtuous cycle of economic stabilization. This moment requires an unprecedented scale of investments in people and businesses in the United States in order to mitigate the pain caused by this economic recession.
But our programs are only as effective as the plumbing we use to distribute those resources in a timely and equitable manner. Systematic disinvestment in our economic infrastructure impaired the well-being of the people in the United States, particularly those who are most vulnerable even in normal economic times. Policymakers’ decisions to allow, or even hasten, the degradation of economic infrastructure is a choice, not a coincidence. Our faulty plumbing has been purposefully neglected, poorly constructed, and designed in the service of short-term profits for some and as a backdoor way to deny aid to the most disadvantaged members of society.
To stabilize our economy in times of macroeconomic contraction, we need to redesign our invisible economic infrastructure to more quickly help individuals and families, not just the most well-resourced, eliminate costly toll collection from financial intermediaries, and reinvest in durable plumbing to prepare us for the next drought.
1. Continuing Pandemic Unemployment Compensation is essential to moderating the severity of the coronavirus recession. Read the statement signed by Heather Boushey, “Statement on Pandemic Unemployment Compensation,” which says in part: “Federal Pandemic Unemployment Compensation (PUC), which is giving tens of millions of unemployed workers a $600 per week boost in unemployment income, has helped ease the pain of this crisis by providing much-needed income to families during an economic crisis and has boosted the economy overall. Every week for the last four months, more than twice as many workers have filed for unemployment insurance than during the worst week of the Great Recession. Meanwhile, cases of COVID-19 are once again rising across the country, and we still lack unified national leadership to give direction and stability in these unprecedented times. Congress must extend enhanced unemployment benefits or risk economic calamity.”
2. Big businesses can draw on deep capital markets to ride out the coronavirus recession. Small businesses cannot. This is a huge problem. Government could solve it. Read Heather Boushey, “Where’s the Life Raft for America’s Small Businesses?,” in which she writes: “Small businesses across the United States fight to survive the coronavirus recession, and all too many succumb … Only 40 percent of small business owners expected to be open at the end of 2020 should the economic crisis last six months. Especially hard-hit are minority- and women-owned businesses. While the number of active business owners in the United States fell by 22 percent from February to April 2020 (the largest drop on record), Black-owned businesses experienced a 41-percent drop, Latinx business owners a 32-percent decline, and women-owned businesses a decrease of 25 percent. Likewise, the JPMorgan Chase Institute found that cash balances of Black-owned firms in March were down by 26 percent from the previous year and by 22 percent for Asian American–owned firms, compared to a 12-percent decrease across all firms. Revenues of Asian American–owned firms declined by more than 60 percent.”
3. I find myself returning to this piece from Equitable Growth Research Advisory Board member Lisa Cook. One would think—or, at least, I would have thought—that successful inventors who are going to patent would have been relatively invulnerable to Jim Crow, lynching, and so forth. It really looks like that might well not be true—that the violently enforced rise in American segregation was absolutely devastating to African American inventors and innovators. Read Lisa Cook, “Violence & Economic Activity: Evidence from African American Patents, 1870–1940,” in which she writes: “Violent acts account for more than 1,100 missing patents compared to 726 actual patents among African American inventors over this period. Valuable patents decline in response to major riots and segregation laws. Absence of the rule of law covaries with declines in patent productivity for white and black inventors, but this decline is significant only for African American inventors. Patenting responds positively to declines in violence. These findings imply that ethnic and political conflict may affect the level, direction, and quality of invention and economic growth over time.”
Worthy reads not from Equitable Growth:
1. When unemployment is high—as it is now—government purchases directed to sectors in which excess productive capacity can be mobilized or quickly created is very powerful indeed. This is the gold standard for papers on the multiplier. An “open economy relative multiplier” of 1.5 in the United States is a closed-economy monetary-forbearance multiplier of 4 or so. Read Emi Nakamura and Jón Steinsson, “Fiscal Stimulus in a Monetary Union: Evidence from US Regions,” in which they write; “We exploit regional variation in military buildups to estimate an “open economy relative multiplier” of approximately 1.5. We develop a framework for interpreting this estimate and relating it to estimates of the standard closed economy aggregate multiplier. The latter is highly sensitive to how strongly aggregate monetary and tax policy “leans against the wind.” Our open economy relative multiplier “differences out” these effects because monetary and tax policies are uniform across the nation. Our evidence indicates that demand shocks can have large effects on output.”
2. The importance of civil rights, the rising significance of class, the productivity slowdown that started in the 1970s, the reaction of local governance to the crime wave that began in the 1960s and to the Great Migration—all of these play a powerful role in the setbacks that Black workers in America have experienced since the end of the 1960s. This is the best thing I have heard on these topics. Listen to Soumaya Keynes and Chad P. Bown, “Trade Talks: Opportunities & Setbacks for Black Workers in the 20th Century” interview Ellora Derenoncourt, Mary Kate Batistich, and Timothy Bond.
3. We at Equitable Growth warned, along with many others, that the 2017 tax cut was very badly designed from the standpoint of boosting investment and would do nothing to accelerate economic growth. Information keeps coming in proving that, unfortunately, we were right. Read Filippo Occhino, “The Effect of the 2017 Tax Reform on Investment,” in which he writes: “The 2017 tax reform affected investment through many channels. I use a macroeconomic model to estimate the overall effect. That estimate suggests that, because the different provisions worked in different directions, the initial impact of the tax reform on investment was small. The same model predicts that the tax reform will hold investment down in the medium term.”
Housing is the most important source of wealth for most U.S. families
Overview
Between the end of 2012 and the end of 2019, the Federal Reserve Board estimates that the total value of U.S. owner-occupied housing increased nearly 60 percent, from $18.5 trillion to $29.3 trillion. Most of that growth—more than 90 percent—was because existing house prices increased, not because new houses were being built. The value of homes alone accounted for about one-third of the overall increase in household wealth over this time period.
Housing is the most important source of wealth for most U.S. families and thus an important wealth equalizer. Yet the increase in house values during the recent expansion did not help to equalize wealth, as might be expected. Homeownership declined after the Great Recession, and those declines were concentrated in the bottom half of the income distribution and among Black and Hispanic families. That means the increases in house values reinforced—rather than offset, as would be expected—increasing inequality in other types of wealth.
Recent trends in homeownership across broad socioeconomic groups are alarming, especially when viewed from a lifecycle perspective. This perspective acknowledges that homeownership varies systematically and expectedly with age. Most adults start life as renters and gradually become homeowners, then remain homeowners through retirement while living independently. As a result, housing wealth is a key component of retirement resources for many families because lower housing costs (after the mortgage is paid off) makes it possible to subsist on the lower income associated with retirement.
Housing also is often a key source of wealth for homeowners managing their transitions to assisted living or dealing with other types of health or financial needs. As such, the change in lifecycle homeownership trajectories across generations over the past decade points to a future crisis in retirement preparedness that goes beyond rising wealth inequality.
In this issue brief, we will briefly examine trends in homeownership by income and race before and after the Great Recession through the end of 2019, when the then-11-year economic expansion had only 2 more months of momentum before the onset of the coronavirus recession. We’ll then look at this data across generations from a lifecycle perspective over the same time period to show that trends in U.S. homeownership feature dramatically rising inequality by income and race, largely driven by failure to move from renting to owning over the lifecycle. These findings are important for policymakers to factor in as they confront the coronavirus recession and prepare policies to ensure the eventual economic recovery is more equitable for all homeowners in the United States, not just the wealthiest.
Trends in homeownership
The past quarter-century has seen a rise and fall in U.S. homeownership, with the period just prior to the Great Recession as the peak. According to the Federal Reserve Board’s Survey of Consumer Finances, or SFC, the fraction of adults living in their own homes was 69 percent in 1995, rising to 73 percent in 2004, and subsequently falling back to 68 percent by 2016.
Starting with income, consider the patterns of homeownership for the top and bottom halves of the income distribution. In every year, homeownership is much higher for the top half of the income distribution than it is for the bottom half. The increase in homeownership between 1995 and 2004 is evident for both income groups, but on net, the top half saw an increase in homeownership from 82 percent in 1995 to 84 percent in 2016. The bottom half of the income distribution also saw gains in the early part of that period, but on net, there is a decrease in homeownership from 56 percent in 1995 to 52 percent in 2016. (See Figure 1.)
Figure 1
Both levels and trends in homeownership, however, differ by race, and the divergence in homeownership is dramatic. Again, the rise and fall in homeownership is ubiquitous, with peaks occurring just prior to the Great Recession. The divergence in homeownership by race in every year is, once again, eye-popping, with the homeownership rate for White people on the order of one-and-a-half times that for Black and Hispanic people. (See Figure 2.)
Figure 2
On net, over the period, White homeownership increased from 74 percent in 1995 to 76 percent in 2016, while Black and Hispanic homeownership also increased from 47 percent in 1995 to 48 percent in 2016. Even though the overall rate of homeownership is down slightly for the past 25 years, the rate of homeownership increased, on net, for all race groups. That apparent conundrum is attributable to changing population shares (more Black and Hispanic families) with different levels of homeownership. The differences are more extreme relative to the recent peak, however, with White homeownership down about 3 percentage points while Black and Hispanic homeownership is down about 5 percentage points.
Lifecycle perspective
Group-level statistics such as those above are a useful starting point for thinking about homeownership and housing policy, but a better way to see what has really been happening is to look at the data from a lifecycle perspective. This perspective tracks groups of people by age through a series of survey snapshots. We see a given birth cohort at a certain age in one survey, and then we see the same cohort again at increasingly older ages in the subsequent surveys. The Survey of Consumer Finance is conducted every 3 years, so we see, for example, those born in 1970 at age 25 in the 1995 survey, then again when they are 28 in the 1998 survey, up until they are 46 in the 2016 survey. (See Figure 3.)
Figure 3
By charting the outcomes for multiple birth cohorts in one picture, we can see the lifecycle pattern for the outcome we are studying—in this case, homeownership. Each connected set of dots along each differently colored line follows a 10-year generational cohort over the part of their lifecycle captured in the 1995–2016 SCF data. Each cohort group shows up in as many as seven survey waves.
The lifecycle pattern of homeownership by age is clear when looking across generational cohorts overlaid on the chart. For all families, homeownership rates increase from about 30 percent for families in their 20s to a peak of around 80 percent in middle and older ages.
But the lifecycle charts also show the decline in homeownership after 2007 from a generational cohort perspective. The last three dots on any given cohort line (in reverse order, 2016, 2013, and 2010) show how much homeownership changed for those cohorts after 2007. For all families taken as a whole, the decline in homeownership can generally be described as failure to move up along the lifecycle trajectory of previous cohorts. The black arrows show how far a given cohort is behind the cohort ahead of them at the same age in terms of homeownership in 2016.
A lifecycle perspective on homeownership by income and race
The differences in homeownership by income and race in the column charts above are also clear in the lifecycle charts. From this perspective, additional insights are evident about how the changes in homeownership are driving overall group outcomes by income and race. We can see this by splitting the overall population data as we did above, first for the top and bottom halves of the income distribution and then by race and ethnicity. (See Figures 4 and 5.)
Figure 4
Figure 5
Splitting the population by income shows us two different economic recoveries from the Great Recession. Other than the young, families in the top half of the income distribution maintained their homeowner status. By age 40, about 90 percent of such families are homeowners, and nothing about that changed after 2007. It is true that young, higher-income families born in the 1980s were less likely to be homeowners around age 30 than the cohorts ahead of them, but they still had homeownership rates above 50 percent and near the levels achieved by the 1960s birth cohort.
The story for the bottom half of the income distribution is, of course, different. Begin with the data showing that the overall lifecycle pattern is much flatter for lower-income families. Although historically 70 percent to 80 percent of families in the bottom half of the income distribution are homeowners by the time they reach retirement age, it has historically taken longer to get there for many lower-income families.
That slower pace of homeownership for lower-income families was a valid policy concern before 2007, but things got much worse after the Great Recession. The lifecycle chart for the bottom half of the income distribution shows how younger cohorts are increasingly falling behind those born in earlier decades. More than 60 percent of those born in the 1950s, for example, were homeowners when they were around age 50, on the eve of the Great Recession. Ten years later, when the 1960s cohort reached the same age, homeownership was only 50 percent.
To be clear: Within the bottom half of the income distribution of the 1960s cohort, 1 in 6 who would have been homeowners had they followed the preceding cohort’s lifecycle pattern were excluded from homeownership. One can look at the cohort chart and infer that homeownership did not fall for the 1960s birth cohort, on average, because those who were homeowners in 2007, on average, remained as such. But that is not the point. Over this crucial part of the lifecycle, some of the families that had been renting should have entered the ranks of homeownership and started to begin building wealth. They did not. If nothing changes, the historical 70 percent to 80 percent of lower-income families being homeowners on the eve of retirement could be more like 40 percent to 50 percent.
The contrast in cohort homeownership by race is nearly as dramatic as the differences by income, and points to the same sorts of divisions. Among White people, only the young (born in the 1980s) seem to be on a different trajectory after 2007. It is an open question as to whether the younger group will ever catch up to the lifecycle trajectory mapped out by earlier birth cohorts, because there are both demographic factors (marriage and fertility decisions) that are intertwined with economic factors (high student debt, diminished income prospects). These factors are likely just delaying homeownership, but it is, of course, too early to tell for sure.
The stark contrast between high and low income is also evident when we compare the cohort charts for White families with the cohort chart for Black and Hispanic families. Again, and consistent with the overall homeownership by race shown above, homeownership for Black and Hispanic families is well below White families at all ages, though the gaps have historically narrowed as any given cohort moves through the lifecycle. (See Figures 6 and 7.)
Figure 6
Figure 7
Historically, homeownership has been 60 percent to 70 percent for recent cohorts of Black and Hispanic families by retirement age. That is still unjustifiably below the 90 percent homeownership rate for White families at older ages, but again, the lifecycle charts show how this could get much worse as we look ahead. Younger and middle-age cohorts are not seeing the expected increases in homeownership as they get older, and many more families in those younger generations might be expected to reach retirement without having enjoyed the benefits of homeownership.
Conclusion
The historical divergence in U.S. homeownership between high and low income and between White and Black and Hispanic families is a longstanding policy concern. That divergence is increasing in recent years, and the immediate implication has been that the potential wealth-equalizing benefits of rising aggregate housing wealth have been diminished, or even reversed. U.S. housing wealth increased after 2012, but those gains were disproportionately and increasingly received by higher income and White families.
The generational perspective on homeownership presented here reinforces the takeaways from the traditional group-level disaggregation and adds a time dimension. Lower-income, Black, and Hispanic families appear to be on a different homeownership trajectory in recent years. Unlike the years leading up to the Great Recession, the pattern of rising homeownership with age seems to have stalled, and possibly even reversed.
The decline in homeownership is concentrated among disadvantaged families in younger generations, and as the years pass by, the opportunities to get those families back on track to a lifetime of productive wealth accumulation are diminished. If policymakers do not act soon and aggressively to reverse recent trends, it will be too late for the young and middle-aged generations of disadvantaged families as they approach retirement.
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
One of the most intense debates over the next coronavirus relief package in Congress will be about whether to extend the weekly $600 supplemental unemployment insurance benefit that expires July 31. The argument in favor of ending it, or sharply reducing it, is that it acts as a work disincentive—that people won’t bother returning to work if their unemployment benefits equal or exceed their regular wages. Supporters argue that there are not a lot of jobs to return to, and that these benefits are helping families survive and supporting the overall economy. Two Equitable Growth posts this week suggest very strongly that “work disincentive” concerns are greatly exaggerated.
The first, by Kate Bahn, cites forthcoming research by Equitable Growth Research Advisory Board member Arindrajit Dube of University of Massachusetts Amherst, Ethan Kaplan of the University of Maryland, College Park, Christopher Boone of Cornell University, and Lucas Goodman of the U.S. Treasury Department. They find that that emergency Unemployment Insurance and extended benefits during and after the Great Recession did not result in higher unemployment rates for counties with longer access to benefits, compared to those with shorter access. The researchers find that overall bad economic conditions, such as those which occurred more than a decade ago and are evident again today, play a larger role in determining whether people return to work.
The second post, an Equitable Growth factsheet, points to research evidence and data from the current pandemic to show that jobless benefits have a negligible effect on unemployment levels, but that the enhancement to Unemployment Insurance is having a big impact on the U.S. economy and has set in motion a virtuous cycle that helps workers weather the economic crisis while keeping demand for goods and services from plummeting even further.
In the post-1970’s U.S. economy, the prevalence of stagnant or declining wages and the shift to “lousy” low-wage jobs and rising wage and income inequality have sometimes been attributed to a “skills gap” associated with an increasingly digital and technologically advanced jobs market. That gap, the story goes, was reflected in the college wage premium, and could be addressed simply by improving education and training. The concept of a skills gap was likewise blamed for high unemployment after the Great Recession ended in July 2009 and is now cited as the key challenge facing low-wage workers amid the current coronavirus recession. But as Kathryn Zickuhr writes in an Equitable Growth issue brief, this focus on individual workers is contradicted by recent data-driven research demonstrating that broad structural conditions constraining workers’ ability to share in economic growth—declining worker power as well as labor market monopsony, in particular—are far more important explanations. They underscore why policymakers need to improve the underlying U.S. labor market conditions for all workers, instead of shifting responsibility to those already struggling in an uneven playing field, writes Zickuhr.
This month’s entry in Equitable Growth’s Expert Focus series, which highlights scholars in our network and beyond doing important social science research, is Part 2 of our look at leading Black scholars studying U.S. economic inequality and growth. The survey, by Christian Edlagan and Maria Monroe, describes Black scholars whose cutting-edge research is influencing our understanding of the historic and persistent role that structural racism plays in driving wealth and income inequality for Black Americans particularly. Here’s Part 1 from last month.
Former Equitable Growth Ph.D. Fellow Jacob Robbins, now on the faculty at the University of Illinois at Chicago, laments the apparent loss of the bipartisan urgency that characterized policymakers’ actions at the beginning of the coronavirus recession. Not only are the health and economic crises far from over, he writes, but “we are in danger of sleepwalking into economic depression.” He makes clear that the first priority for the economy is to stop the spread of COVID-19, the disease caused by the coronavirus, through investment in aggressive public health measures. In addition, he makes the case for extension of the weekly $600 supplemental unemployment benefit, monthly stimulus payments to households, and substantial assistance for state and local governments.
Equitable Growth announced four research grants to scholars who are pushing the frontier of knowledge on paid family and medical leave in the United States. Their research, chosen in a competitive process with vetting by outside academics and approved by our Steering Committee, will be conducted by faculty members at leading U.S. colleges and universities. The grants, totaling more than $250,000, will fund research in the areas of medical leave, caregiving leave, and employers and paid leave. This was the organization’s first Request for Proposals specific to a subject area. We will announce our new round of grantees resulting from our more general 2020 Request for Proposals later this year.
Links from around the web
“Covid-19 has shined a spotlight on the economic importance of small businesses and their physical impact on communities across the country,” writesLaura Entis for Vox. “It has also highlighted their precariousness.” She quotes Equitable Growth’s Amanda Fischer, who warns that the pandemic could be “an extinction-level event” for small businesses. Entis also points to national policies that have made it ever harder for small businesses to survive. “From tax codes that benefit multinational corporations to the erosion of antitrust laws to a health care system that puts the onus of providing insurance on employers, myriad policies favor large corporations over the interests of small business owners,” she writes.
“How Congress decides to help the tens of millions of unemployed workers during the pandemic could determine whether the stark gap between America’s rich and poor will continue to widen amid a crisis that has already hit the lowest earners the hardest,” writesPolitico’s Megan Cassella. She notes that more than two-thirds of those earning a salary of less than $25,000 are now out of a job, “a number that has risen in recent weeks even as higher-wage sectors have shown potential signs of recovery.” And, Cassella writes, those least likely to have savings to lean on, the bottom quarter of wage earners, comprise one-third of jobless benefits recipients. A significant cut in the $600 weekly unemployment supplement “could exacerbate already staggering wealth and income divides, which have been growing for decades and which are larger in the U.S. than in any other nation in the G-7 … And it could hurt workers of color in particular, who are overrepresented in low-wage jobs.”
There’s a new phenomenon known as “learning pods” or “pandemic pods,” which parents—mainly white parents with significant resources—are forming to support or supplement their children’s COVID-related online education. Writing in The New York Times, Clara Totenberg Green says these pods are “small groupings of children who gather every day and learn in a shared space, often participating in the online instruction provided by their schools. Pods are supervised either by a hired private teacher or other adult, or with parents taking turns.” While they might seem like a necessary solution to the current challenges facing schoolchildren, Green writes, “they will exacerbate inequities, racial segregation and the opportunity gap within schools.” She concludes, “Paradoxically, at a time when the Black Lives Matter movement has prompted a national reckoning with white supremacy, white parents are again ignoring racial and class inequality when it comes to educating their children. As a result, they are actively replicating the systems that many of them say they want to dismantle.”
Almost five months into our country’s response to the coronavirus pandemic and ensuing recession, policymakers seem to have lost the urgency that characterized the initial days of dramatic, bipartisan action. In March, four pieces of coronavirus legislation were passed and signed into law. But over the following 2 months, very little in the way of meaningful new policy action occurred. What’s worse, some congressional leaders, squinting at recent data through rose-colored glasses, are ready to declare “mission accomplished,” letting the previous legislation expire and taking no further action.
Are they right? Well, the stock market is now about even for the year. Unemployment declined by 1.4 percentage points in May, and 2.2 percentage points in June. Retail sales increased by 17.7 percent in May, the largest increase ever. And deaths per day from COVID-19, the disease spread by the novel coronavirus, have fallen by half. With the vast majority of stimulus checks delivered and cashed, and with the extra payments for the unemployed set to expire at the end of July, might the U.S. economy be able to muddle along without further support?
The short answer is no—not by a long shot. The few green shoots of improved economic data belie the fact that the health and economic crises are far from over. In fact, we are in danger of sleepwalking into economic depression.
What real-time data are telling us
A careful review of the data reveals gaping wounds caused by the coronavirus pandemic: large declines in market incomes, consumer spending, and employment, all barely propped up by the temporary government stimulus payments. To prevent economic collapse, it is urgent that policymakers take further action. Congress must continue to support unemployed workers’ incomes, send additional stimulus payments to families to keep them financially afloat and increase spending, and give aid to local and state governments so they don’t have to lay off workers.
But, most importantly, policymakers at the state and federal levels must do more to control the spread of the coronavirus, which is now growing at the rate of 70,000 cases a day.
The April Personal Consumption and Income report from the U.S. Bureau of Economic Analysis showed a historic collapse of consumption expenditures, with total spending down 13.6 percent. The decline came despite a record increase in personal income of 10.8 percent, due to the massive inflow of federal stimulus and Unemployment Insurance payments. Without these transfer payments, personal income would have declined 6.3 percent in April and spending would have collapsed even further. For every dollar of stimulus, households increased spending by 25 cents to 35 cents, according to recent estimates, while previous research shows that every dollar of Unemployment Insurance benefits leads to 27 cents of spending.
Thanks in large part to pandemic-related income support, spending recovered somewhat in May, rising 8.2 percent, but it is still down 9.8 percent from the same period in 2019. The most recent official data, the June Retail Sales report, shows that spending on retail goods has largely recovered to its level from last year, while spending on restaurants remain depressed, down 26 percent from its period last year.
While government data give the most accurate picture of the aggregate economic situation, alternative real-time data are crucially important in understanding the scale of the economic crisis and determining the appropriate government response. In a recent paper, I use real-time payment data from Earnest Research, a company that analyzes spending data from credit and debit cards, to study the latest on how consumer spending is responding to the pandemic.
My analysis based on these data examines measures of real-time retail and restaurant spending growth, comparing weeks in 2020 with the corresponding weeks in 2019. The higher-frequency data show that the spending drop came at the end of March and beginning of April, followed by a partial recovery at the end of April. The revival stalled somewhat in May, but continued again in June, with spending in some weeks actually above 2019 levels. In July, however, there are initial signs that with Covid-19 cases spiking again, spending is declining, with retail spending down 7 percent for the week ending July 15. (See Figure 1.)
Figure 1
Restaurant spending saw a sharper decline and slower recovery: As of July 15, it was still down more than 15 percent. Aggregate service spending saw the largest decline in spending, more than 50 percent, and was still down more than 40 percent as of July 15.
The decline in consumer demand raises the specter that even if businesses are able to reopen after lockdowns end, there will not be enough demand to sustain them. A recent survey of small business owners found their biggest concern is that sales will not be high enough to justify their reopening. Layoffs—initially concentrated in sectors directly affected by the pandemic, such as restaurants and hotels—have metastasized to white-collar sectors, such as professional services, finance, and real estate.
Unemployment remains at a staggering level, with the latest jobs report showing 18 million Americans unemployed. The unemployment rate in June 2020, 11.1 percent, is the highest it’s been since the Great Depression in the 1930s, except for the previous two months. The good news in the report was that this elevated level is down 3.6 percentage points from April, driven mainly by workers who were on temporary layoffs being recalled to their jobs. The largest gains were in the leisure, hospitality, and retail trade sectors. Unemployment among Black workers declined by only 1.3 percent between April and June, about a third of the magnitude of White workers. And the data contained other worrying signs: The number of workers who have permanently lost their jobs increased to almost 3 million.
There are two additional factors that cause the headline number to understate the impact of the pandemic on employment. First, the report counts as employed an extra 2 million people who were “not at work for other reasons” and does not include the 4.6 million who have left the labor force since February. The 2 million were misclassified in error and should rightfully be counted as part of the true unemployment rate. Second, usually workers who leave the labor force are not included in totals of unemployment, but this pandemic presents a special case. Labor force participation fell substantially between February and May; a decline this large suggests that some of the people leaving the labor force may have done so temporarily due to the difficulties of looking for a job. Adjusting for these factors would increase the June unemployment rate to 13 percent.
Another worrying sign in the jobs data is government employment. State government employment declined by 247,00 between March and June, local government employment fell by a staggering 1.2 million, and federal government employment has been flat. As the coronavirus pandemic knocks a massive hole in their budgets, governments are laying off workers by the thousands. Lower consumer spending means lower tax revenue, and new coronavirus-related expenses means higher government spending. As a result, state and local governments are tightening their budgets at the worst possible moment for the economy. These government cuts have disparate impacts on Black Americans, who make up 12 percent of the labor force but 18 percent of government jobs.
The overall picture of the economy, then, is seriously troubling. Consumers are struggling, with incomes propped up by massive government stimulus and unemployment benefits. Some businesses are recalling furloughed workers but are concerned about a lack of demand. And governments are cutting employment and essential services due to unanticipated expenses and rapid declines in revenues. These fundamental issues will not resolve themselves on their own. The government acted with surprising alacrity in passing the Coronavirus Aid, Relief, and Economic Security, or CARES, Act in March, but further action is needed.
Policy proposals to head off a depression
First and foremost, the extra $600 per week Unemployment Insurance payments, slated to expire on July 31, should be extended and based on automatic triggers tied to an eventual economic recovery. The benefits are not only a lifeline to the 20 million workers who have been laid off but also the thin thread by which consumer spending is hanging. The drop in income and spending from the expiration of this benefit would be catastrophic for an economy in which market income is falling and spending has collapsed. Congress must extend the benefits and not put an expiration date on them, keeping them elevated until triggered off by unemployment returning to normal.
But even this is not enough. Given the collapse in consumer spending, it is clear that more demand support is needed than additional Unemployment Insurance payments. While the $1,200 stimulus payment in the CARES Act was a good start, there is no reason for this to be a one-off benefit. Monthly payments—$1,000 would be a good start—should be made until unemployment returns to normal and/or consumer spending improves.
State and local budget deficits through 2021 might approach $1 trillion. Without additional aid, the shedding of government workers across the country will continue. This is not a short-term issue that can be solved with a one-time stimulus bill. Once again, what is needed is monthly aid to state and local governments that continues until the unemployment rate returns to normal and states’ fiscal health improves.
While each of these policies can help to deal with the symptoms of the economic collapse, the fundamental cause remains the continuing spread of the novel coronavirus and the lethality of COVID-19 uncontained. Many of the layoffs are in the restaurant, travel, and retail sector, whose customers will not come back in sufficient numbers until it is safe to do so. Even with states beginning to reopen, 78 percent of Americans say they would be uncomfortable eating at a restaurant, and 67 percent are not comfortable shopping at a retail clothing store. While the outbreak may have left the front pages of some newspapers, it continues unabated. Around 500 Americans per day are dying from COVID-19, with 70,000 new cases reported each day.
Several of the hardest-hit European countries, such as Italy and Spain, have succeeded in suppressing new cases to the low hundreds per day. They did so by following the only tried-and-true plan that has worked against the coronavirus: a comprehensive program of tracking and tracing, with massive testing and effective tracing and quarantining of those exposed to the virus. Compared with the four economic stimulus plans Congress has already passed, the cost of these public health measures is moderate. Congress has already spent more than $1 trillion on relief and recovery measures—and more will be necessary—but the cost of following the proven path these other nations have taken would run in the relatively modest tens of billions of dollars, and could save additional trillions of dollars in consequently unneeded stimulus costs down the road.
There is much to be done. The federal government, state governments, and local governments must refocus and redouble their efforts to suppress the virus. A plan by Sens. Michael Bennet (D-CO) and Kirsten Gillibrand (D-NY) would create a national test-and-trace program that would hire hundreds of thousands of people who would help carry out testing, contact tracing, and eventually vaccinating to fight the coronavirus, at the cost of $55 billion. The Medical Supply Transparency and Delivery Act of Sens. Tammy Baldwin (D-WI) and Chris Murphy (D-CT) would finally rationalize the medical supply chain, utilizing the Defense Production Act to ensure the production of critical medical supplies.
Recovery from the coronavirus pandemic and the coronavirus recession is neither close nor assured. This mission has not been accomplished. The federal government needs to act and spend aggressively to support families, workers, and states and localities, and restore consumer demand. Acting swiftly and certainly can mean the difference between a lengthy, weak recovery with unnecessary suffering by those who already suffer from economic and racial inequality, and a strong recovery that leads to stable, broad-based growth and a more equitable economy.
Equitable Growth’s 2020 Paid Family and Medical Leave Grantees
The Washington Center for Equitable Growth today announced four research grants to scholars who are pushing the frontier of knowledge on paid family and medical leave in the United States. Their research, chosen in a competitive process with vetting by outside academics and approved by our Steering Committee, will be conducted by faculty members at leading U.S. colleges and universities.
Equitable Growth supports research to better understand the channels through which inequality affects growth and to provide evidence for policies that can address inequality and ensure strong, stable, and broad-based economic growth. We’re dedicated to bridging the gap between academia and policy by making sure research is relevant to today’s policy debates and by informing policymakers of cutting-edge research.
Equitable Growth is committed to advancing academic knowledge on paid family and medical leave. Connecting this new knowledge to policymakers, employers, media, and the public is increasingly important amid the ongoing public health crisis and recession caused by the coronavirus pandemic. In our first Request for Proposals specific to a subject area, Equitable Growth sought to stimulate research in three major areas:
Medical leave. Personal medical leave is the type of leave that is most frequently accessed, yet it also is the type of leave about which the least is known.
Caregiving leave. Caregiving leave impacts the lives of both caregivers and recipients, but outcomes are understudied for both groups.
Employers and paid leave. Even when paid leave is available from the state, employers affect their employees’ interactions with the paid leave system. The responses of firms to the availability of paid leave is a key channel through which paid leave affects the broader economy.
We are pleased to announce investments in research in all three areas.
In their project “Employers and paid leave: Assessing the interdependencies between state-level mandates, medical leave, and voluntary provisions of paid leave” Nicolas Ziebarth of Cornell University, Catherine Maclean of Temple University, and Stefan Pichler of ETH Zürich will examine the effect of both state-provided paid medical leave and city- and state-level sick pay mandates on the provision of paid leave. The proposed project will use restricted-use National Compensation Survey data with geographic identifiers and a difference-in-differences approach to determine whether employers react to the mandated provision of sick leave and state paid leave social insurance programs by reducing their voluntary provision of medical leave, private group disability insurance, and other forms of paid leave such as family leave. No other study has examined comprehensively the interactions and interdependencies of state-level sick pay mandates, employer provisions of paid leave, and state-run medical leave systems.
Two projects will examine caregiving leave. Priyanka Anand and Janusz Wojtusiak of George Mason University, Laura Dauge of Texas A&M University, and Kathryn Wagner of Marquette University will identify the characteristics of individuals who lack caregiving leave but have a family member who experiences the onset of disability or health shock. The investigators also will estimate the impact of access to paid caregiving leave on the financial security and employment for this group of individuals. The research team will use data from the National Compensation Survey to develop a machine-learning classification model to determine the likelihood that individuals observed in the Survey of Income and Program Participation have access to paid leave. This novel technique overcomes limitations in existing data sources that have hamstrung previous research efforts and is poised to make a significant contribution to the small but growing body of research on caregiving leave. This team’s project is titled “Access to paid caregiving and the impact on financial security, employment, and public program use of non-elderly adults in the United States.”
Kanika Arora of the University of Iowa and Doug Wolf of Syracuse University will look at another subset of people who may have caretakers in need of paid leave: older adults. Their project seeks to understand how access to paid family leave influences the provision of eldercare and labor market outcomes among individuals in midlife and whether the effects vary by the characteristics of care providers or recipient. To examine these issues, the research team will pool data from 11 waves of the Health and Retirement Survey to examine the experiences of respondents ages 51 to 65 with at least one living parent. They will survey responses to determine the intensity of caregiving provided, as well as the intensity of labor force participation, and use a difference-in-differences approach to compare the experiences of individuals residing in states with operational paid leave social insurance programs (California, New Jersey, and Rhode Island) to those who reside elsewhere. This team’s project is titled “Paid family leave and work eldercare tradeoffs.”
In their project “Employer employee discordance in awareness and perceived accessibility of paid family and medical leave” Julia Goodman of Oregon Health & Science University and Portland State University School of Public Health and Danny Schneider of Harvard Kennedy School will examine whether and how employers and employees are aligned in understanding about the accessibility of paid leave. Their research takes advantage of a unique data source, The Shift Project at the Malcolm Wiener Center for Social Policy at Harvard Kennedy School. The project samples low-wage service-sector workers from within a set of large retail and food service employers across the United States and allows the team to match employee responses with individual employers. The research will pair quantitative analyses of Shift Project data and in-depth interviews with twenty human resources staff members at firms in the sample. This mixed-methods approach will provide important information about how employer practices may mediate awareness and take-up of paid leave benefits.
Equitable Growth’s process does not end with grantmaking. We look forward to engaging with this impressive slate of grantees through publication of their findings in our working paper series, dissemination of their findings, and continuing to build a bridge between those who make paid leave policy and those who can provide the evidence needed to do so in a way that supports an economy that works for all.
Thank you to our paid leave advisory committee, whose expertise made this round of grantmaking possible:
Chantel Boyens, Principal Policy Associate, The Urban Institute Tanya Byker, Assistant Professor of Economics, Middlebury College Christopher Ruhm, Professor of Public Policy and Economics, University of Virginia Jack Smalligan, Senior Policy Fellow, The Urban Institute Kristin Smith, Visiting Associate Professor of Sociology, Dartmouth College Alexandra Stancyzk, Researcher, Mathematica Policy Research Jane Waldfogel, Compton Foundation Centennial Professor of Social Work for the Prevention of Children’s and Youth Problems, Columbia University
