The Democrats’ HEROES Act Could Extend Our Economic Distress

Continuing to fund additional unemployment benefits will deter workers from returning as the economy tries to reopen.

By
36

Thanks to the economic relief packages that have already been implemented, the U.S. is set to run a $3.8 trillion deficit this year. But Speaker of the House Nancy Pelosi and her fellow House Democrats have proposed yet another round of spending—the $3 trillion “HEROES Act.”

The bill includes a federal bailout for financially struggling states and localities and additional broad-based $1,200 relief checks for individuals. But the most significant provision could be its extension of enhanced unemployment benefits through January 2021. Critics warn this could undermine states’ efforts to reopen and put a drag on our economic recovery through 2021. 

Here’s why.

The original $2 trillion CARES Act, passed in March, expanded eligibility for state-level unemployment benefits, and it gave workers an additional $600 weekly in federally funded benefits. This made it more profitable for some workers to stay home than return to work. 

Start a Free Trial
Get every newsletter and all of The Dispatch. Support quality, fact-based journalism. Get Started ALREADY HAVE AN ACCOUNT? SIGN IN
36
By
Comments (36)
Join The Dispatch to participate in the comments.
 
  1. Merlin

    IMO the principal reason that many workers will if financially possible not immediately return to work is not that they are lazy good-for-nothings looking for a handout out, which many people in certain circles think is typical if not universal of all American workers, but because they do not believe that it is yet safe to return to work, regardless of being offered additional "hazard pay" or a COVID_19 coffee mug or t-shirt. And they are simply not willing to risk their lives and leave their family in the lurch because politicians and billionaires think that their lives are not worth losing any additional profit.
    We have spent trillions bailing out mega corporations and billionaires, surely we can spend a few trillion bailing out the really essential workers who have kept this nation running and will continue to do so even at the peril of their lives. While the politician have proven themselves to be unessential and and Millionaires and billionaires have been attending a Masque of the COVID-19 in their gated estates, yachts, and islands.
    Customers are not all that eager either to rush out there where wise men fear to go shopping and spend they hard earned money that they may be needing to pay their hospital or funeral bills. Jus' sayin'.

    Collapse
  2. Avatar photo
    rlritt

    Most wait staff earn $5 to $10 per hour plus tips. That's $9600 to $19,000 per year. I don't know where you got $35,000 per year. Now just because a restaurant opens, doesn't mean they'll have customers. And working with the public is a dirty business. Nearly impossible if you're handling dirty dishes and silverware. So you're saying people who don't want to expose themselves to possible contagion for such low pay are greedy and lazy and just want to stay on the dole is completely unfair and elitest.

    Collapse
  3. Connor Donaldson

    While extending the expanded unemployment insurance certainly runs the risk of prolonging the economic catastrophe before us, I've been disappointed that more conservatives aren't acknowledging that fundamental changes have to be made to the economy to prevent "the next one" from crippling our economy like Covid-19 has. I'd like to see Republicans push for universal paid sick leave & embrace the dignity of work by advocating a floating minimum wage tied to the CPI. Conservatives should support the abolishment of the sub-minimum tip wage, a vestigial relic of slavery. Particularly as working-class individuals have shifted allegiance, it makes sense to propose market-based alternatives to progressive goals. Why does the pro-life party not support universal child care or propose legislation to increase access to pre-natal services? Being a party of opposition is useful until you try to govern. I hope 2020 is the wake-up call that the right needs to become more than anti-Democrats.

    Collapse
  4. Avatar photo
    Scarlette Tarte

    Another thing we could do, is let Americans still receive their benefits while they go back to work. Call it "hazardous duty pay". Let the low wage workers know we understand work is risky right now, and if they return to work, they will still receive their benefits, at least for the first two months back at work AND if the virus kicks up again, they will be laid off again with no interruption to their unemployment.

    This would mitigate the risk in their minds, about the virus and about a second round of layoffs.

    And make them feel safe in going back to work.

    Mostly, stop begrudging the working schlub from getting ahead a very little bit.

    Collapse
  5. Avatar photo
    Scarlette Tarte

    It is not just higher unemployment keeping people home...They sincerely don't want to go back while a virus raging. They don't think their employers will keep them safe. They won't make customers wear masks, they won't help the employee of the employee gets sick with the virus.

    Here is a plan. Make a real reopening plan, based on keeping employees safe. Tell them the bus will immediately close if numbers start rising. Tell them you will not tolerate customers or other employees not masking or social distancing.

    Lastly...give them a freaking raise. Most of these workers are low wage, and right now they are making enough money to actually save some, to get ahead in bills, to pay their credit cards off. If you can't give them a raise, then just let them ride on unemployment until that runs out. Then reopen. Let them get ahead a little bit in their life.

    And maybe realize that, if you can't open without your employees, then they are perhaps more essential to your business...And that they deserve better pay and benefits.

    Collapse
  6. Kevin Heller

    I struggle to understand the thought process behind staying unemployed instead of going back to work. Ok, you make more on unemp for a while but what is the plan once it ends. Assume the job will still be there? just job search? Seems like it is short-sighted. I'm sure some people also weigh the risk of going back when we haven't implemented enough testing capability, or a proven treatment. And in that case I'm sympathetic and don't know how you balance the competing interests.

    Collapse
    1. PM

      Depends on where you live. If you work part time and make less than $10/hr then the extra $600 has real appeal.

      There's a real question of whether the job will be there or not.

      But you're going to get paid unemployment if the job is not there. It remains to be seen how long the $600 will last but I suspect that if the unemployment numbers are high enough that enhanced benefits will continue.

      Collapse
  7. Avatar photo
    Logical

    For ages, the defense and govt (including Trump for $150 golf cart fee for SS) contractors, wall street bankers, Medicare doctors have been suckling on more than their share of tits. No one cried the moral hazard. I don't mind if the little guy gets a few spoons of extra milk.

    Collapse
    1. Cody Passman

      It would be nice to see a comparison history of tax payer bail outs to capital v bails out to labor. Not to sound Marxist as I am a supporter of markets but I bet the comparison would put some things in perspective.

      Collapse
      1. Avatar photo
        Logical

        If we consider the Fed balance sheet as backstopping capital, the direct labor portion is a small fraction. Separately, a big chunk of ppp is going to turn into windfall profits for digital companies, hedge funds, smaller pharmacies, etc.. whose business is either not effected or even booming.

        Collapse
    2. Avatar photo
      Logical

      To add:

      - My mother-in-law was was in the hospital for two nights. All sorts of doctors, about a dozen other than the actual surgical team, just walked through. The total bill to Medicare was $86k
      - Defense contractors routinely under bid and just wait for a change order....juice in $Bs, accumulating to $Ts
      - None of the WS bankers ever returned their cumulative bonuses, even though we had to put up loans to cover cumulative losses for about 10 years in 2008/2009
      - Trump has been charging face value room cost to SS. In the history of hotel industry, no one ever paid the sticker value displayed somewhere in the room, other than Superbowl time.

      Shall I keep going. Everyone crying foul now for a waiter getting a few extra bucks.

      Collapse
  8. Cody Passman

    I agree with some of the commentators that this article is overly broad and does not dig into details of the UE program when issuing the warning that the CAREs and potentially the HEROES Act will have longstanding negative impacts on our recovery. The honest answer is we do not know just like we did not know whether or not the bailouts, or the quantitative easing, after the financial crisis were going to work at the time (which still can be debated). However, I would have liked to see Mr. Polumbo wrestle a bit more with his conclusion. What I think should have been included is some discussion of the following:

    1. Number of people claiming UE v actually eligible
    2. UE benefits have an expiration date
    3. UE requirements of actively looking and applying for jobs to maintain eligibility when restrictions are loosened.

    I think the cited evidence to support his position is lacking. Aside from the one off examples, the only other source of support mentioned is the Heritage “study”, which reads more like a conclusion supported by the authors perceptions of how humans will behave without any backing from hard data (where are the surveys actually asking people what they intend on doing?!?! Go to the source!!!). We all know economics is a soft science anyway.

    I am of the position that given the opportunity, majority of people receiving benefits will either choose or be forced to go back to work v sitting at home and doing nothing. I think looking back this will be a fascinating topic of study and the more discussion on the issue the better.

    Collapse
    1. Cody Passman

      I meant to include a link to the following article from Pew, which I thought was insightful: https://www.pewresearch.org/fact-tank/2020/04/24/not-all-unemployed-people-get-unemployment-benefits-in-some-states-very-few-do/

      Collapse
  9. Avatar photo
    BrandonAlleman

    I am tired of hearing about the anecdotal experience of the Washington spa owner. There are plenty of other anecdotal stories telling different stories. The PPP attempted to create a parrallel unemployment system that that runs out in June. Many or most restaurants, spas, and retail had already laid their employees off before they even applied for the PPP money. It's unlikely these businesses will be providing full employment by the time the PPP money or current unemployment expires regardless of local regulations.

    The limits on the PPP funds makes them hard to use for the purpose of keeping the businesses afloat until they can resume on their own two feet with it's strict timeline and 75% for payroll requirements which were both instituted by the SBA and were not part of the original bill.

    This isn't normal times so it's discouraging to hear normal tropes of unemployment incentivizing people working the system as the only way to view this. The pandemic has added the unknown dangers of safety at work and providing childcare. There are plenty of anecdotal stories of people being given the choice of part time work or losing their unemployment since they refuse.

    Returning unemployment to 100% seems reasonable after CARES expires but making the PPP more flexible and continuing unemployment for COVID affected individuals beyond the CARES Act seem reasonable too.

    Collapse
  10. Avatar photo
    Michael Darwin

    I would like to propose a bill that permanently prohibits further bills from using acronyms.

    Collapse
    1. Avatar photo
      DougCLE

      I will canvas door-to-door for that one.

      Collapse
Load More