On 27 March Donald Trump signed the Cares Act into law, Congress’s main sweeping response to the economic depression which was induced by coronavirus. There are many problems with it, but one truly exemplary part of the legislation was the federal addition of $600 dollars a week to unemployment benefits. The United States historically has very ungenerous unemployment benefits. With tens of millions of people becoming unemployed, many households would be facing foreclosure, eviction and worse on those skimpy unemployment benefits. Instead, for those actually able to receive their benefits, the additional $600 dollars a week has made unemployment compensation a livable income and helped many people survive these difficult times.
This policy is all the more amazing because it was accidental. The original proposal for increasing unemployment insurance was to increase the “income replacement rate” of unemployment compensation to 100%. In other words, Congress initially intended to simply make sure that everyone was paid unemployment compensation equal to their previous average wage income. Congress changed the proposal to adding $600 dollars a week when it became clear that increasing the replacement rate was not something that state unemployment insurance systems could implement with their aging, understaffed and underfunded information technology systems. $600 dollars a week is approximately the amount of money it would take to bring the “average worker” up to 100% replacement of their income.
Congressional Republicans claim that this policy has actually increased unemployment by providing a strong “disincentive to work”. However, the reality is this policy has mainly helped businesses plan for the future and provide their customers income so they keep coming back. The additional $600 a week has been especially beneficial to precarious gig workers with volatile incomes at the best of times. Like the minimum wage, the minimum benefit level in unemployment compensation helps set standards in the labor market.
Unfortunately, the last supplementary unemployment benefits went out last weekend because Congress has failed to reauthorize them. Even if they reauthorized the $600 a week immediately, which seems unlikely, it would take 1-5 weeks for state workforce agencies to reprogram their computer systems to send out the additional benefits again according to the National Association of State Workforce Agencies. System adjustments would likely end up at the higher end of that range if the number is slashed to $200 dollars a week, as congressional Republicans are proposing. Any attempt to skip straight to boosting replacement rates would take months to implement.
This unconscionable withdrawal of support comes as the federal eviction moratorium on federally backed properties has expired, while a number of state and local eviction moratoriums are set to expire soon. These two expirations are threatening to collide and make millions of people homeless in the middle of a global pandemic. In other words, Congress’s failure to extend both of these policies is not just economic malpractice but could make coronavirus impossible to suppress. Housing is always a form of healthcare, but it is an especially important form of healthcare during the spread of a very infectious airborne virus.
In order to avoid these disasters, Congress must immediately extend the federal eviction moratorium until the public health emergency is over, extend the $600 a week unemployment benefit until the unemployment rate is below 5% again and provide generous federal funding for eviction legal assistance. Over the medium term, the state unemployment insurance system must be federalized to ensure efficient delivery of benefits and relieve the fiscal burden of unemployment insurance from state governments. More generally, state and local governments need far greater federal fiscal support in order to facilitate their response to coronavirus and prevent their budget cuts and tax increases from sinking our fragile economy.
By accident, Congress has stumbled on a great and innovative economic policy which by itself greatly improves our social support system. It discovered the $600 a week supplement just in time to diminish the worst economic effects of the coronavirus depression. It is already an unacceptable failure that these benefits have expired, leaving millions of households in immediate danger. If Congress fails to reauthorize the full $600 a week soon, the economy and the fight against the virus will take a turn for the worse. Congress still has the power to head off this looming disaster, it simply needs to act. If Congress won’t act quickly and sufficiently, the public must force it to.