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Thursday, April 2, 2020

States Start Grappling With Hit to Tax Collections [feedly]

States Start Grappling With Hit to Tax Collections

COVID-19 has triggered a state budget crisis. States, tribes, and local governments are incurring huge new costs as they seek to contain and treat the coronavirus and respond to the virus-induced spike in joblessness and related human needs. At the same time, they are projecting sharply lower tax revenues due to the widespread collapse of economic activity brought about by the virus' spread and needed containment activities. The federal stimulus bills to date include fiscal relief — but it's already clear that it will fall far short of what states, tribes, and localities will need.

It's impossible to predict what the precise impact of the pandemic will be on the economy, but the consensus is that the country appears to have already entered a recession that could be much worse than the Great Recession. For example, Goldman Sachs projects that the unemployment rate will hit 15 percent in the third quarter (July-September) and remain at 7 percent through the end of the year.

States have only just begun to forecast the pandemic's likely impacts on their revenues based on the best economic projections available and their experience with past recessions and other shocks to state economies (see Table 1). The early reports are sobering, and as the full scale of the downturn becomes clearer, revenue projections will likely fall further.

State tax collections will be rocked by both the immediate impact of the measures taken to stem the spread of the virus and a likely deep COVID-induced recession.

States face an immediate problem for the remaining months of this fiscal year because sales tax collections are likely already declining and income taxes withheld from paychecks will begin to drop soon as workers are laid off. In addition, the federal government has delayed the federal income tax deadline (which many states also use) from April 15 to July 15, which will lower revenue and increase costs in the next three months in most states.

But it's more than just a timing shift. There's a strong possibility that the delayed revenues will also be substantially less than expected if small businesses facing bankruptcy or out-of-work individuals can't make their tax payments in July, making next year's problems even worse.

  • Vermont estimates a revenue drop of $224 million this fiscal year.
  • Arkansas expects $353 million less in revenue this fiscal year, with $193 million of this drop due to the filing extension and the remainder due to lower collections.

And early state estimates show that revenues for the next fiscal year, which begins on July 1 for most states, could fall as much or more than they did in the worst year of the Great Recession. New York and Colorado, for example, project revenue drops of 13 percent or more if the recession is deep.

  • New York's tax revenues will fall by between $9 billion and $15 billion in 2021, according to the state's Budget Director. Both the state Comptroller and the Budget Director project dramatic revenue declines; the Budget Director's projection is more pessimistic.
  • Colorado estimates that a recession could cause revenues to drop by as much as $1.8 billion in 2021 and $2.1 billion in the following year.
  • California expects a decline of several billion dollars in capital gains income alone in 2021 as a result of the stock market fall, according to the Legislative Analyst's Office.
  • Virginia's Secretary of Finance estimates that revenues will drop by at least $1 billion in both 2021 and 2022, compared to pre-COVID projections.

Another group of states are facing a double threat. States with a high concentration of oil-related industries are seeing a decline in economic activity and tax collections because of plunging oil prices on top of COVID-19-related effects and the recession. For example, Alaska is projecting a $600 million decline in revenues in the coming fiscal year due to the oil price drop, and New Mexico could see a $1.5 to $2 billion drop.

States will first draw on their rainy day funds and other budget reserves to address these shortfalls but, as in the last recession, those reserves are going to be far from adequate. And states will worsen the recession if they respond to this dire fiscal crisis by laying off employees, scaling back government contracts for businesses, and cutting public services and other forms of spending.

There are already reports of the cuts to come. For example, Ohio's governor has asked state agencies to prepare estimates of what it would take to cut their budgets by 20 percent. Given the economy's extremely rapid decline and the extraordinary damage being done to state, tribal, and local budgets, federal policymakers will need to provide more help to states and families affected by the crisis.

Tracking Estimated State Revenue Shortfalls

We've collected the estimated revenue declines we're aware of in the table below. We'll update this list as states continue to revise their revenue estimates for the upcoming fiscal year. In all cases these are preliminary estimates that will be updated as more is known about the impact of the COVID-19 pandemic on the economy and tax collections.

COVID-19 Pandemic Expected to Cause Sharp Revenue Drops in States
StateAmountPercent of Pre-COVID-19 projectionsSourceDate
Preliminary Estimated General Fund Revenue Declines in Fiscal Year 2020
Arkansas$353 million6 percentDepartment of Finance and AdministrationMarch 23
Colorado$396 million3 percentOffice of State Planning and BudgetingMarch 16
Michigan$1 to $3 billion4–12 percentTreasury, Budget Office, press reportMarch 30
Oklahoma$219 million3 percentAppropriations ChairMarch 31
Vermont$224 million14 percentJoint Fiscal OfficeMarch 25
Preliminary Estimated General Fund Revenue Declines in Fiscal Year 2021
Alaska$600 million20 percentLegislative Finance Division, press reportMarch 13
Colorado$750 million6 percentOffice of State Planning and BudgetingMarch 16
Colorado-recession scenario$1.8 billion13 percentOffice of State Planning and BudgetingMarch 16
Hawaii$319 million4 percentCouncil on RevenuesMarch 20
Kentucky$115 million1 percentHouse Budget Chair, press reportMarch 25
Michigan$1 to $4 billion4–16 percentTreasury and Budget Office, press reportMarch 30
New Mexico$1.5-$2 billion20–27 percentSenate Finance Committee, press reportMarch 31
New York$4 – $7 billion $9 - $15 billion5–8 percent 9–17 percentComptroller, State Budget Director, press reportMarch 17 March 24
Oklahoma$250 - $500 million4–7 percentAppropriations ChairMarch 31
Virginia$1 billion4 percentSecretary of Finance, press reportMarch 24
April 2, 2020

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3.5 million workers likely lost their employer-provided health insurance in the past two weeks [feedly]

3.5 million workers likely lost their employer-provided health insurance in the past two weeks

We estimate that 3.5 million workers were at high risk of losing their employer-provided health insurance in the past two weeks. Because the United States is unique among rich countries in tying health insurance benefits to employment—roughly half of all U.S. workers receive health insurance through their own employer's provided coverage—many of the newly unemployed will suddenly face prohibitively costly insurance options. The linkage between specific jobs and the availability of health insurance is a prime source of inefficiency and inequity in the U.S. health system. It is especially terrifying for workers to lose their health insurance as a result of, and during, an ongoing pandemic.


Last week and this week saw a historically large number of workersfiling initial claims for unemployment insurance (UI) benefits due to layoffs (or furloughs of hours reductions) connected to the economic impact of the coronavirus and associated "social distancing" measures. The 8.7 million new claims over the past two weeks are about 5.9% of total employment over the last year, 2.5 times as large as any previous two-week period on record.

This scale of job loss will obviously cause huge distress for the affected workers and their families. One aspect of this distress will be the likely loss of employer-provided health insurance (EPHI). Most non-elderly people in the United States who have health insurance get it through their own employer or through the employer-sponsored plan that was available to somebody in their family. When jobs are lost, this primary source of health insurance coverage is also lost.

Using new UI claims by industry from the state of Washington—the epicenter of the coronavirus outbreak in the United States—we are able to provide a very rough estimate of the number of workers at high risk of losing health insurance they had through their own employer due to coronavirus-related layoffs (or furloughs or hours reductions). We can't say exactly how many people will lose insurance coverage altogether for several reasons. For example, some workers who lose EPHI due to layoffs or hours reductions that trigger UI claims may be able to obtain coverage through health care exchanges set up by the Affordable Care Act (ACA) or through Medicaid. Some of this group may also be able to obtain continuing coverage through COBRA, paying out of pocket the full cost of their EPHI coverage. Some workers may be able to obtain coverage through other family members, or if only experiencing a temporary furlough or hours reduction, their employers might continue to pay for coverage. On the other hand, our calculations might understate the loss of health insurance coverage because they do not account for family members who are no longer covered because of the policyholder's layoff. And because not all layoffs result in UI claims, we will underestimate the actual magnitude of job losses.

Those caveats aside, we find that 3.5 million workers were at high risk of losing EPHI due to coronavirus-related layoffs in the past two weeks. Most EPHI plans are monthly, so April 1 (yesterday) is likely the day the bulk of these losses would have happened. Policymakers should think hard about how to help these workers. A quick and minor fix that would provide some short-term help would be for the federal government to allow a special enrollment period for the Affordable Care Act (ACA) exchanges in the 38 states that rely on the federal government to administer their exchanges. 11 of the 12 states who run their own exchanges (and the District of Columbia) have already allowed such a special enrollment period. The federal government (and Idaho, the lone holdout among state-run exchanges) should follow suit. This special enrollment period would make it easier for workers who have lost EPHI to enroll quickly in the ACA exchanges.

At a minimum, all COVID-19 related care should be covered by the federal government at no cost to patients. However, we should also think about how to hold harmless workers who lose EPHI due to COVID-19 and then find themselves facing expensive medical bills because of other health ailments that would have been covered by their previous employer plan. A bolder and comprehensive policy would be to extend Medicare and Medicaid to all those suffering job losses during the pandemic period, with the federal government funding this expansion. Finally, we should bolster overall measures to provide relief and spur economic recovery once the epidemic's economic effects pass.

Below, we document how we made our estimate of 3.5 million workers at high risk of losing EPHI due to recent layoffs.


To calculate potential losses of employer-provided health insurance, we first calculated national industry-specific shares of employer-provided health insurance coverage rates using data from the 2018 March Current Population Survey, limiting the sample to those who worked in the private-sector or government during the previous year.

Table 1

From the national industry-specific shares in Table 1, we assumed that if, say, there were 100 initial UI claims filed in a state's "Utilities" sector, then that represents 100 job losses (or hours reductions – which can trigger UI claims in most but not all states)—and 77 of those workers lost their employer-provided health insurance, because the EPHI coverage rate in that sector is 77.1%.

To estimate UI initial claims by state and industry, we used industry-specific initial claims data from Washington State for the week ending March 21. Washington was hit early by the COVID-19 crisis and implemented several economic restrictions before March 21, including statewide bans on large gatherings and the closure of all sit-down restaurants.

Washington had a total of 133,478 initial UI claims for the week ending March 21. The industry-specific data provided by the state does not assign industries to every claim, so we proportionally scaled the available industry data to sum to the total number of initial claims in Washington. Table 2 combines the sector-specific UI claims in Washington with the national EPHI shares from Table 1 and provides total job losses and jobs lost with EPHI.

Table 2

Table 2 also expresses total job losses in an industry as a share of that industry's employment in Washington for the prior year, calculated using the most recent QCEW data for 2018q4-2019q3. To extend the analysis to other states, we apply this industry-specific job loss share to all other states' industry-specific employment totals, and then proportionally scale these losses so that each state's total job loss equals its statewide not-seasonally-adjusted total initial UI claims for the two weeks ending March 21 and March 28. These estimates therefore distribute state-specific UI claims to industries in a way that accounts for labor market data from the early and intense COVID-19 shock in Washington state and accounts for each state's industry mix prior to the epidemic. Moreover, the calculation allows us to incorporate EPHI variation across industries when estimating the national share of workers at high risk of losing EPHI due to recent layoffs.

Table 3

Finally, we can do the same exercise of using the Washington UI claims by industry to allocate job losses to industries in each state, and then derive the likely number of workers losing EPHI (based on national shares of workers in each industry who receive EPHI). We display these results below. Unsurprisingly, the hardest-hit states are those with high shares of workers in accommodations and food services, such as Nevada.

Figure A

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The Trump NLRB needs to be removed [feedly]

The Trump NLRB needs to be removed

That's it. The Trump appointees to the National Labor Relations Board (NLRB) need to be removed for neglect of duty and malfeasance—now.

The latest outrage? Yesterday, the Trump board added to its long and growing list of anti-worker, anti-union actions, issuing new rules that undermine the longstanding practice of voluntary recognition, by which employers agree to recognize and bargain with a union when a majority of employees sign cards saying they want a union. The Trump board is now requiring these employers to post a notice telling workers they can file a petition and have an election to get rid of the union – the very same union that a majority of workers have just chosen. And the new rules call for running union elections and counting ballots even when charges have been filed alleging that an employer has engaged in illegal unfair labor practices that have tainted the election. In an Orwellian twist, the Trump board calls these new rules, which undermine workers' ability to form and keep their unions, rules to "Protect Employee Free Choice."

What makes this latest action so egregious and outrageous is that it is happening at the very same time that the Trump board had unilaterally halted all elections by workers seeking to form unions. Thousands of workers who were poised to vote on forming unions have had their elections cancelled—even though the elections could be held by U.S. mail, whose employees are courageously keeping the Postal Service going. Instead, workers are left without a voice, and the Trump NLRB has done nothing to discourage or prohibit employers from running anti-union campaigns while workers are left in the lurch.

That's right. The agency can't figure out a way to let workers vote when they want a union, but they found time to finalize a rule to make it harder for workers to form and keep unions. The double standard is obvious, it is outrageous, and it is a dereliction of these appointees' statutory duties. After the Trump Board got called out publicly on this double standard by Rep. Bobby Scott, the chairman of the House Education and Labor Committee with jurisdiction over the NLRB, and a petition campaign by the AFL-CIO, the Trump Board backtracked and today announced that elections will resume next week.

In recent days, we have seen a surge in strike and protest activity by workers seeking action by their employers to protect them from the deadly COVID-19 virus. Nurses seeking protective gear. Instacart workers seeking hazard pay. Amazon workers seeking better safety practices. And it goes on and on. Faced with unprecedented circumstances and challenges, workers are standing together with their co-workers to demand changes to protect them from getting sick and possibly dying from this new disease.

The NLRB was established by Congress to protect workers' rights to organize and engage in exactly this sort of protest activity. But the Trump Board has taken the law in exactly the opposite direction, issuing decision after decision undermining workers' rights to organize and giving employers more power to interfere in organizing campaigns. One of these actions resonates particularly loudly in this moment—a decision by NLRB General Counsel Peter Robb that Uber drivers—and presumably other "gig" workers—are not protected by the federal labor law because—according to Uber and Robb—they are independent contractors. Yes, that's right—the same workers who are most vulnerable in this current crisis won't be protected by the Trump NLRB if they are fired or retaliated against for protesting for better safety on the job.

Trump's appointees to the NLRB took an oath to faithfully uphold and execute a law whose purpose is to protect and promote the right of workers to form unions and engage in other group activity to improve their lives at work. The necessity and importance of these rights to working women and men is being demonstrated every day as workers confront the COVID crisis. But instead, Trump's appointees are willfully neglecting their statutory duties and promoting rules and policies that directly conflict with the law's purpose. Appointed officials cannot be removed lightly – they can only be removed for "neglect of duty or malfeasance in office." Sadly, Trump's appointees to the NLRB have met that standard. It is time for them to go.

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Nearly 20 million workers will likely be laid off or furloughed by July: Updated state numbers project further job losses due to the coronavirus [feedly]

A grim report from EPI

Nearly 20 million workers will likely be laid off or furloughed by July: 

Updated state numbers project further job losses due to the coronavirus

As the United States comes to terms with the scale of the coronavirus pandemic, new economic projections continue to deteriorate, indicating an increasingly devastating impact on the U.S. economy. The latest Goldman Sachs forecast predicts a 9% contraction for the first quarter of this year and a 34% contraction in the second quarter. This large drop in GDP is consistent with 19.8 million jobs lost by July, bringing unemployment rates across the country into the mid-teens.

Our estimate is much larger than was predicted even a week ago, when the forecasting implied 14 million would be furloughed or laid off. Each escalating forecast is an indication that policymakers at every level of government need to be acting immediately to curb the spread of the virus and protect the health and economic well-being of their communities.

Importantly, these latest estimates account for the recently enacted CARES Act and assume a fourth coronavirus-related federal relief bill that will ramp up state aid—a particularly effective form of stimulus. In other words, Congress must pass additional stimulus measures—especially aid to state and local governments—just to keep the losses where we are predicting them to be today. Policymakers could go one step further and use public debt to finance the wages of workers who would otherwise lose their jobs, as Britain and Denmark are doing. This would allow workers to keep their jobs, even if they are unable to work from home or their employer is closed. It would also allow some workers to save money that they could spend once the pandemic has subsided, which would help jumpstart the recovery.

In the map and tables below, we have updated our estimates of predicted layoffs and furloughs by state and added a projection of the resulting unemployment rates in each state. The map in Figure A shows that California is expected to have the largest number of jobs lost, with the state losing nearly 2.3 million jobs through June. Texas, Florida, and New York have the next largest job loss numbers at 1.7 million, 1.3 million, and 1.2 million jobs lost, respectively—losses representing between 14.7 and 17.0% of total private-sector employment in these states.

Figure A

Nevada is expected to have the largest job losses in percentage terms (20.1%), as the state's high concentration of retail, leisure, and hospitality jobs are likely to experience disproportionate losses. Social distancing measures are essential for stopping the spread of the coronavirus, but they have a disproportionate impact on businesses and workers in these industries, for whom teleworking is largely not possible.

Nevada will also have the highest unemployment rate (19.7%) of any state by July, while more than 1 in 6 workers are projected to be unemployed in Alaska (17.8%), Hawaii (17.8%), Mississippi (17.5%), and Delaware (16.8%).

We should note that not every one of these lost jobs would necessarily be captured by employment surveys. For example, if workers are furloughed rather than laid off, then they may still be on employer payrolls. This 19.8 million job loss number is a measure of lost labor demand that could show up as reduced hours, layoffs, a collapse in hiring, or furloughs.

Our unemployment projections simply add the projected job losses onto February 2020 unemployment levels in each state (the most recent available state-level data) and divide by the February 2020 labor force levels. (In other words, we are assuming no change in labor force levels or participation.)

These assumptions may overstate the actual change in the official unemployment rate since some workers hold multiple jobs, and it is unclear how the current circumstances will affect people's labor force status. Under normal circumstances, people are only counted as officially unemployed if they are actively searching for work—something that is not possible, nor desirable, with social distancing measures in place. Yet, they do indicate how dire the situation is likely to be for working people in every state. In the depths of the Great Recession, the highest unemployment rate any state reached was 14.6% in Michigan in June 2009.

Table 1

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Policymakers twice missed the chance to avert widespread job loss, now they should act to avoid more layoffs [feedly]

Policymakers twice missed the chance to avert widespread job loss, now they should act to avoid more layoffs

The economic impact of the coronavirus is well upon us. Though not yet officially declared, we are certainly now in a recession. Last week we learned that 3.3 million workers applied for unemployment insurance claims during the prior week alone, and we will see much worse in coming weeks. I have been a labor market economist for a long time—including through the Great Recession—and I have never seen anything like this.

Congress just passed a bill that, while problematic in important respects, will reduce the hardship for millions of people who are out of work because of the virus. The most effective parts of the bill are a $600 increase in weekly unemployment insurance checks and the creation of a special disaster relief program that expands unemployment insurance coverage to many of those who fall through the gaping holes in our current system, including gig workers and the self-employed.

But is important to remember that mass unemployment as a result of the coronavirus did not have to happen—in fact, policymakers twice missed the chance to avert widespread job loss. First, the failure to take the coronavirus seriously early on and to implement rapid and accurate testing means we cannot now distinguish between those who are sick and need to be quarantined, and those who are healthy and could largely continue normal activity. This in turn means that to avert a much greater disaster, we have no choice but to enforce widespread lockdowns rather than more targeted quarantines. In other words, the lack of early response turned a public health threat into an economic recession, which will continue at least as long as our testing and tracing capability is insufficient.

Moreover, even after we failed to test for the virus on a sufficient scale and control its spread, we still could have protected jobs. Other countries have chosen to compensate coronavirus-impacted employers for close to the entire amount of their workers' salaries, as long as they keep their workers on payroll. Making it possible for businesses to keep workers on payroll is crucial because at some point, hopefully sooner rather than later, the threat of the virus will be over, and the economy will be able to restart. People who have been on lockdown will be very excited to go out to restaurants and do other things they have missed out on (count me among them!). But that sudden surge in demand could go one of two ways. If employers still have their workers on payroll, they will be able to turn the lights back on and deal with the rush of customers. But if they had to lay off workers, they will need to spend great deal of resources posting jobs, interviewing, hiring, onboarding, and training. This scramble to re-match workers with jobs will prolong the pain of the recession much longer than necessary.

And for workers, not losing their job would obviously matter enormously. For one, it would mean being able to hold on to employer-provided health benefits. But it would also mean that these workers —and their families—would not face the long-term scarring effects of job loss. Losing a job can have lasting effects on earnings and can negatively affect the whole family for years. For example, research shows that children whose parents were laid off have lower earnings as adults than other children.

The bill that passed Congress does have some provisions that will preserve jobs. For example, it makes clear that workers who are furloughed because their workplace closed due to the coronavirus will be eligible for unemployment insurance benefits and provides businesses with a payroll tax credit for keeping workers on health insurance. The bill also includes loans for small businesses that will be forgiven if the money is used to preserve jobs and wages. These measures will incentivize employers to keep workers on payroll. However, a glaring hole in the bill is the fact that its single biggest tranche of money goes towards industry bailouts that do not include adequate safeguards to ensure that the money is used to preserve jobs, rather than to preserve the wealth of shareholders, creditors, and corporate executives. This is a mistake that will cause lasting harm to workers who would have kept their jobs if the conditions on the bailouts had been stronger, and it will prolong the downturn.

Based on new GDP forecasts, we project that nearly twenty million workers will be laid off or furloughed by July as a result of the coronavirus shock. These lob-loss estimates are based on GDP forecasts by Goldman Sachs that, shockingly, include the impact of the $2 trillion relief package that was passed last week and also assume another relief package will be passed that will focus on aid to states, which is a particularly effective form of stimulus. In other words, far more than 20 million workers will be laid off or furloughed unless we get another relief and recovery package that includes a substantial amount of state aid.

Though we should have acted sooner, Congress should now turn to crafting another relief package that includes not just state aid but also includes policies to encourage employers to keep workers on payroll or on furlough during the lockdown—rather than laying them off—so as few families as possible face the near- and long-term consequences of job loss and so that workers are ready to jump back in to work as soon as the lockdown is over.

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The New Front-Line Workers: The Working People Weekly List [feedly]

The New Front-Line Workers: The Working People Weekly List


Every week, we bring you a roundup of the top news and commentary about issues and events important to working families. Here's the latest edition of the Working People Weekly List.

The New Front-Line Coronavirus Workers: Grocery Clerks, Delivery Drivers: "Much of the American workplace has shut down, sending millions of employees home to wait out the coronavirus pandemic. Among those still on the job are grocery-store clerks, prison guards and delivery drivers. 'Who would have ever thought that we would be on the front lines?' said Joyce Babineau, a 67-year-old supermarket supervisor in Dartmouth, Mass., a coastal village 60 miles south of Boston."

AFL-CIO President Richard Trumka Discusses the Labor Movement's Respose to the Coronavirus Pandemic: "AFL-CIO President Richard Trumka joined Bloomberg TV this morning to talk about the labor movement's response to the coronavirus pandemic and why we need to invoke the Defense Production Act."

What Grocery Store Workers Need: "As of this writing, supermarket workers in Denver, Oregon and Washington state have tested positive for COVID-19. Here in New York City, two Trader Joe's supermarkets have suddenly faced temporary closures after workers at the Soho and Union Square stores became confirmed cases of the disease. The closures at these stores, which have seen huge increases in customer traffic since the onset of the crisis, highlight the dangers grocery store workers—performing their jobs in close quarters with other workers and customers—are facing, typically for low pay and benefits. The situation is set to become even more precarious as more New Yorkers become ill, with the peak of the pandemic apparently still awaiting us weeks or even months in the future."

AFL-CIO's Trumka: Coronavirus Relief Package 'Not Perfect' but 'Going to Do a Lot of Good': "AFL-CIO President Richard Trumka expressed support for the coronavirus stimulus package moving through Congress, although he said it's 'not perfect'."

'Just Keep the Faith': Workers Are Stepping Up to Beat Coronavirus: "The Machinists union and the AFL-CIO have circulated a brief video of [Trevar] Smedal as part of an effort to highlight the role union workers have played in addressing the coronavirus outbreak. Looking into the camera, he tells an anxious America, 'Just keep up the faith. I know that my co-workers, we're going to show up every day and we're going to get out as many as we can.'"

Nurses Call for More Protective Gear, Training in the U.S.: "In some parts of the country, nurses are already struggling to secure the equipment and training they need to safely care for their patients, while protecting themselves from the infectious disease. Without the proper protection or training, the risk is high for nurses, especially since they have the most direct contact with patients. To understand the impact this pandemic is having on nurses, The Takeaway spoke to Jean Ross, the president of National Nurses United, the largest organization of registered nurses in the United States, and Judy Sheridan-Gonzalez, a registered nurse at Montefiore Medical Center in the Bronx and the president of the New York State Nurses Association."

Who Is Most at Risk in the Coronavirus Crisis: 24 Million of the Lowest-Income Workers: "This week, unemployment claims soared as state and federal officials restricted public gatherings and shuttered stores to prevent the spread of the COVID-19. Using wage data from the U.S. Department of Labor and working conditions surveys from O*NET, we analyzed those who are most vulnerable."

Unions: "Essential" Workers Need More Coronavirus Protection: "Union leaders, representing workers that have been deemed 'essential' as Illinois battles the coronavirus, called Monday for more protective gear to guard members against infection."

Women's History Month Profiles: Roxanne Brown: "For Women's History Month, the AFL-CIO is spotlighting various women who were, and some who still are, leaders and activists working at the intersection of civil and labor rights. Today, we are looking at Roxanne Brown."

Fighting the Coronavirus: Making Ventilators: "Trevar Smedal is a member of Machinists (IAM) Local 1406 employed at General Electric's Datex-Ohmeda in Madison, Wisconsin. He and his co-workers are in a race against the clock to produce ventilators needed in the worldwide fight against the COVID-19 pandemic. Watch the video to hear Trevar's story."

Put Workers First: In the States Roundup: "It's time once again to take a look at the ways working people are making progress in the states."

Women's History Month Profiles: Jessie Lopez de la Cruz: "For Women's History Month, the AFL-CIO is spotlighting various women who were, and some who still are, leaders and activists working at the intersection of civil and labor rights. Today, we are looking at Jessie Lopez de la Cruz."

Talking About COVID-19: Labor Podcast and Radio Roundup: "In addition to the AFL-CIO's own 'State of the Unions,' there are a lot of other podcasts out there that have their own approach to discussing labor issues and the rights of working people. Here are the latest podcasts from across the labor movement in the United States."

Kenneth Quinnell Tue, 03/31/2020 - 11:27  

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Wednesday, April 1, 2020

PK: Notes on the Coronacoma (Wonkish) [feedly]

Interesting take by PK on stimulus vs disaster relief target of federal aid, coming down solidly on the disaster relief bias. Until the virus is beaten, stimulus aid (keeping GDP up, for example) is like pushing on a string.

Still does not clear up what a real stimulus would look like after several months of step at a time, sweet Jesus!


Notes on the Coronacoma (Wonkish

Paul Krugman

Text Only:

The economic contraction we're experiencing is the fastest on record, by a large margin; we've probably lost as many jobs over the past two weeks as we did in the whole of the Great Recession. The policy response is also gigantic, several times as large a share of GDP as the Obama stimulus.

But it seems to me that we're still not having a very clear discussion of the economics of what's happening, why we're doing it, and what implications all this will have for the longer term, once the pandemic ends. So I've been trying to think it through in terms of a simple model — not even one involving any explicit equations, although I don't think that would be hard to do.

The main moral of this analysis is that what we should be doing — and to some extent what we are doing — is more like disaster relief than normal fiscal stimulus, although there's a stimulus element too. This relief can and should be debt-financed. There may be a slight hangover from this borrowing, but it shouldn't pose any major problems.

The nature of the problem

What we're experiencing is not a conventional recession brought on by a slump in aggregate demand. Instead, we're going into the economic equivalent of a medically induced coma, in which some brain functions are deliberately shut down to give the patient time to heal.

To simplify things, think of the economy as consisting of two sectors, nonessential services (N) that we can shut down to limit human interactions and hence the spread of the disease, and essential services (E) that we can't (or perhaps don't need to, because they don't involve personal interaction.) We can and should close down the N sector until some combination of growing immunity, widespread testing to quickly find and isolate cases, and, if we're very lucky, a vaccine let us return to normal life.

For those (like me) still receiving their regular paychecks, this period of shutdown — call it the coronacoma — will be annoying but not serious. I miss coffee shops and concerts, but can live without them for however long it takes.

Things will, however, be very different and dire for those who are deprived of their regular income while the coronacoma lasts. This group includes many workers and small businesses; it also includes state and local governments, which are required to balance their budgets but are seeing revenues collapse and expenses soar.

How big is the N sector? Miguel Faria-e-Castro of the St. Louis Fed summarizes estimates that are as good as any: 27 to 67 million people, which he averages to 47 million. That's a lot; we could be looking at a temporary decline in real GDP of 30 percent or more. But that GDP decline isn't the problem, since it's a necessary counterpart of the social distancing we need to be doing.

The problem instead is how to limit the hardships facing those whose normal income has been cut off.

Disaster relief with a dash of stimulus

What can be done to help those cut off from their normal incomes during this period of national lockdown? They don't need jobs — we don't want them working at a time when normal work routines can spread a deadly disease. What they need, instead, is money. That is, what's needed now is disaster relief, not economic stimulus.

OK, a few qualifications. Some idled workers may be able to switch to doing other things at fairly short notice — say, Uber drivers making deliveries for Amazon. But that can't absorb more than a small fraction of the idled work force.

A more important point is that if we fail to provide enough help to those afflicted by this crisis, they will be forced to sharply cut their spending even on goods and services we can still produce, leading to a gratuitous further rise in unemployment (and a multiplier process as laid-off workers cut spending even more.) So aid to those in the shutdown sector actually does include an element of conventional fiscal stimulus, even though that's not its central goal.

Finally, the sudden shutdown of revenue streams for many businesses is creating financial stresses that resemble those of 2008-2009, with prices of risky assets plunging and investors trying to pile into government bonds. So the Fed is right to be going all out — doing "whatever it takes" — to stabilize financial markets.

In other words, there are pieces of this crisis that resemble conventional recession-fighting. But the core issue remains disaster relief for those hit hardest by the lockdown.

How do we pay for relief?

Where will the government get the money for the $2 trillion bill Congress has already passed, a bill that's much better than nothing but still far short of what we should be doing? The answer is, borrow. Real interest rates on federal borrowing are negative; the markets are basically begging the feds to take their money.

But why is borrowing so cheap? Where's the money coming from? The answer is private savings that have nowhere else to go. When we finally get data on what's happening now, we'll surely see a sharp rise in private saving, as people stop buying what they can't, and a fall in private investment, because who's going to build houses or office parks in a plague?

So the private sector is going to be running a huge financial surplus that's available for government borrowing. And this is no time to worry, even slightly, about the level of government debt.

Still, the pandemic will eventually end. Will there be a debt hangover?

From the point of view of government solvency, none at all. We live in a world in which interest rates are consistently below the growth rate, so that government debt melts instead of snowballing. The government won't have to pay back the money it's borrowing, just return to a sustainable level of deficits (not zero) and let the debt/GDP ratio decline over time.

There might, however, be a slight macroeconomic issue when the pandemic ends. The private sector will have added several trillion dollars to its wealth via more or less forced saving; between that wealth increase and, perhaps, pent-up demand, there might — might — be some inflationary overheating when things return to something like normal.

This may be a nonissue in an era of secular stagnation, when we might welcome the extra demand. Even if it is an issue, however, it's unlikely, given the numbers, to be something the Fed can't contain with modestly higher interest rates. You could imagine a world in which the costs of the immediate crisis eventually require some future fiscal austerity, but I don't think we're living in that world.

Let me summarize where we are. We're facing a period of unknown length when much of the economy can and should be shut down. The principal goal of policy during this period should not be to boost GDP, but to alleviate the hardship facing those deprived of their normal incomes. And the government can simply borrow the money it needs to do that.

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