More than a quarter of the workforce in 10 states has filed for unemployment [feedly]

More than a quarter of the workforce in 10 states has filed for unemployment
https://www.epi.org/blog/more-than-a-quarter-of-the-workforce-has-filed-for-unemployment-in-10-states/

The Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data this morning, showing that another 2.2 million people filed for regular UI benefits last week (not seasonally adjusted) and 1.2 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren't eligible for regular UI, such as gig workers.

While most states saw a decline in UI claims filed relative to the prior week, 12 states saw increases in UI claims. Washington saw the largest percent increase in claims (31.0%) compared with the prior week, followed by California (15.7%), New York (13.6%), and North Dakota (10.1%).

A note about the data: Unless otherwise noted, the numbers in this blog post are the ones reported by the U.S. Department of Labor, which they receive from the state agencies that administer UI. While DOL is asking states to report regular UI claims and PUA claims separately, many states are also including some or all PUA claimants in their reported regular UI claims. As state agencies work to get these new programs up and running, there will likely continue to be some misreporting. Since the number of UI claims is one of the most up-to-date measures of labor market weakness and access to benefits, we will still be analyzing it each week as reported by DOL, but we ask that you keep these caveats in mind when interpreting the data.

Figure A and Table 1 below compare regular UI claims filed last week with the prior week and the pre-virus period, in both level and percent terms. It also shows the cumulative number of unemployment claims since March 7 and that number as a share of each state's labor force. In 10 states, more than a quarter of the workforce filed an initial claim during the past 10 weeks: Georgia (39.2%), Kentucky (38.0%), Hawaii (35.0%), Washington (30.9%), Louisiana (29.9%), Rhode Island (29.7%), Nevada (29.6%), Michigan (29.2%), Pennsylvania (28.4%), and Alaska (27.9%).

Figure A

All states continue to see astonishingly high numbers of claims relative to the pre-virus period, but the rise in claims has been particularly pronounced in the South. Last week, Florida and Georgia saw the largest percent increase in claims (4,319% and 3,198%, respectively) compared with the pre-virus period. Eight of the 10 states that had the highest percent change in initial regular UI claims relative to the pre-virus period are in the South: Florida, Georgia, Mississippi, Kentucky, North Carolina, Virginia, Louisiana, and Oklahoma.

Table 2 below displays the reported number of people who applied for Pandemic Unemployment Assistance (PUA)—the new federal program that extends unemployment compensation to workers who are not eligible for regular UI but are out of work due to the pandemic, such as gig workers and people who left their jobs to care for a child. The U.S. DOL's release on 5/21/2020 reported that 1,184,792 initial PUA claims were filed in Massachusetts last week, but the correct number is 115,952. The total number of initial PUA claims in the U.S. last week has also been corrected to 1.2 million to reflect this change.

In the last three weeks, about three million workers in 36 states have filed for PUA, with the most PUA claims in California (547,188), Michigan (388,749), New York (269,426), Massachusetts (255,242), and North Carolina (184,304).

To mitigate the economic harm to workers, the next federal relief and recovery package should extend the across-the-board $600 increase in weekly unemployment benefits well past its expiration at the end of July. The package should also include substantial aid to state and local governments (without which, a prolonged depression is inevitable), worker protections, investments in our democracy, and resources for coronavirus testing and contact tracing, which is necessary to reopen the economy.

Table 1

Table 2

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The Sure Way to End Concerns About China’s “Theft” of a Vaccine: Make it Open [feedly]

The Sure Way to End Concerns About China's "Theft" of a Vaccine: Make it Open
https://cepr.net/the-sure-way-to-end-concerns-about-chinas-theft-of-a-vaccine-make-it-open/

I luv Dean when he turns his snarky temperament in the right directions. Countering the BS drumbeats against China with solid analysis is a good example.

In the last couple of weeks both the New York Times and National Public Radio have warned that China could steal a vaccine against the coronavirus, or at least steal work in the U.S. done towards developing a vaccine. Both outlets obviously thought their audiences should view this as a serious concern.

As I wrote previously, it is not clear why those of us who don't either own large amounts of stock in drug companies, or give a damn about Donald Trump's ego, should be upset about the prospect of China "stealing" a vaccine. Concretely, if China gained knowledge from labs in the United States that allowed it to develop and produce a vaccine more quickly, this would mean that hundreds of millions of people might be protected against a deadly disease more quickly than would otherwise be the case. If China made this vaccine available to people in the developing world, then the numbers could be in the billions.

Sounds pretty scary, right?

It is amazing that neither the reporters writing these stories nor their editors apparently gave much thought to the implications of China "stealing" a vaccine. Or perhaps, even worse, maybe they did. Anyhow, I suspect that most of the audiences of these outlets would not consider it a terrible thing if people in China or other countries could get vaccinated more quickly against the coronavirus.

But the issue of this potential theft is just the beginning of the story. If China can in principle develop a vaccine more quickly if it has access to data from labs in the United States then it must also be the case that researchers in the United States could develop a vaccine more quickly if they had data from labs in China and elsewhere. This raises the question of why we are not researching a vaccine collectively, with researchers all over the world posting their findings as quickly as practical so that teams of researchers everywhere can benefit from them?

There is a bad answer and somewhat less bad answer to this question. The bad answer is that the goal of the researchers is to get a government-granted patent monopoly so that they can charge lots of money for a vaccine and get very rich. The less bad answer is that we rely on grants of patent monopolies to finance research. If companies didn't have the hope of getting a patent monopoly, they would have no way to recoup the costs they are incurring paying researchers and undertaking the trials necessary to establish the safety and effectiveness of a vaccine.

The reason why the less bad answer is still a pretty damn bad answer is that it assumes that we have no other way to pay for the research and testing of a vaccine, except with patent monopolies. It should be pretty obvious that this is not the case since much of the funding for the research now taking place comes from the government.[1] However, for some reason, the idea that the government would take up the slack and pick up the full tab for developing a vaccine, including testing and going through the FDA approval, is difficult for people to conceive.

The failure of imagination here is more than a little bizarre. This is in part because the government already pays for many clinical trials through the National Institutes of Health and other agencies. However, there is also an obvious model for large-scale funding for research and development, the Defense Department.

The Defense Department will sign large multi-year contracts with major military suppliers, like Lockheed or Boeing. The contractors will typically subcontract much of the work to smaller and newer companies, but the decision on what to do in-house and what to do under contract is largely left up to the prime contractors.

There are many grounds for complaints about the military, but the fact is that we do get good weapons systems. And, we have a huge advantage with medical research over military research. There are legitimate reasons for keeping military research secret, we would not want ISIS to be able to download the plans for our latest weapons systems off the web. By contrast, there is no good reason for wanting to keep medical research secret. There could be nothing better than to have a team of researchers in another country, learn from findings here, and then build on them to develop a successful vaccine or treatment for the coronavirus. (I discuss this issue in more detail in chapter 5 of Rigged[its free.])

Ideally, we would have some system of international coordination where the costs of research were shared. This would require some negotiations but our current system of patent monopolies also involves difficult negotiations. Provisions on patents and related protections were a major part of every trade deal for the last three decades. These provisions have often been especially contentious. In fact, the final version of the Trans-Pacific Partnership was delayed for several years over the terms on patent-related protections demanded by the U.S. pharmaceutical industry. So, while it is true that we would like a mechanism to ensure fair sharing of research costs, it is likely that negotiating this sharing will be no more difficult than it has been under the patent monopoly system.

However, in a context where the whole world is struggling to deal with a pandemic that is killing hundreds of thousands of people, it might be reasonable to just do the research and worry about the cost-sharing later. It would make sense for governments to fund their own research to the extent practical and require that everything be fully public as soon as possible.

If we went this route, our leading news outlets could put aside their fears that China would steal the vaccine. If they take advantage of U.S. research and rush ahead and develop an effective vaccine before our own researchers, then the whole world will benefit from having a vaccine sooner than would otherwise be the case.

If China somehow decides to break commitments and keep its vaccine secret, surely we will be able to secure a dosage and reverse engineer it. This should still leave us hugely better off than if our researchers are struggling to overcome obstacles that China's researchers have already managed to surmount. In any case, China certainly does not have a poor record of adhering to international agreements, at least not compared to the United States under Donald Trump.

We have a huge amount of potential gain from going the route of open research and very little to lose. And our leading news outlets would be able to stop worrying about China stealing our vaccine.

[1] It is worth noting on this topic that remdesivir, currently the most promising drug for treating the coronavirus, was developed to a large extent with public money, even though Gilead owns a patent on it.

The post The Sure Way to End Concerns About China's "Theft" of a Vaccine: Make it Open appeared first on Center for Economic and Policy Research. 

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Deindustrialization as a Template for COVID-19 [feedly]

Deindustrialization as a Template for COVID-19 [feedly]

https://workingclassstudies.wordpress.com/2020/05/18/deindustrialization-as-a-template-for-covid-19/  

A long line of cars at a Mahoning Valley food bank in April

As we wrote in Steeltown USA: Work and Memory in Youngstown, Youngstown's story is America's story. That's true now as we try to imagine American life after the pandemic. No doubt, coronavirus is a natural disaster that is more contagious, widespread, and deadly than the economic disaster of deindustrialization. But the struggles that Youngstown and similar Rust Belt cities faced after the plant closings of the late 1970s offer a stark warning: the economic crash hitting so many Americans now will have long-term costs. Youngstown's story also makes clear that we can't rely on private enterprise or individual effort to fix things.

As leaders debate when and how to reopen the American economy, some have warned that the economic crisis will lead to as many deaths as COVID-19. Our research on the social costs of deindustrialization suggests that although this economic displacement is not as lethal as the virus itself, if not adequately addressed, it will indeed cost lives. After deindustrialization left thousands without jobs, heart disease, strokes, and cancer rates increased in places like Youngstown.

So did mental health problems. A lost job doesn't just mean lost wages, homelessness, or hunger – important as those material realities are. Laid-off workers also lose important networks and routines. For many, losing a job also means losing a sense of purpose and identity. Combine anxiety, isolation, and self-doubt with fear about an uncertain future, and it's no wonder so many become depressed or seek relief from drugs or alcohol. As Anne Case and Angus Deaton's by now familiar study of "deaths of despair" has shown, an uptick in alcoholism, addiction, and depression in the early 1980s eventually become an epidemic of disease, overdoses, and suicides.

Youngstown provides a discouraging glimpse of how the economic devastation of COVID-19 could play out for communities as well. Lost jobs reduce tax revenues, so cities struggle to maintain streets, fight crime, and run schools, libraries, and recreation centers. This disrupts the social networks that enable communities to pull together to address problems.

Deteriorating infrastructure, high crime rates, and poor local schools also pose challenges for attracting new business and investments. Residents and local leaders pursue any new opportunity, competing with other localities and offering tax abatements in exchange for jobs. Too often, the result is disappointing, as Youngstown knows all too well. Companies hire few locals, and they move on as soon as the tax deals end, feeding a cycle of local desperation.

Americans may well, like many in Youngstown, lose faith in government, business, labor, foundations, and even religious institutions. They might also lose faith in themselves. Self-doubt undermined our community, in part because people internalized the blame implied in media stories questioning why people failed to pull themselves up by the proverbial bootstraps, fell victim to phony economic schemes, or weren't sufficiently entrepreneurial.

Youngstown's story had political outcomes, too. Political resentment about insufficient government assistance, led local voters to embrace political demagogues like Jim Traficant. A few decades later, frustration over the community's continuing struggles and false promises from too many candidates made this traditionally-Democratic area into "ground zero" of Trump country. The current crisis might also generate political effects that could last for a very long time.

People often ask us, what is the answer for Youngstown? Our response is sobering: this place will probably never fully recover. It will survive, but it will not likely thrive. Will that be true for the U.S. after COVID-19?

The answer depends on how we respond. First, we must recognize how the economic policies and business practices of the last few decades created the economic precarity that makes today's crisis so overwhelming. A society in which so many people live on the edge is particularly vulnerable, as we have seen in recent weeks.

Second, we must expand social welfare programs to provide not only basic food, healthcare, and shelter but also mental health resources to help people recover from the multiple losses of this crisis.

Finally, we must insist that relief programs rebuild the economy from the ground up. We can't count on business to act in the best interests of communities or workers. History tells us they will act in the interest of investors. We must create a more just and sustainable economy, and that means prioritizing the security of all, not the wealth of a few.

If we fail to recognize that we have the responsibility not only to protect each other's health but also to protect each other from the devastation of economic collapse, then Youngstown's story will yet again become America's story.

Sherry Linkon and John Russo, Kalmanovitz Initiative for Labor and the Working Poor

 

An earlier version of this piece appeared on NewGeography.

Victory: Ohio’s plan to deny workers their unemployment insurance is shelved [feedly]

Victory: Ohio's plan to deny workers their unemployment insurance is shelved
https://economicfront.wordpress.com/2020/05/18/victory-ohios-plan-to-deny-workers-their-unemployment-insurance-is-shelved/

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PK: We Should Help Workers, Not Kill Them [feedly]

We Should Help Workers, Not Kill Them
https://www.nytimes.com/2020/05/18/opinion/coronavirus-unemployment.html

text only
As far as I can tell, most epidemiologists are horrified by America's rush to reopen the economy, to abandon much of the social distancing that has helped contain Covid-19. We know what a safe reopening requires: a low level of infection, abundant testing and the ability to quickly trace and isolate the contacts of new cases. We don't have any of those things yet.

The epidemiologists could, of course, be mistaken. But at every stage of this crisis they've been right, while predictions of a quick end to the pandemic by politicians and their minions have proved utterly wrong. And if the experts are right again, premature opening could lead to hundreds of thousands of deaths — and backfire even in economic terms, as a second wave of infections forces us back into lockdown.

So where is the push to reopen coming from?

Some of it comes from right-wing crazies. Only a small minority of Americans believes that freedom includes the right to endanger other people's lives (which is what congregating in large groups in the midst of a pandemic does); that wearing a mask is un-American, or unmanly, or something; that Covid-19 is a hoax perpetrated by liberals. But that minority has huge influence within the Republican Party.

Some of it comes from Donald Trump's obsession with the stock market. His initial refusal to do anything to prepare for the pandemic reportedly reflected concern that any acknowledgment of the threat would "spook the market." And the push to reopen may similarly reflect a belief that going back to normal life would be good for the market, even if it kills many people. Let's die for the Dow!

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One thing I keep hearing, however, is that we must reopen for the sake of workers, who need to start earning wages again to put food on their families' tables. So it's important to realize that this is a really bad argument.

For America is fully capable of shielding workers idled by the lockdown from severe economic hardship. As Jerome Powell, the chairman of the Federal Reserve, said in a TV interview aired Sunday, we can and should pursue policies that "keep workers in their homes, keep them paying their bills. Keep families solvent."

And the somewhat surprising fact is that we're already doing a lot of that. The CARES Act, the $2 trillion disaster relief bill enacted in late March, greatly expanded both eligibility for unemployment benefits and the generosity of those benefits. And those expanded benefits are, despite early stumbles, increasingly doing what needs to be done.

It's true that when claims for unemployment benefits began surging in March, unemployment offices — which are run by individual states — were overwhelmed, so that many Americans who were entitled to benefits simply couldn't get through. And many families still aren't getting what they should.

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Even so, a Brookings Institution study suggests that in April unemployment benefits offset about half the wages lost because of the lockdown — an estimate that matches my own back-of-the-envelope calculations.

And this "replacement rate" has almost surely increased substantially in recent weeks. Unemployment offices are gradually catching up on their backlog, so that benefits are reaching a rising number of unemployed workers. At the same time, the available evidence suggests that labor markets more or less stabilized, at least for now, around a month ago.

So it's a good bet that at this point most though not all of the loss in wages caused by social distancing is being offset by increased government aid. That's a largely unheralded success story; most media attention has focused on other parts of the CARES Act, especially small-business support, which is a shambles.

But unemployment assistance, after a troubled start, is doing a lot to help American workers. And credit should go to Democrats, who insisted that this aid be a part of the package.

I suspect that the success of unemployment aid helps explain a key feature of the politics of reopening — namely, that the clamor to end restrictions isn't coming from workers. Job losses have been concentrated among lower-paid workers; but polling suggests that the demand for faster opening is coming largely from high-income Republicans.

So we've done a much better job than I think most people realize of protecting American workers from hardship in a time of lockdown. Of course we haven't been completely successful, and the first few weeks were very rocky. There is, however, a lot less suffering than you might expect given a true unemployment rate that's probably around 20 percent.

But the expanded unemployment benefits that are doing so much good are set to expire on July 31. That should scare you.

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Suppose, after all, that the epidemiologists are right, and that premature reopening leads to a second wave of infections. What we'll need in that case is a second lockdown. But all indications are that Republicans are totally opposed to extending benefits.

What they want, instead, is legislation that would protect businesses from liability if their employees get sick.

That is, they want to force Americans to go to work even if it kills them.

The Times is committed to publishing a diversity of letters to the editor. We'd like to hear what you think about this or any of our articles. Here are some tips. And here's our email: letters@nytimes.com.

Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman


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Branko Milanovic: Ricardo, Marx, and Interpersonal Inequality [feedly]

Ricardo, Marx, and Interpersonal Inequality
https://www.globalpolicyjournal.com/blog/21/05/2020/ricardo-marx-and-interpersonal-inequality

Branko Milanovic on the emergence of the study of interpersonal inequality.

It is a question often asked: what do Ricardo and Marx have to say about interpersonal inequality of income? The answer is, strictly speaking, very little. In writings of neither Ricardo nor Marx does inequality in personal incomes feature at all, and I even think that the concept of what we call "interpersonal inequality" or "size distribution of incomes" does not appear.  

 

The reason why this is the case is both simple and revealing. Ricardo and Marx were concerned with functional (between factors of production) distribution of income, that is with the distribution of net product between workers, capitalists and landlords (the three big classes introduced by Adam Smith). In Ricardo, this concern was such that he wrote on page 1 of The Principles, the famous sentence that the principal problem of political economy is to study the distribution between "proprietors of land, the owners…of capital and the labourers". Actually, the entire book is organized around that idea. Marx likewise (with a few exceptions) dealt with functional distribution only.

 

The omission of interpersonal distribution is revealing of the type of society that Ricardo and Marx had in mind. To see this consider the decomposition of a standard inequality measure like Gini coefficient. It is decomposed into three components: the gap between mean incomes of different groups into which we break a society, inequality within each of these groups, and the "overlap" term which is non-zero when some members of a mean-poorer group have higher incomes than some members of a mean-richer group.

 

Now, consider a society which is strictly segregated into classes such that (say) capitalists are rich and workers are poor. Interpersonal inequality looked at through the lenses of a Gini coefficient will not include the overlap term because of a tacit assumption shared by both Ricardo and Marx that all capitalists are richer than all workers (and if landlords are included that they are richer than the other two groups). If in addition, all workers are paid subsistence, the within-group inequality for them will be zero. Capitalists and landlords may be differentiated depending on how much capital or land each possesses but because of their small population size, they will not add much to inequality (Gini within each group is weighed by the group income and population shares).

 

The bottom line is that most of interpersonal inequality will boil down to the gaps in mean incomes between the two (or if landlords are included, three) classes. Studying only that is not different from being concerned with income shares of the three groups, that is, with functional income distribution. Thus the question of income inequality between individuals dissolves into the question of income shares of landlords, capitalists and workers. In such a society, it is  indeed of little practical import to go beyond functional distribution.

 

This picture which is, I think, basically accurate is a bit simplified, especially as far as Marx is concerned. In Ricardo workers are seen as a homogeneous mass facing capitalists such that every increase in the wage rate implies a direct reduction in profit: "a rise of wages, from the circumstance of laborer being more liberally rewarded, or from the difficulty of procuring necessities on which wages are expended, does not…produce a rise in prices but has a great effect in lowering profits" (Principles, Chapter I, Section VII, p. 31). Or even more clearly: "There is no adequate reason for a fall in profit but a rise in wages, and…it may be added the only adequate and permanent cause for the rise of wages is the increasing difficulty of providing food and necessities" (Chapter XXI, p. 197). 

 

Note that the increase in the wage comes either from an improvement in (what we now call) real wage or from greater cost of providing subsistence which, while keeping real wage unchanged, raises the share that belongs to labor, and reduces that of capital. Throughout are not only the interests of workers and capitalists directly opposed but workers are supposed to be paid subsistence, and when, in very unusual circumstances, they are not, the Malthusian checks kick in to drive them  back to subsistence (Chapter V).

 

In Marx, the opposition between workers and capitalists is similar but the distinction between simple and complex labor introduces some variability among workers' wages even if Marx seldom speaks of it. In fact, workers with greater skills will earn more. The rationale is very similar to "human capital" approach. In principle, workers are paid the amount necessary for the reproduction of their class. That could be subsistence only for unskilled workers who are plentiful; for skilled workers the costs of reproduction may be above subsistence because it costs more to produce a skilled than an unskilled worker: "[the difference in wages] can be reduced to the different values of labour-power itself, that is, its varying production costs" (Theories of Surplus Value; also Rosdolsky, pp. 515ff); or "all labor of a higher or more complicated character than average labor is…labor power whose production has cost more labor and time and which therefore has a higher value than unskiled or simple labor" (Capital, vol. I, Chapter III. Section 7). In contemporary terms we could say that the skilled wage must compensate for the foregone earnings during the period of training and for the cost of additional education.

 

Income inequality among workers thus moves us a bit further from a narrow functional distribution of income. If in addition, we allow for the differentiation of capital stock among capitalists which is implicitly present in both Ricardo and Marx, within-capitalist income Gini will be positive too.

 

The situation present in today's capitalism but not common in classical capitalism, namely that (i) a worker may be richer than a capitalist, or (ii) that people could have both labor and property incomes (even if the rich still depend mostly on property incomes), is not envisaged by either Ricardo or Marx. They must have thought both of these possibilities remote and thus not worth complicating the analysis. Possibility (i) existed as some (few?) members of liberal or scientific professions, say doctors or engineers, probably commanded higher incomes than petty capitalists. Possibility (ii) existed only among the self-employed but they could rightly be considered remnants of a past social order and not representative of capitalism. The British social tables, whether in their original form or as they had been reworked by Peter Lindert and Jeffrey Williamson, or more recently by Bob Allen, can be read as the rankings of different non-overlapping classes where the lion's share of inequality is explained by income gaps between these classes. In other words, we do not lose much in our estimate of total inequality if we ignore both the overlap component, and assume all members of a given class to have same incomes.

 

It was thus left to people like Pareto, who were, at the end of the 19th century, witnessing less segregated and less hierarchical societies and were lucky to have access to tax data, to move the study of inequality from functional to interpersonal.

 

 

 

 

This first appeared on Branko's blog and was reposted with permission.

 

Photo by Harrison Haines from Pexels

 

 

References

 

David Ricardo, The Principles of Political Economy and Taxation, Dover Publication, 2004.

Roman Rosdolsky, The Making of Marx's 'Capital', Pluto Press, 1977.  

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Projected State Shortfalls Grow as Economic Forecasts Worsen [feedly]

Projected State Shortfalls Grow as Economic Forecasts Worsen
https://www.cbpp.org/blog/projected-state-shortfalls-grow-as-economic-forecasts-worsen

As economic projections worsen, so do the likely state budget shortfalls from COVID-19's economic fallout. We now project shortfalls of $765 billion over three years, based on the new projections from the Congressional Budget Office (CBO) of yesterday and Goldman Sachs of last week. The new shortfall figure, significantly higher than our estimate based on economic projections of three weeks ago, makes it even more urgent that the President and Congress enact more fiscal relief and maintain it as long as economic conditions warrant.

CBO now projects that unemployment will peak at 15.8 percent in the third quarter of this year (July-September), fall to a still-high 11.5 percent by the last quarter, and remain at an elevated 8.6 percent at the end of 2021. Goldman's new projection estimates that unemployment will peak at an astonishing 25 percent this quarter and still remain at 8.2 percent at the end of 2021. These CBO and Goldman estimates, considerably more pessimistic than their estimates of early April, account for the aid that Washington has already enacted for businesses, individuals, and state and local governments. Goldman's projections also assume that policymakers will provide additional fiscal relief.

Our projection of $765 billion in shortfalls over state fiscal years 2020-22 — much deeper than in the Great Recession of about a decade ago (see chart) — is based on both the historical relationship between unemployment and state revenues and on the average between the latest CBO and Goldman projections. It covers state budget shortfalls only, not the additional shortfalls that local governments, territories, and tribes face.

Federal aid that policymakers provided in earlier COVID-19 packages isn't nearly enough. Only about $65 billion is readily available to narrow state budget shortfalls. Treasury Department guidance now says that states may use some of the aid in the CARES Act of March to cover payroll costs for public safety and public health workers, but it's unclear how much of state shortfalls that might cover; existing aid likely won't cover much more than $100 billion of state shortfalls, leaving nearly $665 billion unaddressed. States hold $75 billion in their rainy day funds, a historically high amount but far too little to meet the unprecedented challenge they face. And, even if states use all of it to cover their shortfalls, that still leaves them about $600 billion short.

States must balance their budgets every year, even in recessions. Without substantial federal help during this crisis, they very likely will deeply cut areas such as education and health care, lay off teachers and other workers in large numbers, and cancel contracts with many businesses. (States and localities furloughed or laid off nearly a million workers in April alone.) That would worsen the recession, delay the recovery, and further harm families and communities. State and local cuts in health care also could shortchange coronavirus response efforts. The large shortfalls could lead states and localities to raise taxes and fees as well.

The coronavirus relief bill that the House passed on May 15, the Heroes Act, includes substantial state and local fiscal relief, both by providing flexible grant aid and by strengthening and extending the temporary increase in the federal share of Medicaid costs in the Families First Act of March — a particularly effective and efficient form of aid that alleviates state budget pressures and protects health coverage. States will need aid of this magnitude to avoid extensive layoffs of teachers, health care workers, and first responders, which would further weaken an already weak economy.

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