Monday, April 20, 2020

De Blasio Says Surgical-Gown Shortage Is Crucial Concern in NYC [feedly]

It seems plain from articles like this, and many others, life cannot return to normal without a bigger and more responsive and more powerful public sector with public interest enforcement ability, at Federal, State and Local domains. More socialism.

De Blasio Says Surgical-Gown Shortage Is Crucial Concern in NYC

https://www.bloomberg.com/news/articles/2020-04-20/de-blasio-says-big-concern-is-shortage-of-surgical-gowns-in-nyc

New York City will cancel all of its permitted gatherings and public events through June while it continues to battle the new coronovirus, Mayor Bill de Blasio said Monday.

The cancellations remove from the calendar annual parades through Manhattan that attract hundreds of thousands, including Salute to Israel, Puerto Rican Day and the 50th anniversary of Gay Pride. Smaller gatherings such as softball games in public parks, street fairs and outdoor plays and concerts also are affected. Some may be rescheduled later this year if the epidemic can be contained, the mayor said.

Mayor De Blasio Visits Industrial Firms Making Protective Equipment For City's Health Care Workers

Bill de Blasio

Photographer: Demetrius Freeman/Bloomberg

City officials and organizers had estimated the Gay Pride parade, scheduled as part of a two-week celebration in June, would attract 150,000 marchers and 5 million visitors to Manhattan. It was to be part of an international observance of the 50th anniversary of the Stonewall Inn uprising, when patrons of a Greenwich Village gay bar forcibly resisted police efforts to arrest them.

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"These kind of community events, we love them, but they're not what we need right now, they're not the most essential things," de Blasio said during a Monday briefing. "We have to recognize when thousands and thousands of people gather in one place, of course that goes against everything we're trying to do."

In the future, when the epidemic enters a less acute phase, it may be possible to conduct fever checks on people entering restaurants, theaters or large events, but as of now there aren't enough thermometers, de Blasio said.

The key to restarting the city's economy and reopening such venues will be gaining the capacity to conduct hundreds of thousands of virus checks a day, "constantly monitoring for who may be sick and getting them the support they need, making sure they're isolated from their families if necessary," de Blasio said.

Reigniting the city's economy also requires federal reimbursement for the costs of containment and mitigation. City spending is already more than $700 million and will reach about $3.5 billion by the end of the year, the mayor said.

The mayor's announcement came on a day of mixed progress and challenges confronting the virus. A shortage of surgical gowns has raised concerns. De Blasio thanked President Donald Trump adviser Peter Navarro, who he said helped New York City get 265,000 Tyvek suits, as well as fabric that will help the city make 40,000 gowns this week and 400,000 by May 23. Yet that's "nowhere near" what the city needs, the mayor said. He asked for more federal help as well as gowns from other states.

City hospitals have enough masks, face guards and breathing-assistance ventilators to last the week, the mayor said.

De Blasio pointed to data that showed progress in tackling the spread. The number of citywide admissions to hospitals declined, to 212 from 317 on April 17, while public hospital ICU use was up slightly to 853 from 849. Medical emergency calls Saturday dropped to 3,485 from a peak of 6,527 on March 30, and ambulance response times have been cut to 6:43 on Saturday from an average 10:08 in March, the mayor said.

"We have a long way to go, but real progress for sure," he said.


 -- via my feedly newsfeed

Ultra-rich benefit from big tax cut hidden in coronavirus stimulus law [feedly]

Ultra-rich benefit from big tax cut hidden in coronavirus stimulus law
https://www.peoplesworld.org/article/ultra-rich-benefit-from-big-tax-cut-hidden-in-coronavirus-stimulus-law/

WASHINGTON—Oink.

That's the sound the ultra-rich—especially real estate moguls—made as they slurp from the taxpayers' trough, courtesy of a multi-billion dollar tax break or two their GOP handmaidens slipped into the $2.2 trillion economic stimulus law Congress passed on March 18.

The congressional Joint Committee on Taxation blew the formal whistle on that tax cut, which is worth $80 billion this year and another $6.7 billion in the next, in an April 15 report.

The JCT analysis, which was not released until after the stimulus law passed, shows 81.8% of the tax break will go to 43 taxpayers who each declared more than $1 million in earnings last year.

Those are the taxpayers who own private corporations and carry over private "net operating losses." The tax cut would equal all the losses, not just 80%, and the private firms could use them to offset prior profits from the last five years, and future profits as well.

Another 13% of that tax break would go to taxpayers making $200,000 to $1 million. The average windfall for both groups: $1.6 million per taxpayer this year.

Further, a second tax break in the JCT's analysis, entitled "Modification on limitations on losses for taxpayers other than corporations" will bring its recipients $140.6 billion over the next two years.

The lawmakers who asked for the net operating loss data, Sen. Sheldon Whitehouse, D-R.I., and Rep. Lloyd Doggett, D-Texas, sharpened their knives for the pigs when they released preliminary details the day before. They got the data on the $80 billion break, but they asked the White House to justify both.

What wasn't there was who inserted the idea in the economic stimulus law, or which individual taxpayers would benefit. Whitehouse said it was in the GOP-run Senate Finance Committee's version of the stimulus law, but Majority Leader Mitch McConnell, R-Ky., and his staff, reportedly wrote much of that measure.

The identity of the rich taxpayers who will benefit from that break is shielded from public view, by law. But both President Donald Trump and his son-in-law/aide/confidant, Jared Kushner, are real estate moguls. And the Trump Organization, his real estate firm, is privately held.

Trump still refuses to release his tax returns, despite federal law mandating their turnover to congressional tax-writing committees. But an idea of how he could benefit came from the leaked release of the front page of his 1996 tax return, for calendar year 1995, shoved under a door at the New York Times in October 2016. Trump had had to file the return with New Jersey officials when seeking a casino license two decades before.

It showed a $915 million net operating loss, on paper, for 1995. He didn't have to pay any taxes.

"It's a scandal for Republicans to loot American taxpayers in the midst of an economic and human tragedy," said Whitehouse, a former Rhode Island state attorney general. "This analysis shows that while Democrats fought for unemployment insurance and small business relief, a top priority of President Trump and his allies in Congress was another massive tax cut for the wealthy. Congress should repeal this rotten, un-American giveaway and use the revenue to help workers battling through this crisis."

After all, regular taxpayers are getting a one-time $1,200 Treasury check per adult, and $500 per child, as part of the economic stimulus lawmakers approved to counteract the coronavirus's cratering impact on people's jobs and the U.S. economy. But the Treasury told big banks they can seize those checks, or parts of them, to pay for overdrawn checking accounts, fees, and charges.

The Senate Finance Committee, headed by Senate Majority Leader Mitch McConnell's Republicans, inserted the tax cut provisions into the CARES Act. | AP

Left unsaid was that the original McConnell-GOP $2.2 trillion measure did not have the $1,200, or the stimulus law's expansion of jobless benefits. Senate Democrats beat back two McConnell attempts to get his measure through without those sections, before he finally yielded.

"For those earning $1 million annually, a tax break buried in the recent coronavirus relief legislation is so generous that its total cost is more than total new funding for all hospitals in America and more than the total provided to all state and local governments" by the economic stimulus law, said Doggett.

"Someone wrongly seized on this health emergency to reward ultra-rich beneficiaries, likely including the Trump family, with a tax loophole not available to middle-class families. This net operating loss loophole is a loser that should be repealed."

Adding together corporate tax breaks in the legislation, the Joint Committee said they would cost the Treasury $195 billion over a decade, most of it this calendar year and next. That prompted Whitehouse and Doggett to demand, in a letter to the White House, texts of all communications between the White House and congressional tax writers about those two sections, before the overall legislation passed.

The response, if they get one, "would let Congress and the American public better understand the provenance of these tax law changes, and assess whether any individuals within the administration who stand to gain from these provisions were involved in their development," the two wrote. They gave the administration 15 days to reply.


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

9.2 million workers likely lost their employer-provided health insurance in the past four weeks
https://www.epi.org/blog/9-2-million-workers-likely-lost-their-employer-provided-health-insurance-in-the-past-four-weeks/

We estimate that 9.2 million workers were at high risk of losing their employer-provided health insurance in the past four weeks. To avoid prohibitively costly insurance options, the federal government should fund an expansion of Medicare and Medicaid to all those suffering job losses during the pandemic period.

Two weeks ago, when the two-week total of unemployment insurance (UI) initial claims was 8.7 million, we estimated that 3.5 million workers may have lost their health insurance at work. Since then, 11.4 million more workers filed claims for unemployment benefits, bringing the total of UI initial claims over the last four weeks to 20.1 million, currently the most comprehensive measure of the extent of job losses and furloughs due to the COVID-19 pandemic.

We estimate that across all industries where workers have filed UI claims, about 45.7% of workers had their own health insurance provided through their employer. As a result, of the 20.1 million workers who filed initial UI claims in the last four weeks, 9.2 million may have lost coverage through their own employer-provided health insurance (EPHI).

The analysis, described below, combines industry-specific UI claims data for 11 states, representing about 20% of national employment, with national, industry-specific health insurance coverage rates. Using these data, we provide a rough prediction of 9.2 million workers losing EPHI. 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.

Because the United States is unique among rich countries in tying health insurance benefits to employment, many of the newly unemployed will suddenly face prohibitively costly insurance options. A comprehensive policy solution would be to extend Medicare and Medicaid to all those suffering job losses during the pandemic period, with the federal government funding this expansion. Current discussions suggest there may be legislation that the federal government pay for all of COBRA coverage so that workers who are laid off or furloughed may continue their employer-provided coverage. While this policy proposal will help many workers continue coverage, in some states it will not help workers from small businesses with fewer than 20 employees, who are not eligible for COBRA.

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.

Methodology

Our methodology builds on our previous work, which extrapolated from industry-level statistics published by Washington state. In this updated analysis, we instead use recently collected industry-level UI claims datafrom 11 states. From these states' data, we calculate the average industry-specific shock as the number of UI claims as a share of 2019Q3 employment from the QCEW. We apply this industry-specific job loss share to all the other states' industry-specific employment totals, and then we proportionally scale these losses so that each state's total job loss equals its statewide not-seasonally-adjusted total initial UI claims for the four weeks ending March 21 through April 11. The estimates in the first column of Table 1 are the sum of these industry- and state-specific job losses.

Table 1

The second column provides 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 in government during the previous year. Multiplying the first and second column is our estimate of EPHI job losses: the number of layoffs or furloughs in which, on average, workers will be at risk of losing their own employer-based health insurance. Finally, the fourth column expresses the total job loss estimate as a share of 2019Q3 industry-specific employment.

Figure A uses the same methodology but provides state-specific estimates of these job losses.

We should note that other analysis has shown that it is difficult to draw reliable inferences from the industry composition of UI claims. In the case of EPHI, we don't yet have independent direct data sources on coverage to provide a check for the industry-based estimates in this post. As these sources become available, we will use them to check or supplement these estimates.

Figure A


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Saturday, April 18, 2020

Enlighten Radio:The End of the Road Podcast: Very Hard, followed by Wilderness

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Blog: Enlighten Radio
Post: The End of the Road Podcast: Very Hard, followed by Wilderness
Link: https://www.enlightenradio.org/2020/04/the-end-of-road-podcast-very-hard.html

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How Millions of Women Became the Most Essential Workers in America

How Millions of Women Became the Most Essential Workers in America 


Every day, Constance Warren stands behind the cold cuts counter at a grocery store in New Orleans, watching the regular customers come and go.

They thank Ms. Warren and tell her they do not like being stuck indoors, waiting out the epidemic. She wraps their honey-smoked turkey and smiles.

It is good to have a job right now, the mixed fortune of being deemed an essential worker. But she wonders whether, once everyday life is safe again, people will remember the role she played when it was not.

"Don't forget that we were open to serve you in your time of need," she said on a break one recent workday afternoon. "You never know when you might need us again."

From the cashier to the emergency room nurse to the drugstore pharmacist to the home health aide taking the bus to check on her older client, the soldier on the front lines of the current national emergency is most likely a woman.

One in three jobs held by women has been designated as essential, according to a New York Times analysis of census data crossed with the federal government's essential worker guidelines. Nonwhite women are more likely to be doing essential jobs than anyone else.



The work they do has often been underpaid and undervalued — an unseen labor force that keeps the country running and takes care of those most in need, whether or not there is a pandemic.

Share of Essential Workers Who Are Women

SHARE WHO ARE WOMEN

TOTAL WORKERS

52%

All essential workers

48,710,000

Social workers

78

2,320,000

Health care

19,090,000

77

Critical retail

53

7,570,000

Medical supplies

520,000

46

Food processing

2,290,000

38

Delivery, warehousing

34

2,620,000

28

Financial IT services

360,000

Utility workers

23

2,100,000

23

Farmers

2,100,000

19

Hazardous materials

330,000

Law enforcement

17

1,940,000

Transit, transportation

15

6,140,000

14

Defense

1,030,000

Resource extraction

11

380,000

Source: American Community Survey microdata, 2014-18; ipums.orgBy The New York Times

Women make up nearly nine out of 10 nurses and nursing assistants, most respiratory therapists, a majority of pharmacists and the overwhelming majority of pharmacy aides and technicians. More than two-thirds of the workers at grocery store checkouts and fast food counters are women.



In normal times, men are a majority of the overall work force. But this crisis has flipped that. In March, the Department of Homeland Security released a memo identifying "Essential Critical Infrastructure Workers," an advisory guide for state and federal officials. It listed scores of jobs, suggesting they were too vital to be halted even as cities and whole states were on lockdown. A majority of those jobs are held by women.



Among all male workers, 28 percent have jobs deemed part of this essential work force. Some of the biggest employers of men in the United States are building trades, like construction and carpentry — lines of work that are now, for the most part, on hold.

Men do make up a majority of workers in a number of essential sectors, including law enforcement, transit and public utilities, and millions face serious and unquestionable risk as they head to work every day. But there are simply not as many of these jobs as there are in the industry at the forefront: health care.

There are 19 million health care workers nationwide, nearly three times as many as in agriculture, law enforcement and the package delivery industry combined.

Long before the outbreak, in an aging and ailing country, the demand for health care was almost limitless. The size of this work force has ballooned over the decades as medical advances extended the lives of the sick and well alike.

There are now four registered nurses for every police officer, and still hospitals raise alarms about nursing shortages. Within this massive, ever-growing and now indispensable part of the economy, nearly four out of five workers are women. This is reflected in another grim statistic: While male doctors and nurses have died on the front lines, a recent report from the Centers for Disease Control and Prevention found that women account for 73 percent of the U.S. health care workers who have been infected since the outbreak began.

The nation's health care industry spreads far beyond hospitals, encompassing a vast army of people who tend to the young, old, sick and infirm. This "care work force," said Mignon Duffy, a professor at the University of Massachusetts Lowell who studies women and labor, "is part of the infrastructure of our whole society. It holds everything together." Yet it has long been undervalued, she said, a neglect that is as obvious as ever right now, with acute shortages nationwide of basic safety gear.


"But now we're being forced to identify who the essential workers are," Dr. Duffy said. "And guess who they are?"

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Aurora Ozanick, the 5-year-old daughter of a nurse and a construction worker in Pittsburgh, makes sense of her parents' jobs this way: "Mommy fixes people," she says. "Daddy fixes things."

These days, Bobbi Ozanick — "Mommy" — continues to report to work at the hospital. Her husband, who was laid off when his job site was shut down, stays home with Aurora. Fixing things can wait. This has been hard to digest for both parents.

"The concept of it was one of the weirdest conversations we've ever had," Ms. Ozanick, 33, said. She told her husband that if things got bad, keeping her at work for long hours and putting the health of those around her in jeopardy, he should go with their daughter to a relative's house. He wanted none of that. "His plan is to go apply for what's deemed essential. He used to work in a hospital cafeteria years ago."

But being essential does not at all mean being well compensated or even noticed.

While women have steadily increased their share of high-end health care jobs like surgeons and other physicians, they have also been filling the unseen jobs proliferating on the lowest end of the wage scale, the workers who spend long and little-rewarded days bathing, feeding and medicating some of the most vulnerable people in the country. Of the 5.8 million people working health care jobs that pay less than $30,000 a year, half are nonwhite and 83 percent are women.

Image
Constance Warren is still working at a grocery store in New Orleans, a city where nearly 250 have died of the virus.Credit...Annie Flanagan for The New York Times

Home health and personal care aides, jobs that earn little more than minimum wage and until recently were even exempt from basic labor protections, are two of the fastest growing occupations in the entire U.S. job market. More than eight in 10 of these aides are women.



"We're still a part of health care and we're not recognized at all," said Pam Ramsey, 56, who has gone years without health insurance working as a home health aide in rural Pennsylvania.

Ms. Ramsey did not set out to do this. In her 20s, she earned a degree from a trade school in auto body and mechanics, one of just three women in her graduating class of 115. But her father was badly hurt working in a coal mine, and the duty of taking care of him fell to her rather than her brothers. She has been taking care of people, paid and unpaid, ever since.

If protective equipment is in dangerously short supply at big city hospitals, it is virtually nonexistent in Ms. Ramsey's job. She goes to work with no gear beyond what she can find at the dollar store. She does not have a formal letter, like many others have, identifying her as an essential worker. A policeman recently stopped and questioned her when she was out buying medicine.

"People don't look at us because we have no license, no certificate, no proof that we're as good as they are," Ms. Ramsey said. But still she goes to work, bringing whatever rubbing alcohol and peroxide she can get her hands on.

Ms. Ramsey is not alone in having to improvise. While some child care centers are still open for the children of essential workers, this is not true everywhere.

And though educators nationwide are spending long and demanding days teaching online, a young student at home needs an adult there, too. (The federal classification of educator jobs is unclear, so they were not included in the analysis of the essential work force; if they had been, the women's share of the work force would have been substantially higher.)

As a result, many single mothers who have essential jobs are also facing the added emergency of 24-hour child care.


"This one is helping watch this one's child while she works the night shift, then she watches hers for the 7-3 shift," said Keshia Williams, 44, a certified nursing assistant at a nursing home in Scranton, Pa., where the staff members — "99.9 percent of them" women — are trying to cover an ever-growing list of rotations left unfilled by infected or quarantined co-workers.

"Now we are apparently essential," Ms. Williams said dryly, before describing the critical lack of protective gear where she works. Some N95 masks recently arrived, but she is limited to one a week, an uneasy regimen given that she spends each morning screening residents for the virus. Still, dealing with people face to face is what drew her to her job in the first place. The pandemic has not changed that.

That millions of care workers are "driven by incentives other than purely economic incentives" is in part why this work has traditionally been so undervalued, said Gabriel Winant, a labor historian at the University of Chicago.

It is a type of work that does not produce an object that can be traded or sold, he said; it is simply work that has to be done. "There is a whole system in place to make us not think of this as critical infrastructure," he said.

Until that system gets a shock.

"I didn't sign up for a pandemic," said Andrea Lindley, 34, an I.C.U. nurse at a Philadelphia hospital where scores of coronavirus patients have been admitted. "But I am not going to walk away when people need me."

Growing up, she wanted to become a doctor, watching her mother come back exhausted and back-sore from long hours as a licensed practical nurse. Health care is harder physical work than people realize — workers in health care and social assistance suffer nonfatal injuries on the job at a rate higher than workers in construction or manufacturing. Ms. Lindley's mother described the job to her this way: "You work too hard and you don't get paid enough."

But Ms. Lindley was attracted to the personal, hands-on practice of nursing. "We are in the rooms way more than the doctors," she said. It is what she still loves about the job. These days, with her husband unable to find carpentry work and her daughter recovering from leukemia, it is also what makes the job so dangerous.



"I have horrible nightmares knowing I'm going into the hospital the next day," she said. She felt a sense of deep relief when, on a recent shift, she was transferred to the burn unit.

Across the state, in southwestern Pennsylvania, Crystal Patterson heads to work. Her stepfather was laid off from his airport job, and her parents are unsure what they will do.

For Ms. Patterson, 30, a home health aide, there is less uncertainty. Yes, she has to manage caring for her son, but there is a client in her 90s who is depending on her. So for around $10 an hour, she stays on the job. There is a fundamental question before her, one faced by countless other women keeping the country alive: If she does not do this, who will?

"As a woman, this is nothing new to me," Ms. Patterson said. "That's how it's always been in this country: 'When we're sick, get us through this.'"

Katy Reckdahl contributed reporting.

Methodology: The New York Times identified essential workers by applying the federal government's essential worker guidelines with industry and occupation codes contained in U.S. Census American Community Survey microdata, 2014-18, obtained from ipums.org. In some cases, all workers in a category, such as law enforcement, were tagged as critical, but in other cases, such as retail, only workers for stores that have widely been allowed to stay open, such as supermarkets and drugstores, were included.

Robert Gebeloff is a reporter specializing in data analysis. He works on in-depth stories where numbers help augment traditional reporting. @gebeloffnyt

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Friday, April 17, 2020

Dean Baker: It’s the End of the World Economy as We Know It, Just Like the Great Recession [feedly]

the clever Dean Baker with a backwards argument against nationalism.

It's the End of the World Economy as We Know It, Just Like the Great Recession
https://cepr.net/its-the-end-of-the-world-economy-as-we-know-it-just-like-the-great-recession/

Neil Irwin tells us there will be fundamental changes in the world economy as a result of the pandemic. While he repeats many things that are conventional wisdom, as is often the case, the conventional wisdom is not very wise.

First, the pandemic is supposed to teach us the dangers of having foreign sources of supply, as parts of our supply chain from China shut down when it was hard hit by the virus in December and January. While this is supposed to be a key takeaway from the pandemic, it makes little sense.

We have seen major factories shut down in the United States as a result of the pandemic, most recently a South Dakota processing plant that produces five percent of the nation's retail pork. The United States does have a huge domestic market, so it can see shutdowns in certain segments and still likely get by without severe shortages, but smaller countries absolutely need diverse sources. And, even in the case of the United States, it is helpful to have access to producers worldwide rather than being forced to just rely on domestic sources, especially since the timing and severity of the pandemic have varied greatly across countries.

The real lesson from this episode is the importance of having large stockpiles of key medical gear. The U.S. did not have adequate stockpiles because of the negligence of its government, but this issue is independent of where the items are produced.

The piece also raises the issue of U.S. companies being reluctant to invest in China because of concerns over intellectual property theft. While this is an often-stated concern, most items, like prescription drugs, can be reverse engineered without great difficulty. The U.S. will be better able to limit China's appropriation of items to which U.S. corporations have patent monopolies or related claims if it has agreements with China requiring it to respect these rules.

In the absence of such agreements, there is no reason that China should not make copies of items like prescription drugs, medical equipment, fertilizers, pesticides, computers, and software, to which U.S. companies have intellectual property claims, and sell them freely both on their domestic market and internationally.  If the U.S. wants to protect the intellectual property claims of its corporations it will need more engagement with China, not less.

Finally, the piece does raise the importance of the dollar as the world's major reserve currency. This is and has been a growing problem for the world economy, since it makes much of the world subject to the whims of the Federal Reserve Board and the U.S. administration. In the last crisis, dollar swap lines were extended to certain countries, and not others, for clearly political purposes. This is likely happening again today.

However, the issue here is not the importance of the dollar, but rather the reluctance of other major economic powers (e.g. the EU, Japan, and even China) to directly challenge U.S. policy. Given the erratic and arbitrary actions of the Trump administration, hopefully, they will get over this reluctance, but to date this has not been the case.

The post It's the End of the World Economy as We Know It, Just Like the Great Recession appeared first on Center for Economic and Policy Research.


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Thursday, April 16, 2020

Eight-Weeks of Relief Is Not Enough for Small Firms Facing Failure [feedly]

Wall street buzz from Bloomberg is that July 1 is "crunch time" when, if economy does not restart, 3-5 MORE trillion dollars will have to be raised to avert complete collapse --- not as easily done as the first 2 Trillion


Eight-Weeks of Relief Is Not Enough for Small Firms Facing Failure

https://www.bloomberg.com/news/articles/2020-04-15/eight-week-clock-ticks-too-fast-for-small-firms-facing-failure

For many U.S. small business owners, eight weeks of federal coronavirus relief won't be enough to survive the pandemic's economic damage, spurring calls from mom-and pop firms to extend the time frame.

The rescue plan for small companies, designed as a stopgap until life returns to normal, falls short for restaurants, hair salons and other small companies that are bracing for months of poor business. Long after the lockdowns are lifted, customers will face economic hardship and be wary of crowded spaces, say advocates who are calling for funding that's not tied to a tight timeline.

"We're not going to open our hotels in April, and we're not going to open our hotels in May," said Richard Born, a longtime New York City hotelier who has shut 40 operations qualifying as small businesses. "We're hoping for July, and we are the poster child for the industries that have been hurt the most."

With money from the $349 billion package for small businesses running out, the focus in Washington is on pushing for more funding to shore up a key portion of the economy. But without a change in the structure of the loans, advocacy groups say, many small businesses will fail despite the hundreds of billions in relief that have been laid out for them.

"A month or two, they might manage, but by the third month you get in the questionable zone," said Richard Prisinzano, director of policy analysis at the University of Pennsylvania's Penn Wharton Budget Model. "This is a short-term relief bill. It is predicated on the shutdowns being over in two months."

The rub is in the conditions of the Paycheck Protection Program, known as PPP. Borrowers must use the loans to cover payroll over about eight weeks for the debt to be forgiven, and keep or rehire the same number of employees as before the shutdowns. The point is to ensure people continue to receive paychecks even as unemployment has skyrocketed in recent weeks.

Clock Ticking

The clock starts ticking on the first day of disbursement, meaning borrowers who got funding this week would be covered through mid-June. And the period covered by the program ends June 30.

That timing doesn't work for Clara Osterhage, who owns hair salons in Ohio and other states and had to lay off hundreds of employees. She wonders what she'll do with her employees if her businesses are still closed or limited at the end of the eight weeks.

"Do I lay them off again, which is not the nicest thing to do to these people who are already upside down?" she said.

Almost half of small businesses in a recent survey published in a National Bureau of Economic Research paper said they think the crisis will still be going on at the start of July. Many respondents to that question weren't confident about their answers, reflecting the uncertainty of today's world, according to the paper.

READ MORE ON SMALL BUSINESS WORLDWIDE

Industry groups including the National Restaurant Association are seeking a number of fixes to the PPP, including an extension of the period when owners can use the loan and still have it forgiven.

Rather than bringing back staff for a few weeks and then letting them go again, owners should be able to use the funds later, perhaps when they're reopening in the late summer or fall, said the restaurant group's executive vice president of public affairs, Sean Kennedy.

"If they have more certainty that there is a chunk of cash that will be available to them, that is going to be the difference between them saying, 'I'm turning my keys back in to the bank,' or, 'I'm going to try to ride this out,'" Kennedy said.

The restaurant association also wants owners to be able to put more money from the aid toward rent.

It took 12 to 18 months for the travel business to return after 9/11 and the 2008 recession, according to Brian Crawford, executive vice president of government affairs for the American Hotel & Lodging Association, a lobbying group. Businesses will have to contend with the social reality that customers may be scared to find themselves wedged into an airplane seat beside a coughing stranger.

"People are not going to travel until they feel safe again," Crawford said. "The notion that we would be at 75% by June 30th is not realistic in our opinion and probably not workable."

The International Franchise Association -- a lobbying group representing franchises in hotels, retail, restaurants and business services -- is pushing for a series of demands, including extending the maximum loans to cover eight times the average monthly cost of all expenses, an additional $600 billion in funding and extending the time covered to December.

Hugh Acheson, a judge on the TV show "Top Chef," who owns the restaurant 5&10 in Athens, Georgia, is selling future catering, on top of a government loan, to stay afloat.

"Whether the public comes back is the biggest thing right now, and the longer this goes on, I think the longer people get used to distancing," Acheson said.

For Mark Christ, the uncertainty over how to use his government-backed loan is proving particularly vexing.

Christ, who owns a Florida business that cleans kitchen exhaust systems, Hoodz of Orlando, said he'd received $290,000 under the program. Now he must decide whether to use the money to pay his staff for the next two months and get the loan forgiven, or keep it on the books as a hedge against his concerns about Florida's economic prospects for the rest of the year while his laid-off workers can draw unemployment.

"I am so consumed with this," he said. "It's driving me crazy."

— With assistance by Mark Niquette, and Michael Sasso


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