Tuesday, July 7, 2020

State Borrowing Can’t Substitute for More Direct Aid to Cope With Recession [feedly]

State Borrowing Can't Substitute for More Direct Aid to Cope With Recession
https://www.cbpp.org/blog/state-borrowing-cant-substitute-for-more-direct-aid-to-cope-with-recession

Contrary to suggestions by Treasury Secretary Steven Mnuchin and others, borrowing isn't a viable substitute for the substantial direct federal aid that states need to offset their sharp revenue declines and cost increases due to the deep, pandemic-driven, recession, our new report explains.

Without more federal aid, states will have to lay off even more workers and make even deeper cuts in services, which will likely mean thousands of teacher layoffs and cuts in health care and other services that would worsen the recession and disproportionately hurt people of color and low-income people, who recession is already hitting the hardest.

The argument that states don't need federal aid because they can borrow to cover their shortfalls have three key shortcomings:

  • States' fundamental problem is that their tax revenues will likely fall far short of covering their necessary expenses for health care, education, and other critical services for several years — we estimate by $615 billion over just three fiscal years. If states borrowed enough to avoid the deep cuts that they'll have to make without substantially more direct aid, they wouldn't be in good enough financial shape to repay it when the debt came due in a year or two.

     

    States might decide to borrow very short term — say, 6-12 months — to manage cash flow or buy time in hopes that federal policymakers will provide more direct aid. But without substantially more aid, short-term borrowing likely would only delay damaging layoffs and spending cuts, not avert them, since the state budget crisis will last far longer than a year.

  • Some analysts have proposed longer-term state borrowing as an alternative to more direct aid, but most state constitutions include balanced budget requirements and/or debt limits barring them from building borrowing into their enacted budgets and borrowing to cover unanticipated revenue shortfalls for more than a short period, often less than a year.
  • Even a state without these constitutional constraints would find it risky to borrow for long periods to cover budget gaps, which could set the state up for even deeper financial problems down the road. No one knows how long the recovery from this recession might last before the next one starts or when a natural disaster might strike; states could find themselves in new fiscal straits before paying off the debt they incurred during this recession. Moreover, every dollar that a state uses used to pay off new debt would be a dollar that it doesn't have to deposit in a "rainy day fund" to prepare for the next recession.

     

    Even if states could take out big loans to mitigate the need for immediate service cuts, that would likely drive up interest rates on borrowing that states routinely — and appropriately — do to finance long-lived capital assets like highways and state university facilities, further squeezing their finances.


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Evictions are likely to skyrocket this summer as jobs remain scarce. Black renters will be hard hit. [feedly]

Evictions are likely to skyrocket this summer as jobs remain scarce. Black renters will be hard hit.
https://www.washingtonpost.com/business/2020/07/06/eviction-moratoriums-starwood/?utm_source=feedly&utm_medium=referral&utm_campaign=wp_business

A backlog of eviction cases is beginning to move through the court system as millions of Americans who had counted on federal aid and eviction moratoriums to stay in their homes now fear being thrown out.

A crisis among renters is expected to deepen this month as the enhanced unemployment benefits that have kept many afloat run out at the end of July and the $1,200-per-adult stimulus payment that had supported households earlier in the crisis becomes a distant memory.

Meanwhile, enforcement of federal moratoriums on some types of evictions is uneven, with experts warning that judges' efforts to limit access to courtrooms or hold hearings online because of covid-19 could increasingly leave elderly or poor renters at a disadvantage.

Of the 110 million Americans living in rental households, 20 percent are at risk of eviction by Sept. 30, according to an analysis by the Covid-19 Eviction Defense Project, a Colorado-based community group. African American and Hispanic renters are expected to be hardest hit.

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Judge Yvonne Williams, glasses snuggled tight to the blue mask covering most of her face, peered into the camera in her Texas courtroom recently to press a renter about the more than $4,000 she owed her landlord.

"What do you have toward the rent?" Williams asked.

The renter appeared on another shaky screen from a dark room and explained that she had been furloughed as the spread of the novel coronavirus shut down much of the U.S. economy. But she had three kids and nowhere to go, the renter said, and was working to raise the money, which included more than $1,000 in late fees.

"I have heard almost 60 cases so far, and this is everybody's problem," Williams responded before approving the eviction.

Like many other aspects of the pandemic and ensuing recession, the evictions are expected to hurt people of color most.

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"If you look at the covid pandemic and the health outcomes, the economic outcomes, that is hitting black and brown people very hard," said Peter Hepburn, a research fellow at Princeton University's Eviction Lab. "And that is likely to be seen in the housing market as well."

In response to a survey by the U.S. Census Bureau, about 44 percent and 41 percent of adult Latino and black renters, respectively, said they had no or slight confidence they could pay their rent next month or were likely to defer payment, according to an Urban Institute analysis of the data, which was collected between May 28 and June 9. About 21 percent of white renters felt the same.

In Milwaukee, where a state eviction moratorium was lifted in late May, the number of eviction filings through June 27 was up 13 percent compared with previous years, according to data collected by the Eviction Lab research group. Nearly 1,300 cases have been filed so far in June. About two-thirds of those cases were filed in majority-black neighborhoods.

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"Milwaukee is the future. A lot of these other cities are just beginning to ramp up their capacity to process cases again," Hepburn said.

Evictions are also beginning to pick up in areas where coronavirus infections have recently spiked, said Diane Yentel, president and chief executive of the National Low Income Housing Coalition.

In Texas, for example, Gov. Greg Abbott (R) recently ordered bars to close and restaurants to reduce occupancy after coronavirus cases surged in the state. But the courts remain open in Houston, the country's fourth-largest city, where more than 2,000 eviction complaints were filed in June, according to January Advisors, a data science consulting firm.

"That wave [of evictions] has already begun. We are trying to prevent it from becoming a tsunami," Yentel said.

Enforcement left to courts

Exacerbating the crisis, housing advocates say, is that an eviction moratorium covering federally backed mortgage companies Fannie Mae and Freddie Mac, which includes 30 to 40 percent of renters, is being unevenly enforced, leaving renters to wade through a complicated legal process and at risk of being illegally evicted.

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In Travis County, which includes Austin, eviction courts reopened June 2, and soon Williams was hearing the case of the renter who owed more than $4,000. During the hearing, the judge was asked whether the renter might be covered by the moratorium, which doesn't expire until late July. But Williams shrugged off the question. (The Washington Post viewed the hearing online.)

"I am not familiar with that, but if someone will show me the law on that, I will certainly entertain that," she responded. "Right now, I am going to give them the eviction … as unfortunate as it is."

According to a search on Fannie Mae's website, the building is covered by the moratorium.

Williams said in an interview with The Post that she "misspoke" and always advises renters they can appeal her ruling. She is "very sympathetic when it comes to evictions," Williams said, but landlords can also be hurt in the process.

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A few days after that hearing, Austin announced it would reinstate its local eviction moratorium after Texas coronavirus cases spiked. The evictions Williams had approved are now on hold.

"Part of the problem with these moratoriums is that there is no enforcement. It is up to the courts to know what is required," said Emily A. Benfer, director of the Health Justice Advocacy Clinic at Columbia Law School, which has been tracking evictions during the pandemic.

Only 15 states require landlords to verify that their buildings aren't covered by the federal moratorium, leaving it to renters to find out and enforce the law, she said.

Juanita Herrera DeLeon says she told her landlord in April that she wouldn't be able to pay the nearly $600 monthly rent on her San Antonio apartment after losing her job at a bakery. Herrera DeLeon says she hasn't received her $1,200 stimulus check and says she gets a busy signal when she calls to apply for unemployment benefits. "We were in lockdown; there was nothing I could do," she said.

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In late April, the landlord placed a "lockout box" on her apartment door while she was in the shower to prevent Herrera DeLeon from reentering her home. Eight hours later, after a flurry of calls to the police and city officials, the box was removed. "It's been very hard for me," DeLeon said though tears.

The landlord was alerted in writing that the building was covered by federal eviction moratorium, which was included in the Cares Act, but continued to pursue an eviction against Herrera DeLeon, said her attorney, Christina E. Trejo of Texas RioGrande Legal Aid. She eventually filed a restraining order. (The landlord didn't respond to calls seeking comment.)

"The things that the government has done to help with the pandemic have been great attempts," including the federal eviction moratorium, Trejo said. But "there is no enforcement mechanism for it, there are no penalties, and it takes a lawyer to file to get any relief. But the poorest of the poor can't get access to attorneys."

Local bans weaken

Starwood Capital Group, a large private equity firm, repeatedly pursued the eviction of residents in its apartment buildings after the eviction ban was put in place. On March 30, SCG Atlas Coconut Palm Club, owned by Starwood, filed an eviction complaint against one of its residents in Coconut Creek, Fla., for missing a rent payment, according to court records. Highmark Residential, also owned by Starwood, filed two eviction complaints against residents of Grande Court Apartments in Jacksonville, Fla., on March 30.

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In both instances, the buildings had loans backed by Fannie Mae or Freddie Mac, covered by the federal eviction moratorium.

"It's crazy that a massive landlord like Starwood Capital is evicting people now at a time when people are being asked to stay at home," said Jim Baker, director of the Private Equity Stakeholder Project.

Starwood, founded by Barry Sternlicht, a member of the panel advising President Trump on reopening the economy, said despite the court filings, none of its 100,000 tenants had been evicted during the moratorium.

"It is possible that a small number of eviction petitions, less than 10, that were already previously in process for nonpayment of rent, might have been filed in error shortly after the March 27, 2020 moratorium went into effect," the company said in a statement. "However, all of our residential tenants who were at risk of eviction for nonpayment of rent have been allowed to remain in their apartments."

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Federal help for renters has been limited.

A proposal from Democrats to establish a $100 billion rental assistance program passed in the House but hasn't garnered as much support in the Republican-controlled Senate. Three Democratic senators, including Elizabeth Warren of Massachusetts, introduced legislation this week to expand the federal eviction moratorium to include more renters and extend the protection until next March 2021. But landlords and property owners are likely to object and that legislation also hasn't gained wide Republican support.

Most renters fall outside the federal moratorium and are protected by a patchwork of state and local eviction bans that are starting to weaken.

And even for renters in properties backed by Fannie Mae and Freddie Mac, which includes about 40 percent of the mortgages for multifamily dwellings, federal authorities say they have limited power to enforce the eviction moratorium.

The Federal Housing Finance Agency (FHFA) said this week that property owners with mortgages backed by Fannie Mae and Freddie Mac would be eligible for more help — extra time to pay their mortgage. The landlords are barred from filing eviction complaints or charging late fees while receiving that help.

But FHFA lacks power to enforce the law, said Mark Calabria, the agency's director. "We have no information on renters. We have no way of contacting renters," said Calabria, noting that eviction law is traditionally a local issue.

As unemployment rates jumped, Fannie Mae and Freddie Mac scrambled to create online search engines so renters could look up whether their buildings were backed by either company and therefore covered by the federal moratorium. But the hastily built websites can be tripped up by someone abbreviating a word or putting an extra space in an address.

"We have had to build this thing from scratch," Calabria said. "There were certainly some kinks to it, [but] I would rather have this up working 80 percent than not having it at all."

Freddie Mac and Fannie Mae said that they follow up on renters' complaints and are working to improve their online search tools.

A growing rental problem

Without strict enforcement of the law, housing advocates say, millions of people could be illegally evicted. Fannie Mae and Freddie Mac "must proactively ensure compliance with this provision" of the Cares Act, Sen. Sherrod Brown (D-Ohio) said in separate letters to the companies. "Now is the time to prevent evictions."

The moratoriums are a temporary remedy that could lead to a bigger problem for renters asked to quickly catch up on missed payments when the bans lift, said David Dworkin, president of the National Housing Conference, which has called for the creation of a large-scale rental assistance program. "This is a once-in-a-100-year pandemic. It is not unreasonable to expect the government to cover" lost rental income, he said.

Without a rental assistance program, some communities could find themselves in the uncomfortable position of having local police enforcing eviction orders in black neighborhoods after weeks of protests following the killing of George Floyd in Minneapolis, he said.

"Eviction is a very public experience that impacts the entire community. Your belongings are dumped on the street while your children and neighbors watch," Dworkin said. "Given the high degree of tension we are already experiencing, I don't think that's a dynamic we want to test."

Some housing advocates are also worried about the virtual hearings occurring in some cities where in-person court appearances are still hampered by the coronavirus.

Not all renters, especially the elderly or poor, will have access to the technology needed to participate in such hearings, said Abigail Staudt, managing attorney at the Legal Aid Society of Cleveland. "Can witnesses attend these hearings? How are subpoenas being handled? How is evidence being entered into the record?" she said. "Maybe the court is handling everything very well, and I trust that they probably are, but we don't know because we can't see what's happening."

When Columbus, Ohio, began preparing to open its court dockets again, Franklin County Administrative Judge Ted Barrows said it was clear the courtrooms were too small for all lawyers, plaintiffs and other court watchers to keep a proper social distance. He considered moving the hearings to nearby schools and recreation centers before settling on the local convention center. When the courts began hearing cases again last month, temperatures were taken as attendees entered the building, and seats were placed six feet apart, Barrows said.

In many of the cases heard so far, either the tenant has already vacated the apartment or the landlord is trying to work out a deal, Barrows said. But it's still early, he acknowledged.

"It's logical to think there is going to be an uptick" in evictions, he said. "I don't feel good about that, but I am between a rock and hard place. The courts are here to enforce contracts; a lease is a contract."


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Beijing Just Reported No Cases. Here’s How They Turned It Around - Bloomberg

Beijing Just Reported No Cases. Here's How They Turned It Around

by Bloomberg News

Beijing reported zero new coronavirus cases for the first time in 26 days, a sign the resurgence that ignited fears of a second wave in China looks to have been brought under control for now.

https://www.bloomberg.com/news/articles/2020-07-07/beijing-just-reported-no-cases-here-s-how-they-turned-it-around?sref=woWS9Szx

Beijing reported zero new coronavirus cases for the first time in 26 days, a sign the resurgence that ignited fears of a second wave in China looks to have been brought under control for now.

The city of more than 20 million people appears to have quelled a flare-up that infected 335 people, with infections down from 36 a day at their peak in mid-June. Authorities took a different approach to the virus when it reappeared in China's political and economic hub after nearly two months of no locally transmitted cases than they did in Wuhan, the central city where the pathogen first emerged.

Instead of resorting to a sudden across-the-board lockdown that risked reversing the gains made since China started reopening, Beijing deployed more targeted measures. While some -- like confining whole neighborhoods to their homes -- may be more difficult to replicate in western democracies, they could hold lessons for other countries as they grapple with the inevitable return of the virus given an effective vaccine is months, potentially even years, away.

The Beijing resurgence, which took root in a wholesale food market in the city's southwestern district, injected fresh uncertainty into the global struggle against the virus, hitting as citizens were getting used to a semblance of normal life. It served as a warning to places that look to have nailed the pandemic: the virus is elusive and isn't easily beaten.

The Problem of Medical Supplies Was a Stockpile Problem, not a China Supply Chain Problem [feedly]

The Problem of Medical Supplies Was a Stockpile Problem, not a China Supply Chain Problem
http://feedproxy.google.com/~r/beat_the_press/~3/gD_zrRMjzWQ/

As Donald Trump tries to whip up anti-Chinese sentiment as part of his re-election campaign, many have joined in by complaining about our Chinese supply lines. The NYT joined this effort by highlighting the extent to which the U.S. and the rest of the world relies on China for medical supplies.

While it is arguable whether the reliance on China for medical supplies or anything else is a big problem, that was not the main issue when it came to shortfalls of protective gear and other medical supplies at the start of the pandemic. Those shortages stemmed from the government's failure to maintain adequate stockpiles of essential equipment.

Even if all this equipment was produced in the United States, our factories could not immediately ramp up production by a factor or five to meet the demand the country was facing in March and April. The only way this demand could have been met quickly was if the stockpiles were already in place. This was the major failure in the crisis and it obscures the issue to complain about supply chains going through China.

As a practical matter, it is striking how little production has been disrupted in response to a once in a century pandemic and totally incompetent leadership at the national level. That would seem to imply that our supply chains are not a big problem.

The post The Problem of Medical Supplies Was a Stockpile Problem, not a China Supply Chain Problem appeared first on Center for Economic and Policy Research.


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Sunday, July 5, 2020

Economic Update - Europe's New Internationalist Left [feedly]

Economic Update - Europe's New Internationalist Left
https://economicupdate.podbean.com

download (size: 66 MB )

 On this week's show, Prof. Wolff presents updates on "zombie" companies and their rapid growth in the US, The Federal Reserve "stress tests" expose risks, and weaknesses of major US banks. On the second half of the show, Prof. Wolff is joined by Greek economist, academic, philosopher and politician, Yanis Varoufakis on DiEM25, Europe's new internationalist left.


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Friday, July 3, 2020

BLS jobs report shows U.S. employment crash continues [feedly]

BLS jobs report shows U.S. employment crash continues
https://www.peoplesworld.org/article/bls-jobs-report-shows-u-s-employment-crash-continues/

WASHINGTON—Donald Trump's happy talk today notwithstanding, the nation's current depression, the employment crash caused by closures forced by the coronavirus pandemic, continues, the latest Bureau of Labor Statistics report shows.

That's because 1.445 million more people applied for regular state unemployment benefits, and another 839,563 sought special federal benefit checks in the week ending June 27.

The overall U.S. unemployment rate for June dropped to 11.1%, another BLS report says. It adds businesses claimed to create 4.8 million new jobs that month. Both reports were released July 3, but the regular June jobs report includes only data through June 12.

That makes it out of date. It's also understating joblessness, top economists said the day before, as workers who "are on temporary layoff but still paid"—due to federal aid—are not counted as jobless.

And the 4.8 million jobs businesses claimed to create in June as they started to reopen are those whose workers could be easily called back first, and who just as easily be laid off again as the coronavirus pandemic resurges. Such layoffs are already starting.

The more-up-to-date weekly report showed 19.2 million people received regular state unemployment benefits as of June 27. Numbers covering other benefits, from the federal government only–including 749,000 people who get just $600 weekly federal checks–went to 13.603 million other people in the week ending June 13. The federal numbers always lag a week or two behind state data.

"The total number of people claiming benefits in all programs for the week ending June 13 was 31,491,627, an increase of 916,722 from the previous week," that weekly benefits claims report says.

The economists warned the roof could fall in at the end of July unless Congress again extends jobless benefits, including weekly $600 checks to "independent contractors," musicians and other workers who don't qualify for state jobless aid. Extension is up in the air, Rep. James Clyburn, D-S.C., a member of the House leadership and chair of the select committee on the coronavirus, said the day before.

"There's another round of layoffs that are likely to occur as businesses that opened up are then likely to cut back" due to a resurgence of coronavirus pandemic, AFL-CIO chief economist Bill Spriggs said in that same telephone press briefing.

Those cuts are starting. Delta Airlines earlier asked 40% of its 90,000 workers to go on unpaid furloughs for up to a year, and Gov. Gavin Newsom, D-Calif., faced with rising coronavirus figures in the Golden State, ordered more business closures on July 2.

The bad numbers in the more up-to-date weekly claims report didn't stop the GOP Trump regime from crowing about the drop in the monthly unemployment report but made Trump's comeback claims a lie.

And even the better-looking monthly data showed weakness: Almost half (2.1 million) of those 4.8 million "new" jobs were in reopening bars, hotels and especially restaurants—all firms now forced to close again to combat the resurgent coronavirus. BLS reported on July 1 that all 389 U.S. metro areas lost jobs in May.

Those workers who returned came back to shorter workweeks and lower pay. "In June, average hourly earnings for all employees on private nonfarm payrolls fell by 35 cents to $29.37," BLS said in the monthly jobs report and the workweek declined by 0.2 hours, to 34.5 hours.

That earnings drop "reflects job gains among lower-paid workers; these changes put downward pressure on the average hourly earnings," BLS said. The big job gains in the private sector were among the lowest-paid workers: Restaurant workers, temps, and janitors.

That decline may understate the case. A University of Chicago business school study, commissioned by the Washington Post, found four million workers who have kept their jobs through the crash have had their pay cut, too.

"We're in two recessions," Spriggs said. One is a "normal cyclical recession" after joblessness hit a low of 3.5% in March, before the virus's impact hit home. The other and larger one is of people laid off due to the campaign to enforce social distancing and prevent the virus's spread, he explained. Those layoffs total 31.491 million from the March start of the pandemic through June 13, the BLS weekly jobless claims report said.

The reopenings have spread the coronavirus again. Analysis shows the number of new coronavirus cases in June was 50% higher than the number of new cases in May. June is when the reopenings began.

"We may see more losses in future months due to the coronavirus," Spriggs added, especially in state and local governments. BLS's monthly jobs report said those governments shed 1.9 million jobs in April and May and added only 33,000 in June. There were 70,000 more jobs in local schools and losses in other governments.


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Tuesday, June 30, 2020

PK: The pandemic depression is on track


By Paul Krugman

Opinion Columnist

The coronavirus led to a plunge in output and employment. This plunge, however, was a feature, not a bug. As I've been saying for a while, we deliberately put the economy into the equivalent of a medically induced coma, suppressing activity to give ourselves a chance to get the pandemic under control.

If we had stayed the course, this period of pain could have set the stage for a rapid recovery. But it was obvious early on that mishandling the situation — failing to stay the course on social distancing, failing to use the time to develop enough testing and contact tracing to gradually resume normal life while keeping a lid on new outbreaks — could extend the pain, turning a short, sharp recession into a prolonged depression, a long period of very high unemployment.

Here's how I described the nightmare scenario more than six weeks ago: "Over the next few weeks, many red states abandon social-distancing policies, while many individuals, taking their cues from Trump and Fox News, begin behaving irresponsibly. This leads, briefly, to some rise in employment.

"But fairly soon it becomes clear that Covid-19 is spiraling out of control. People retreat back into their homes, whatever Trump and Republican governors may say."

Continue reading the main story

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Well, it's no longer a nightmare scenario; it's just reality. The New York area, after a terrible start, has done what most advanced countries have done, and crushed the curve. But Covid-19 is now exploding in the Sun Belt. Arizona is in full-blown crisis. So is Texas, especially big cities like Houston, where hospitalizations have soared. Florida, which has been suppressing data on hospitalizations, is probably similar.

All three states have Republican governors who enthusiastically lifted stay-at-home orders and, in Arizona and Texas, at first even prevented local governments from requiring that people wear masks. Even now, they're dithering, taking only baby steps toward restoring social distancing as the pandemic rages.

From an economic point of view, however, it may not matter what the governors do: Fear of the coronavirus is likely to stall recovery, and maybe even send these states back into recession, even if there isn't a new lockdown. Like many economists these days, I've been using restaurant reservations from OpenTable as an early warning signal for economic changes. Here's what smoothed data for the three hot spot states looks like since the beginning of May:

Recovery, stallingOpenTable

In case you're wondering (which you probably aren't), I'm using seven-day medians — seven-day to eliminate day-of-the-week effects, medians to avoid blips like Father's Day. What the data show is a substantial recovery in eating out during May in early June, stalling and perhaps going into reverse in the past couple of weeks.

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This tells you, among other things, how to react to Thursday's employment report, which is likely to show pretty big job gains. Namely, it will show a dead cat bounce, reflecting the effects of early reopening but not the effects of the surge in infections that followed.

For months, both epidemiologists and economists have been trying to tell policymakers and business types that there was no trade-off between fighting the pandemic and economic growth. That is, if we didn't get Covid-19 under control, any short-term gains would soon vanish, and we'd find ourselves getting the worst of both worlds — more deaths plus economic stagnation. But that message was ignored, and here we are.

Quick Hits

The level of fear is more important than official rules.

Larry Kudlow continues his impressive record of never being right.

Fox News has kept millions from practicing social distancing.

Trump's self-defeating resistance to mask wearing.

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John Case
Harpers Ferry, WV
Enlighten Radio
Socialist Economics
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