Whenever you meet a friend on the street or get a friendly email asking how you are doing, how often do you say “fine”? I say it a lot. I am fine in the sense that I am managing to endure what is now approaching six months of modified house arrest without getting sick or going insane or knowing anyone who has. I am fine because I realize how much better off I am than so many others. I am fine because I do not feel I have the right to complain. But to be honest, these are pretty low bars. In this strange time when we do not know who might get sick next or what will happen when businesses start opening up more, or when colleges “sort of” start up again or when our grandchildren start going back to school or when more people start eating indoors at restaurants or going to religious services or when people just give up and quit wearing masks–well, no I am not fine. And my guess is neither are you. Nobody is fine. We are all coping, some better than others.
So let me be clear: finding a way out of the grips of this global health monster is and should be the number one priority. I do believe we will find a vaccine that works and we will move on. Eventually. How much water will pass under the bridge before that happens, who knows?
But then there is also the economy. This I would call “the second shoe.” The reason that the U.S. economy has managed to muddle through this disaster as well as it has —and it has hardly been what you would call great, except for maybe the stock market rebound—is due mainly to the initial bailout and the $600/week boost in unemployment benefits. Republicans complain that this was poorly designed in the first place since many people who received this check actually made more money than they were when they were working. There are said to be at least twenty Republican Senators who will never vote for an extension or any more bailout money under any circumstances. In any event that unemployment benefit was huge. It was the lifeline not only for the 30 million people who have lost their jobs during the Covid outbreak, about half of whom are still not working. It was the lifeline for the economy. And it is now gone. There are at least 16 million American adults in our country right now whose incomes just dropped by $2,400/ month from what they were receiving a couple of weeks ago when they were getting the extra $600/week in bailout money. Few, if any, just sat on that money. Few, if any, put it under the mattress. They spent it. They paid the rent or the mortgage, bought food for their families, made the car payment, the student loans and credit card payments, and maybe had enough left over for a treat or two. But at this moment that money is gone. Trump’s executive order appears to be neither legal nor practical. Maybe Congress will find a way to restore it. Maybe not.
Forget for a moment what it means to try to live on an income closer to $12,000-$15,000 a year (the standard previous benefit in most states pre Covid ) instead of $30,000-$40,000/year during the bailout. What do you think this will mean for the economy?
Well, what it means is that this money will be sucked out of the economy. Losing, say, $600 a week in consumer spending for 15 million consumers translates to about $9.6 billion a week! That money is the money that would have found its way to mortgage companies, landlords, grocery stores, banks, doctors and dentists, and businesses small and large. If these companies are not able to sell their goods and services, they lay off employees. These unemployed people now have about $300/week to get by, hardly enough. That leads to failure to pay rent, car payments, student loans, health care bills. That translates to even more layoffs and to business failures.
There is a name for this. It is called a recession. When the economy tanked in 2008 due to the mortgage crisis, it was called the Great Recession. What is staring us in the face right now is another Great Depression. It is the second shoe that could drop.
I am not an economist or an expert in such matters, but I do know something about housing. And it is no secret that when people have their incomes slashed, they are not able to pay the rent or the mortgage. Getting food on the table for their families comes first. I also know that in July over 25% of all U.S. households were at least a month overdue in paying the landlord or the mortgage company. The August numbers are estimated to be over a third of all U.S. households. I also know that the moratorium on evictions in federally assisted properties has ended and that a third of all households—about 30 million households and over 50 million people—are at risk of finding themselves out on the street.
Simply evicting these households is not the answer for the banks and lenders either. With such high unemployment, fewer people can afford to move in. Many banks and mortgage companies will fail. Remember 2008-2009?
Folks, we are looking at an economic disaster of perhaps unprecedented proportions. And the tragedy is that we know it is coming and we have the tools, if not to fix it, to soften the blow. The first step is to continue the $600/week unemployment payment for as long as it takes to get us through this. The second is to establish a housing relief fund to help with the ensuing eviction and mortgage crisis. The third is a massive jobs program focusing on green energy and infrastructure. And the fourth is a revamped tax code where the rich and superrich pay their fair share of footing the enormous cost of recovery. And bailing out the beleaguered states should also go into the mix. You got it: pretty much what the House passed several months ago and as things now stand has no chance of passing in the Senate.
And before we can really fix the economic crisis we have to get control of the pandemic. So it is a vicious circle.
Let’s hope the Biden-Harris ticket will win. Let’s pray that they win. Let’s do everything we can to help them win.
But even if they do win—and I believe they will—it still will be a tough slog, and there is still uncertainty when we will land on our feet. A lot depends on who gets elected to the Senate.
The alternative—another four years of Trump—is unthinkable.
God help us. God help the people of the United States. And the world.