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    Automatic Aid for the People? How Jobless Benefits Can Fit the Economy.

    The pandemic showed the flaws in the American approach to help the unemployed. Alternatives exist.The line outside an unemployment office in Fayetteville, Ark., last April.September Dawn Bottoms for The New York TimesFor years, people who study unemployment benefits have warned that the American system of jobless insurance was too antiquated and clunky to meet the needs of workers in a time of economic crisis.To understand what they were worried about, consider this bizarre timeline since the start of the pandemic:Last spring, when the economic shutdown caused millions to lose their jobs, many state systems were so clogged that people were unable to receive jobless benefits for weeks, sometimes longer.Congress concluded that it would be technologically impossible to calibrate extra benefits to replace every jobless person’s full income, so it took a blunter approach: Lawmakers tacked an extra $600 per week onto unemployment checks. The result, by one estimate, was that 76 percent of recipients made more than they earned when they were working.At the end of July, that $600 supplement expired, falling to zero. But the economy remained in dire condition with jobs nowhere to be found — leaving millions of jobless people in the lurch.Then, early this year, $300 per week was tacked on. It is set to stay there until September, even as Americans are vaccinated on a mass scale and as the economy starts to roar ahead.So while unemployment insurance has fulfilled a vital role of keeping families afloat financially — and preventing overall demand for goods and services from collapsing — the stop-and-start cash sequence has been reflective of neither individual recipients’ lost income nor the state of the labor market.This has been partly the result of U.S. policymakers’ rejection of ideas that many labor market experts support, and that some advanced nations have adopted to varying degrees. These economists have called for investing more in the technological and customer service infrastructure of state unemployment systems, and presetting benefits based on economic conditions. Benefits would adjust automatically to the level of need, thus helping people who are struggling and stabilizing the overall economy without Congress having to do much of anything.“There are a lot of flaws and gaps in the unemployment insurance system that were revealed in Covid but have always been there,” said Chloe East, an economist at the University of Colorado Denver who has studied the system.Such proposals have typically come from left-of-center policy experts. But now, as the economy starts to recover, there’s a twist. In the potential boom-time summer to come, these automatic triggers would probably fulfill conservative policy goals — ensuring that benefits are reduced as the economy recovers, thus increasing incentives to return to work.In some areas, employers are struggling to attract workers.  A roadside banner beckons potential employees outside Channel Control Merchants in Hattiesburg, Miss.Rogelio V. Solis/Associated PressBusinesses around the country are complaining of difficulty finding people to hire. Many employers blame generous unemployment insurance payments that may give some would-be workers incentive to stay home.Some recipients still earn more on unemployment than they do when they’re working, thanks to the $300 supplement. And under current law, those benefits will remain in place until Sept. 6 no matter how much the economy might boom or how abundant jobs turn out to be.In a proposed sweeping overhaul of the system published this month by Arindrajit Dube of the University of Massachusetts Amherst, the duration of jobless benefits would vary based on the unemployment rate. States with a jobless rate under 5 percent would extend benefits for 26 weeks, and those with 10 percent unemployment for 98 weeks. He would also raise benefits by $100 a week when the jobless rate was above 6 percent, and by $200 when it was above 8 percent.Some lawmakers are thinking similarly. Two Democrats, Senators Ron Wyden of Oregon and Michael Bennet of Colorado, proposed legislation this month that would, among many other things, extend benefits when the unemployment rate is at or above 5.5 percent.Similar proposals have failed to advance for a range of reasons. For one, the plans appear expensive in the conventions of budget math. The current practice is to extend benefits in a bill, or a series of them, if the need arises. That appears less expensive than building in money in advance for jobless benefits and automatic triggers based on the economy.Now consider the partisanship that can come into play in limiting the size of recession aid packages. If lawmakers agree to spend only $900 billion on economic help, for example, it’s a disadvantage if some of that is devoted to a theoretical estimate of what jobless benefits might be years in the future.Moreover, lawmakers may like the appearance that they are leaping to citizens’ aid in a crisis or recession — which would be less visible if the aid were increased automatically.In times of economic crisis, like last year, Democrats and Republicans have been able to agree on these policies. But if they were to try to devise a system from scratch, they might turn out to be quite far apart on how generous jobless benefits should be.“I think everyone can agree the optimal system would be calibrated to the economy, but the devil is so much in the details,” said Marc Goldwein, policy director of the Committee for a Responsible Federal Budget. “I suspect the parties are much farther apart on what a permanent trigger should look like than what we should do in the next six months.”Still, the current moment shows there could be harmony between at least some fiscal conservatives and pro-business interests and those on the left who would like to see more expansive benefits.“Even people who would like to see pandemic unemployment insurance gone by now would have wanted people last May and June to be getting checks when millions of people weren’t getting them because the systems couldn’t function,” said Jay Shambaugh, an economist at George Washington University. “One way or another, the system we have now didn’t provide money along the optimal path.”The flip side of a system that can get money out quickly is that it can also be fine-tuned to make sure benefits go away when circumstances justify it. 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    Federal Aid to Renters Moves Slowly, Leaving Many at Risk

    Congress allocated $25 billion in December and another $21 billion in March to help people who fell behind on rent during the pandemic. Little has reached landlords or tenants.WASHINGTON — Four months after Congress approved tens of billions of dollars in emergency rental aid, only a small portion has reached landlords and tenants, and in many places it is impossible even to file an application.The program requires hundreds of state and local governments to devise and carry out their own plans, and some have been slow to begin. But the pace is hindered mostly by the sheer complexity of the task: starting a huge pop-up program that reaches millions of tenants, verifies their debts and wins over landlords whose interests are not always the same as their renters’.The money at stake is vast. Congress approved $25 billion in December and added more than $20 billion in March. The sum the federal government now has for emergency rental aid, $46.5 billion, rivals the annual budget of the Department of Housing and Urban Development.Experts say careful preparation may improve results; it takes time to find the neediest tenants and ensure payment accuracy. But with 1 in 7 renters reporting that they are behind on payments, the longer it takes to distribute the money, the more landlords suffer destabilizing losses, and tenants risk eviction.Millions of tenants are protected from eviction only by a tenuous federal moratorium that faces multiple court challenges, omits many households and is scheduled to expire in June.“I’m impressed with the amount of work that unsung public servants are doing to set up these programs, but it is problematic that more money isn’t getting out the door,” said Ingrid Gould Ellen, a professor at New York University who is studying the effort. “There are downstream effects if small landlords can’t keep up their buildings, and you want to reach families when they first hit a crisis so their problems don’t compound.”Estimates of unpaid rents vary greatly, from $8 billion to $53 billion, with the sums that Congress has approved at the high end of the range.The situation illustrates the patchwork nature of the American safety net. Food, cash, health care and other types of aid flow through separate programs. Each has its own mix of federal, state and local control, leading to great geographic variation.While some pandemic aid has flowed through established programs, the rental help is both decentralized and new, making the variation especially pronounced.While Charleston has started a local rent assistance program, South Carolina has $272 million to spend and has not begun taking applications.Cameron Pollack for The New York TimesAmong those seeking help is Saundra Broughton, 48, a logistics worker outside Charleston, S.C., who considered herself safely middle class in the fall, when she rented an apartment with a fitness center and saltwater pool. To her shock, she was soon laid off; after her jobless benefits were delayed, she received an eviction notice.“I’ve always worked and taken care of myself,” she said. “I’ve never been on public assistance.”A judge gave Ms. Broughton 10 days to leave her apartment. Only a last-minute call to legal aid brought word of the federal moratorium, which requires tenants to apply. She rushed to the library to print the form with 24 hours to spare. “But I still owe the money,” she said, about $4,600 and counting.If Ms. Broughton lived in nearby Berkeley County, she could have sought help as early as March 29. In Charleston County, a few miles away, she could have applied on April 12. But as a resident of Dorchester County, she must apply through the state, which has $272 million in federal money but is not yet taking applications.“Why are they holding the money?” she said. “I have thousands of dollars of debt and could be kicked out at any moment. It’s a very frightening feeling.”The huge aid measures passed during the early stages of the pandemic did not include specific provisions to help renters, though they did give most households cash. But hundreds of state and local governments started programs with discretionary money from the CARES Act, passed in March 2020. These efforts disbursed $4.5 billion in what amounted to a practice run for the effort now underway with 10 times the money.Lessons cited include the need to reach out to the poorest tenants to let them know aid is available. Technology often posed barriers: Renters had to apply online, and many lacked computers or internet access.The demand for documentation also thwarted aid, as many people without proof of leases or lost income could not finish applications. Some landlords declined to participate, perhaps preferring to seek new tenants.Despite rising need, programs in Florida and New York, financed by the CARES Act, returned tens of millions of unspent dollars to the states. By the time Congress passed the new program in December, nearly 1 renter household in 5 reported being behind on payments.The national effort, the Emergency Rental Assistance Program, is run by the Treasury Department. It allocates money to states and also to cities and counties with populations of at least 200,000 that want to run their own programs. About 110 cities and 227 counties have chosen to do so.The program offers up to 12 months of rent and utilities to low-income tenants economically harmed by the pandemic, with priority on households with less than half the area’s median income — typically about $34,000 a year. Federal law does not deny the aid to undocumented immigrants, though a few states and counties do.Modern assistance seems to demand a mix of Jacob Riis and Bill Gates — outreach to the marginalized and help with software. Progress slowed for a month when the Biden administration canceled guidance issued under President Donald J. Trump and developed rules that require less documentation.Other reasons for slow starts vary. Progressive state legislators in New York spent months debating the best way to protect the neediest tenants. Conservatives legislators in South Carolina were less focused on the issue. But the result was largely the same: Neither legislature passed its program until April, and neither state is yet accepting applications.“I just don’t know why there hasn’t been more of a sense of urgency,” said Sue Berkowitz, the director of the South Carolina Appleseed Legal Justice Center. “We’ve been hearing nonstop from people worried about eviction.”There is no complete data on how many tenants have been helped. But of the $17.6 billion awarded to state governments, 20 percent is going to states not yet taking applications, though some local programs in those states are. Florida (which has $871 million), Illinois ($566 million) and North Carolina ($547 million) are among those that have yet to start.“The pace is slow,” said Greg Brown of the National Apartment Association, who emphasized that landlords have mortgages, taxes and maintenance to pay.In a recent talk at the Brookings Institution, Erika Poethig, a housing expert on the White House Domestic Policy Council, praised the “unprecedented amount of rental assistance” and said “the federal government only has so much ability” to encourage faster action.Accepting applications is only the beginning. With $1.5 billion to spend, California has attracted 150,000 requests for help. But of the $355 million requested, only $20 million has been approved and $1 million paid.Texas, with $1.3 billion to spend, started quickly, but the company it hired to run the program had software failures and staffing shortages. A committee in the state House of Representatives found that after 45 days, the program had paid just 250 households.By contrast, a program jointly run by the city of Houston and Harris County had spent about a quarter of its money and assisted nearly 10,000 households.Not everyone is troubled by the pace. “Getting the money out fast isn’t necessarily the goal here, especially when we focus on making sure the money reaches the most vulnerable people,” said Diane Yentel, the director of the National Low Income Housing Coalition.Given the challenge, she said, “I think it’s going OK.”She points toward a program in Santa Clara County, Calif., that won praise for its outreach last year. Many of the people it served spoke little English or lacked formal leases to submit. Now, with $36 million to spend under the new program, it opted for weeks of additional planning to train 50 nonprofit groups to find the poorest households“Giving away money is actually quite hard,” said Jen Loving, who runs Destination: Home, a housing group leading the campaign. “All the money in the world isn’t going matter if it doesn’t get to the people who need it.”In Charleston, S.C., housing became a subject of concern after a 2018 study found the area had the country’s highest eviction rate. Charleston County ran three rounds of rental relief with CARES Act money, and the state ran two.The second state program, started with $25 million in February, drew so many applications that it closed in six days. But South Carolina is still processing those requests as it decides how to distribute the new federal funds.Antonette Worke is among the applicants awaiting an answer. She moved to Charleston from Denver last year, drawn by cheaper rents, warmer weather and a job offer. But the job fell through, and her landlord filed for eviction.Ms. Worke, who has kidney and liver disease, is temporarily protected by the federal eviction moratorium. But it does not cover tenants whose leases expire, as hers will at the end of next month. Her landlord said he would force her to move, even if the state paid the $5,000 in overdue rent.Ms. Worke is temporarily protected by a federal moratorium on evictions, but her lease is set to expire at the end of the month.Nora Williams for The New York TimesStill, she said the help was important: A clean slate would make it easier to rent a new apartment and relieve her of an impossible debt. “I’m stressing over it to the point where I’ve made myself sicker,” she said.Moving faster than the state, Charleston County started its $12 million program two weeks ago, and workers have taken computers to farmers’ markets, community centers and a mall parking lot. Christine DuRant, a deputy county administrator, said the aid was needed to prevent foreclosures that could reduce the housing stock. But critics would pounce if the program sent payments to people who do not qualify, she said: “We will be audited,” possibly three times.Latoya Green is caught where the desire for speed and accounting collide. A clerk who lost hours in the pandemic, she owes $3,700 in rent and utilities and is protected by the eviction moratorium only until her lease expires next month.She applied for help on the day the county program started but has not completed the application. She said she is unsettled by the emails requesting her lease, which she lacks, and proof of lost income.Still, Ms. Green does not criticize Charleston County officials. “I think they’re trying their best,” she said. “A lot of people run scams.”With time running short, she added: “I just hope and pray to God they’ll be able to assist me.” More

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    Unemployment Is High. Why Are Businesses Struggling to Hire?

    Health concerns, expanded jobless benefits and still being needed at home are among the reasons would-be workers might be staying away.A BevMo store in Larkspur, Calif., early this month.Justin Sullivan/Getty ImagesThere are two distinct, and completely opposite, ways of looking at the American job market.One would be to consult the data tables produced every month by the Bureau of Labor Statistics, which suggest a plentiful supply of would-be workers. The unemployment rate is 6 percent, representing 9.7 million Americans who say they are actively looking for work.Alternately, you could search for news articles mentioning “labor shortage.” You will find dozens in which businesses, especially in the restaurant and other service industries, say they face a potentially catastrophic inability to hire. The anecdotes come from the biggest metropolitan areas and from small towns, as well as from tourist destinations of all varieties.If this apparent labor shortage persists, it will have huge implications for the economy in 2021 and beyond. It could act as a brake on growth and cause unnecessary business failures, long lines at remaining businesses, and rising prices.What explains the disconnect? There are competing theories, all plausible — and potentially interrelated. Meanwhile, the economic and public health situation is evolving too quickly for research to keep up. So consider this a guide to these potential explanations, and an accounting of the evidence for each.Benefits too generous?“The government is making it easy for people to stay home and get paid. You can’t really blame them much. But it means we have hours to fill and no one who wants to work.” — Tom Taylor, owner of Sammy Malone’s pub in Baldwinsville, N.Y., quoted in The Syracuse Post-Standard.Business leaders have been quick to blame expanded unemployment insurance and pandemic stimulus payments for the labor shortages.The logic is simple: Why work when unemployment insurance — including a $300 weekly supplement that was part of the newly enacted pandemic rescue plan — means that some people can make as much or more by not working? And the combined $2,000-per-person cash payments enacted since late last year created a cushion people can rely on for a time.Ample economic research shows that more generous unemployment benefits are a disincentive for people to seek or accept work. But several studies on what happened when a $600 weekly supplement was added to benefits last spring suggested that the early pandemic had unique dynamics.Research by Ioana Marinescu, Daphné Skandalis and Daniel Zhao, for example, found that every 10 percent increase in the jobless benefits a person received corresponded to a 3 percent decline in the number of jobs applied to. But in the context of mass closings of businesses, that didn’t matter for how many people were employed — there were still far more job seekers than jobs.By contrast, “right now what seems to be happening is that job creation is outpacing the search effort that workers are putting forth,” said Professor Marinescu, an economist at the University of Pennsylvania. “Compared to how people reacted last spring, it’s not that long ago, but the situation has changed a bit.”That is to say, a similar decline in workers’ desire to pursue jobs matters more when there are plenty of jobs to go around, which is increasingly the case as the economy reopens.In other research on the expanded jobless benefits, Peter Ganong of the University of Chicago Harris School and five co-authors found a smaller decrease in the inclination to search for jobs than earlier research would have predicted. In other words, those $600 weekly supplements didn’t decrease employment very much.But those were circumstances that may no longer apply.“The goal of government should be to get everyone back to work as soon as possible while continuing to provide economic support to workers who have not gone back to work yet,” Mr. Ganong said. “Those two things were not in tension in 2020, and they are in tension in 2021. All of those things that made 2020 special are receding, so we now face a more traditional set of trade-offs.”Arindrajit Dube, an economist at the University of Massachusetts Amherst who has also studied the impact of last year’s expanded benefits, is skeptical that the lure of jobless benefits is the primary explanation. He notes that even with the reported shortages, businesses appear to be successfully hiring at a breakneck pace.Companies added 916,000 employees to payrolls in March alone, a number matched only by the initial rebound from pandemic shutdowns last summer and in the immediate aftermath of World War II. Moreover, the expanded benefits are scheduled to expire in September.“Maybe an unemployed person spends several additional days unemployed because of the $300,” Professor Dube said. “But if it’s a problem, it takes care of itself. It’s nothing compared to the broader trajectory of the reopening, which swamps anything on the unemployment insurance front.”Which brings us to other factors that may be keeping would-be workers away from the job market, especially in the service sector.Worried about getting sick“We’ve been taking lockdown pretty seriously. My wife and son have some autoimmune conditions. I didn’t want to put my family in a position where I’d be working in a very public-facing job and potentially bringing something home.” — Paul Hofford, former bartender at A Rake’s Progress in Washington. Quoted in Washington City Paper.Nobody wants to get a potentially deadly disease for a job slinging eggs Benedict. And more so than many other occupations, restaurants and other parts of the service sector require face-to-face contact with the public.One piece of evidence supporting this idea: There appears to be a relationship between vaccinations of people and a rise in their employment rate.Aaron Sojourner, a University of Minnesota economist, used the Census Bureau’s Household Pulse Survey to explore that relationship among 3,600 finely grained groupings of Americans by demographics and geography.A 10-percentage-point increase in the share of people fully vaccinated corresponded with a 1.1-percentage-point increase in their employment. There are many ways to interpret the finding — it doesn’t tell us anything about causation — but one possibility is that vaccinated people are more comfortable taking jobs.“The first-order issue is the virus, and if that’s what caused the crisis, then it is also the path out of the crisis,” Professor Sojourner said. “Crushing the virus is the solution to both the supply problem and the demand problem.”Health concerns and the expanded jobless benefits can operate hand in hand. It’s easier for a person nervous about the virus to stay out of the work force when benefits are more generous.Still needed at home“Lot of kids are still at home doing school so, depending on age, they’ve got to have a parent there, somebody who would have been in the work force. We need them back and we need them back in force.” — Stacy Roof, president of the Kentucky Restaurant Association, quoted in The Lexington Herald-Leader.Someone has to oversee the school-age children stuck at home taking classes. The same goes for older or disabled relatives who might have had other forms of care before the pandemic.The Census Household Pulse survey shows that this remains a major reason for adults not to be working. Based on surveys taken in late March, 6.3 million people were not working because of a need to care for a child not in a school or day care center, and a further 2.1 million were caring for an older person. Combined, those numbers amount to nearly 14 percent of the adults not working for reasons other than being retired.What’s more, those numbers have actually gone up since the start of the year — an additional 850,000 people.That speaks to the interrelated challenges of reopening the economy. Many businesses may be opening and seeing a surge of demand, but so long as schools, day care centers and elder care are still limited, there will be constraint in their ability to get workers.“As we move toward herd immunity, those issues around care infrastructure will get better,” said Heidi Shierholz, an economist at the Economic Policy Institute. “These structural things related to public health, we may not know the magnitude of how many people they’re keeping out of the labor force, but with the vaccine we can come at this with optimism that it will improve.”Show me the money“If you can swing a hammer, you can go make $25 an hour.” — Brandt Casey, manager of Cafe Olé in Meridian, Idaho, quoted in The Idaho Statesman.The simple, Economics 101 answer to what a company should do when it has trouble recruiting enough workers is to pay them more. That is the logic that underpins the economic policy of the Biden administration and the Federal Reserve: Achieving a tight labor market will result in higher pay for workers.But the restaurant industry faces a particular challenge. The sectors that have thrived during the pandemic have been on hiring binges, often paying higher wages than restaurants do. Amazon alone added 500,000 employees in 2020, with a wage floor of $15 an hour. Companies like Walmart, Target and home-improvement and grocery chains have all been hiring aggressively with wages at or not far behind those levels.And as Mr. Casey suggested, those with some in-demand skills — whether in construction or commercial truck driving — can do even better. Knight-Swift Transportation Holdings has raised its wages for newly certified drivers by 40 percent, to the point they can average $60,000 salaries.That puts restaurants in a tough spot competitively. According to federal data, the median cook or food preparation worker made $13.02 an hour in May 2020, and dishwashers $12.15.For tipped workers like waiters and bartenders, the pandemic has made potential earnings more erratic. In an era of outdoor dining, a rainy day can mean a drastic loss of income.It’s easy to see how restaurant workers might be exploring other options. Restaurants, with thin profit margins in the best of times, have had their finances walloped by a year of stop-and-start pandemic closures.“When certain sectors have disadvantages like not enough tipped earnings or worries about the pandemic, you would expect reduced labor supply to those sectors and greater labor supply to other sectors that have experienced increased demand, like logistics,” Mr. Dube said.Reconsidering career decisions?“This reprieve has given for a lot of people a chance to contemplate their lives, where they’re going and where they want to be, and for the industry to take a look at itself.” — Lisa Schroeder, owner of Mother’s Bistro in Portland, Ore., quoted in The Counter.Has the pandemic spurred many people to re-evaluate their lives, their careers and what they care about most?Many people who have long done hard, physically demanding work — with odd hours and modest pay — might second-guess those choices when faced with a year of crisis. In industries that had their economic underpinnings severed last March virtually overnight, there was a particular lesson in the inherent instability of the modern economy and what really matters.Could this be a meaningful cause of the food service sector’s labor shortage? It’s not the type of question that can be answered with solid data. But it is one that hangs over all sorts of businesses as the great reopening begins. More

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    Biden Highlights Small-Business Help, as Problems Persist With Lending Program

    President Biden visited a Black-owned flooring company as he continued his weeklong push to highlight the $1.9 trillion economic relief package.President Biden dropped by a flooring company in the Philadelphia suburbs on Tuesday to promote an assortment of measures in his $1.9 trillion aid package that are aimed at helping small employers and their workers endure the pandemic’s economic shocks.But Mr. Biden’s most immediate and sweeping small-business initiative — changes he made last month to the Paycheck Protection Program — has been mired in logistical challenges. With the relief program scheduled to end in just two weeks, the effect of his modifications will be blunted unless Congress extends it.Last month, Mr. Biden abruptly altered the rules of the $687 billion program to make business owners who employ only themselves eligible for more money. The move was intended to address a clear racial and gender disparity in the relief effort: Female and minority owners, who are much more likely to run tiny businesses than larger ones, were disproportionately hobbled by an earlier rule that based the size of sole proprietors’ loans on their annual profit.Many companies were shut out of the program because of that restriction, while others got loans as small as $1. The administration switched to a more forgiving formula that lets those businesses instead use their gross income, a change that significantly increased the money available to millions of business owners. Its implementation, though, has been a mess.The program’s government-backed loans are made by banks. The largest lender, JPMorgan Chase, refused to make the change, saying it lacked the time to update its systems before March 31, the program’s scheduled end date. The second-largest lender, Bank of America, decided to update all of its applications manually, causing anxiety and confusion among its borrowers. Wells Fargo released its revised application on Tuesday and told borrowers with pending applications that they had just three days to reapply using the new form.Compounding the problem is that Mr. Biden’s change was not retroactive, which has prompted backlash from the hundreds of thousands of borrowers who got much smaller loans than they would now qualify for. Many have used social media or written to government officials to vent their anger.JagMohan Dilawri, a self-employed chauffeur in Queens, got a $1,900 loan in February. Under the new rules, he calculates that he would have been eligible for around $15,000. That wide gulf frustrated Mr. Dilawri, who has struggled to keep up on his mortgage, car loan and auto insurance payments since the pandemic took hold.“When the Biden administration came, they said, ‘We will be fair with everyone,’” he said. “But this is unfair.”Officials at the Small Business Administration, which manages the program, said only Congress could fix that disparity. Absent legislative action, loans that were completed before the rule was revised “cannot be changed or canceled,” said Matthew Coleman, an agency spokesman.On Tuesday, the Senate confirmed Mr. Biden’s nominee to run the Small Business Administration, Isabel Guzman, by an 81-to-17 vote.Despite the concerns, Mr. Biden was met with praise in Chester, Pa., when he visited Smith Flooring, a Black-owned business that supplies and installs flooring. White House officials said the shop cut payroll over the last year, from 22 union employees to 12, after revenues declined by 20 percent during the pandemic. It has survived, the officials said, thanks in part to two rounds of loans from the Paycheck Protection Program, which Congress established last year during the Trump administration to help small businesses.“This is a great outfit. This is a union shop,” Mr. Biden said in brief remarks. Its employees, he said, “work like the devil, and they can make a decent wage, a living wage.”The owners of Smith Flooring, Kristin and James Smith, secured their second loan from the program as part of one of the Biden administration’s changes, which created a two-week exclusive period for certain very small businesses to receive loans. They thanked Mr. Biden for his efforts and for visiting Chester.Mr. Biden’s aid bill, signed last week, added $7 billion to the program and funded others to help struggling businesses, including a $28 billion grant fund for restaurants. The law also set aside additional money for other relief efforts run by the Small Business Administration, including a long-delayed grant program for music clubs and other live-event businesses, which the agency said would start accepting applications early next month.Lenders are scrambling to carry out the administration’s changes to the Paycheck Protection Program and finish processing a flood of applications before March 31. The American Institute of Certified Public Accountants called the deadline “unrealistic,” and 10 banking groups sent a letter to lawmakers urging Congress to give them more time.Advocacy groups are also calling, with increasing urgency, for both an extension and a fix to make the rule change for sole proprietors retroactive.Mr. Biden met with the owners of Smith Flooring, Kristin and James Smith, in Chester, Pa., on Tuesday.Doug Mills/The New York Times“We absolutely need those changes,” said Ashley Harrington, the federal advocacy director at the Center for Responsible Lending. In December, Congress made retroactive changes to Paycheck Protection Program loans for farmers that allowed those borrowers to recalculate and increase previously finalized loans..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.“To have that change be made for one group and not be made for another — especially for a group that has so many Black and Latino business owners that have struggled so much in this crisis — really raised alarms and red flags for us,” Ms. Harrington said.Some key Democratic lawmakers said they were willing to extend the date. Representative Nydia M. Velázquez, a New York Democrat who leads the House Small Business Committee, said she was working with the Small Business Administration and congressional Republicans “to find a path forward, whether that be through agency action or additional legislation.”“For those sole proprietors who applied before the new rules took effect, we understand their concerns and are eager to work with Congress to resolve them,” said Bharat Ramamurti, the deputy director of the National Economic Council and the White House’s point person on the relief program.Mr. Ramamurti said that “tens of thousands” of loans had been approved by around 4,000 lenders using the new formula, and that some large lenders — including the online lender Biz2Credit and two banks, Cross River Bank and Customers Bank, that make loans for dozens of partner companies — said they had successfully made the needed updates.But many applicants are struggling. Chase’s refusal to make the change provoked outrage on social media from its customers. “What a slap in the face,” one tweeted at the bank. “Please make this right,” another begged.And some Bank of America customers are mired in confusion over the bank’s process, which required loan seekers to apply in writing for an incorrect amount — one that used the older formula — and rely on the bank’s staff to correct their applications by hand.Asim Khan, an environmental consultant in Ann Arbor, Mich., has been trying for two weeks to get his Bank of America application untangled. He has spent hours on the phone and on hold. “I’ve had two reps tell me they’ve seen it work for people, but yet they can’t make it work for me,” he said. “It’s all super clumsy.”Bill Halldin, a Bank of America spokesman, said the bank was “working with each individual client to manually update their loan information, which is the best way for us to help them take advantage of the recently announced rule change.”While the program still has two weeks left, the big banks are already shutting down. Bank of America stopped accepting new applications last week, and Chase plans to close its application system on Friday. More

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    How the U.S. Got It (Mostly) Right in the Economy’s Rescue

    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanBiden’s AddressWhat to Know About the BillAnalysis: Economic RescueBenefits for Middle ClassShoppers at a mall in Los Angeles. Consumer spending is nearly back to its prepandemic level.Credit…Mark Abramson for The New York TimesAnalysisHow the U.S. Got It (Mostly) Right in the Economy’s RescueThough the recession has been painful, policymakers cushioned the pandemic’s blow and opened the way to recovery.Shoppers at a mall in Los Angeles. Consumer spending is nearly back to its prepandemic level.Credit…Mark Abramson for The New York TimesSupported byContinue reading the main storyMarch 15, 2021Updated 2:31 p.m. ETWhen the coronavirus pandemic ripped a hole in the economy a year ago, many feared that the United States would repeat the experience of the last recession, when a timid and short-lived government response, in the view of many experts, led to years of high unemployment and anemic wage growth.Instead, the federal government responded with remarkable force and speed. Within weeks after the virus hit American shores, Congress had launched a multitrillion-dollar barrage of programs to expand unemployment benefits, rescue small businesses and send checks to most American households. And this time, unlike a decade ago, Washington is keeping the aid flowing even as the crisis begins to ease: On Thursday, President Biden signed a $1.9 trillion aid bill that will pump still more cash into households, businesses, and state and local governments.The Federal Reserve, too, acted swiftly, deploying emergency tools developed in the financial crisis a decade earlier. Those efforts helped safeguard the financial system — and the central bank has pledged to remain vigilant.The result is an economy far stronger than most forecasters expected last spring, even as the pandemic proved much worse than feared. The unemployment rate has fallen to 6.2 percent, from nearly 15 percent in April. Consumer spending is nearly back to its prepandemic level. Households are sitting on trillions of dollars in savings that could fuel an epic rebound as the health crisis eases.Yet not everyone made it into the lifeboats unscathed, if at all. Millions of laid-off workers waited weeks or months to begin receiving help, often with lasting financial consequences. Aid to hundreds of thousands of small businesses dried up long before they could welcome back customers; many will never reopen. Long lines at food banks and desperate pleas for help on social media reflected the number of people who slipped through the cracks.“The damage that has been done has occurred in a disparate fashion,” said Michelle Holder, a John Jay College economist who has studied the pandemic’s impact. “It’s occurred among low-income families. It’s occurred among Black and brown families. It’s certainly occurred among families that did not have a lot of resources to fall back on.”For many white-collar workers, Dr. Holder said, the pandemic recession may one day look like a mere “bump in the road.” But not for those hit hardest.“It wasn’t just a bump in the road if you were a low-wage worker, if you were a low-income family,” she said. “Their ability to recover is just not the same as ours.”Jesus Quinonez lost his job as a manager at a warehouse in the San Diego area early in the pandemic. He quickly found another job — with a company that shut down before he could begin work. He hasn’t worked since.It took Mr. Quinonez, 62, three months to fight his way through California’s overwhelmed unemployment insurance system and begin receiving benefits. Less than two months later, a $600-a-week unemployment supplement from the federal government expired, leaving Mr. Quinonez, his wife and his four children trying to subsist on a few hundred dollars a week in regular unemployment benefits.By January, Mr. Quinonez was four months behind on rent on the one-bedroom trailer he shares with his family. He had raided his 401(k) account, leaving no savings a few years before his intended retirement. Government nutrition assistance kept his family fed, but it didn’t help with the car payment, or pay for toilet paper.“I started falling behind on my bills, plain and simple,” he said.A closed storefront in Newark. Not everyone made it into the lifeboats unscathed.Credit…Bryan Anselm for The New York TimesFor hundreds of thousands of small businesses, government aid dried up long before they could welcome back customers. Many will never reopen.Credit…Bryan Anselm for The New York TimesBut in December, Congress passed a $900 billion aid package, which included a second round of direct checks to households and revived the expanded unemployment programs. By January, Mr. Quinonez was able to pay off at least part of his debt, enough to hold on to the trailer and his car. The next round of aid should carry Mr. Quinonez until he can work again.“As soon as they lift the restrictions and more people get vaccinated, I see things coming back good,” he said. “I expect to get a job, and I expect to continue working until I retire.”Whether Mr. Quinonez’s story — and millions more like it — should count as a success or failure for public policy is partly a matter of perspective. Mr. Quinonez himself is unimpressed: He worked and paid taxes for decades, then found himself subject to a decrepit state computer system and a divided Congress.“Now that we need them, there’s no freaking help,” he said.Research from Eliza Forsythe, an economist at the University of Illinois, found that from June until Feb. 17, only 41 percent of unemployed workers had access to benefits. Some of the rest were unaware of their eligibility or couldn’t navigate the thicket of rules in their states. Others simply weren’t eligible. Asian workers, Black workers and those with less education were disproportionately represented among the nonrecipients.The gaps and delays in the system had consequences.“The impact of that is folks’ having to move out of their apartments because they have this money that’s supposed to be coming but they just haven’t received it,” said Rebecca Dixon, executive director of the National Employment Law Project, a worker advocacy group. Others kept their homes because of eviction bans, but had their utilities shut off, Ms. Dixon added, or turned to food banks to avoid going hungry — measures of food insecurity surged in the pandemic.Still, the federal government did far more for unemployed workers than in any previous recession. Congress expanded the safety net to cover millions of workers — freelancers, part-time workers, the self-employed — who are left out in normal times. At the peak last summer, the state and federal unemployment systems were paying $5 billion a day in benefits — money that helped workers avoid evictions and hunger and that flowed through the economy, preventing an even worse outcome.The record of other federal responses is similarly mixed. The Paycheck Protection Program helped hundreds of thousands of small businesses but was plagued by administrative hiccups and, at least according to some estimates, saved relatively few jobs. Direct checks to households similarly helped keep families afloat, but sent billions of dollars to households that were already financially stable, while failing to reach some of those who needed the help the most — in some cases because they had not filed tax returns or did not have bank accounts.Beyond the successes and failures of specific programs, any evaluation of the broader economy needs to start with a question: Compared with what?Relative to a world without Covid-19, the economy remains deeply troubled. The United States had 9.5 million fewer jobs in February than a year earlier, a hole deeper than in the worst of the last recession. Gross domestic product fell 3.5 percent in 2020, making it among the worst years on record.Relative to the rosy predictions early in the pandemic — when economists hoped a brief shutdown would let the country beat the virus, then get quickly back to work — the downturn has been long and damaging. But those hopes were dashed not by a failure of economic policy but by the virus itself, and the failure to contain it.“If you want to think back on what we got wrong, really the fundamental errors were about the spread of the virus,” said Karen Dynan, a Harvard economist and Treasury Department official during the Obama administration. But relative to the outcome that forecasters feared in the worst moments last spring, the rebound has been remarkably strong. In May, economists at Goldman Sachs predicted that the unemployment rate would be 12 percent at the end of 2020 and wouldn’t fall below 6 percent until 2024. The same team now expects the rate to fall to 4 percent by the end of this year. Other forecasters have similarly upgraded their projections..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.The recovery proved so strong in part because businesses were able to adapt better — and Americans, for better or worse, were willing to take more risks — than many people expected, allowing a faster rebound in activity over the summer. But the biggest factor was that Congress responded more quickly and forcefully than in any past crisis — a particularly remarkable outcome given that both the White House and Senate were controlled by Republicans, a party traditionally skeptical of programs like unemployment insurance.Millions of laid-off workers waited weeks or months to begin receiving help, a lag that often left financial consequences.Credit…Bryan Woolston/ReutersLong lines at food banks provided a hint of the number of people who slipped through the cracks.Credit…Tamir Kalifa for The New York Times“The dominant narrative about Washington and about legislating and public policy is one of dysfunction, one of not being able to rise to meet challenges, one of not being able to get it together to address glaring problems, and I think it’s a well-earned narrative,” said Michael R. Strain, an economist at the American Enterprise Institute. “But when I look back over the last year, that is just not what I see.”Congress didn’t prevent a recession. But its intervention, along with aggressive action from the Federal Reserve, may have prevented something much worse.“We could have experienced another Great Depression-like event that took years and years to recover from, and we didn’t,” Dr. Strain said.Washington’s moment of unity didn’t last. Democrats pushed for another multitrillion-dollar dose of aid. Republicans, convinced that the economy would rebound largely on its own once the pandemic eased, wanted a much smaller package. The stalemate lasted months, allowing aid to households and businesses to lapse. Economists are still debating the long-term impact of that delay, but there is little doubt it resulted in thousands of business failures.“We had this grand success that policymakers acted so quickly in passing two significant pieces of legislation early in the pandemic, and then they flailed through the whole fall in just the most frustrating of ways,” said Wendy Edelberg, director of the Hamilton Project, an economic-policy arm of the Brookings Institution. “That was just such an unforced error and created confusion and needless panic.”But unlike in 2009, when Republican opposition prevented any significant economic aid after President Barack Obama’s first few months in office, Congress did eventually provide more help. The $900 billion in aid passed in late December prevented millions of people from losing unemployment benefits, and helped sustain the recovery at a moment when it looked like it was faltering.The $1.9 trillion plan that Democrats pushed through Congress this month could help the United States achieve something it failed to do after the last recession: ensure a robust recovery.If that happens, it could fundamentally shift the narrative around the pandemic recession. The damage was deeply unequal, and the economic response, though it helped many families weather the storm, didn’t come close to overcoming that inequity. But a recovery that restores jobs quickly could help workers like Mr. Quinonez get back on track.“It’s just a bad year, and you just close the page and move on and try to make the best of the new days and new years,” he said. “Things are going to get better.”AdvertisementContinue reading the main story More

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    Move Over, Nerds. It’s the Politicians’ Economy Now.

    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanWhat to Know About the BillSenate PassageWhat the Senate Changed$15 Minimum WageChild Tax CreditAdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyMove Over, Nerds. It’s the Politicians’ Economy Now.Leaders of both parties have become willing to act directly to extract the nation from economic crisis, taking that role back from the central bank.March 9, 2021Updated 4:58 p.m. ETPresident Biden at a roundtable meeting where he listened to some Americans who would benefit from the pandemic relief measure.Credit…Samuel Corum/Getty ImagesAmerican political leaders have learned a few things in the last 12 years, since the nation last tried to claw its way out of an economic hole.Among them: People like having money. Congress has the power to give it to them. In an economic crisis, budget deficits don’t have to be scary. And it is better for both the economy and the democratic legitimacy of a rescue effort when elected leaders choose to help people by spending money, versus when pointy-headed technocrats help by obscure interventions in financial markets.Lawmakers rarely phrase things so bluntly, but those are the implications of a pivot in American economic policy over the last year, culminating with the Biden administration’s $1.9 trillion pandemic relief bill. It is set to pass the House within days and be signed by President Biden soon after. And while this vote will fall along partisan lines, stimulus bills with similar goals passed with bipartisan support last year.Leaders of both parties have become more willing to use their power to extract the nation from economic crisis, taking the primary role for managing the ups and downs of the economy that they ceded for much of the last four decades, most notably in the period after the 2008 global financial crisis.It is an implicit rejection of an era in which the Federal Reserve was the main actor in trying to stabilize the nation’s economy. Now, elected officials are embracing the government’s ability to borrow and spend — the “great fiscal power of the United States” as Fed Chair Jerome Powell has called it — as the primary tool to fight a crisis.“That’s really been the story of this recovery,” Mr. Powell said at a recent hearing. “Fiscal policy has really stepped up.”The new relief bill is similarly a rejection of the concerns of centrist economists, including the former Treasury secretary Larry Summers and the former I.M.F. chief economist Olivier Blanchard, that its size and structure invite inflation or other problems. Democratic lawmakers have concluded that the favorable politics of this plan outweigh such risks.If sustained, this assertion of control over economic management by elected leaders would be as momentous a change as the one that followed the Paul Volcker Fed in the 1980s.“This is an enduring regime shift,” said Paul McCulley, who teaches at Georgetown’s McDonough School of Business. “Having the tools of economic stabilization work a whole lot more through the fiscal channel and a whole lot less through the monetary channel is a profound, pro-democracy policy mix.”It is in distinct contrast with the experience after the 2008 financial crisis.There was a large 2009 fiscal stimulus action, but a mix of legislative politics and deficit concerns by some officials in President Barack Obama’s inner circle restrained its size. Many of its components were relatively invisible to the average voter. And when the economy remained weak into 2010 and beyond, Republicans and many Democrats focused on deficit reduction. “Stimulus” became a dirty word in Washington.The Fed stepped in, undertaking quantitative easing (essentially, buying bonds with newly created money) and other untested strategies in an effort to keep the expansion going.But central bankers’ tools are limited. They can adjust interest rates and push money into the financial system in hope of making credit easier to obtain. That can spur more investment and spending, which in turn can generate more jobs and higher wages.Sound circuitous? It is — the economics equivalent of a triple bank shot in billiards.In the 2010s, the strategy sort of worked. There was no dip back into recession, and the expansion was the longest on record, until the pandemic ended it. But it took years and years for the economy to return to health, and it was a deeply unequal recovery in which owners of financial assets saw the biggest gains. That the effort was led by unelected central bankers reduced its democratic legitimacy, by appearing as if it were merely an effort by elitist institutions to protect the rich and powerful at the expense of everyone else.“You can do it and it can be successful, but the income and wealth inequality consequences of it will stink to high heaven,” Professor McCulley said. “You can do it that way, but it is anathema to democratic inclusion.”By contrast, fiscal authorities can spend money directly, funneling it where it is needed, without expectation of being paid back. The United States has done exactly that over the last year on a scale with no parallel since World War II.The new $1.9 trillion package includes, among other provisions, $1,400 payments to most Americans, a new child care tax credit that will put $300 per month in the bank accounts of most parents of a young child, help for those facing eviction or foreclosure, and billions of dollars in grants for small businesses. Public opinion polling finds it considerably more popular than other major domestic policy legislation in recent years.“For all the failures and weaknesses of American democracy over recent months, this is a dramatic demonstration of democracy’s power to act,” said Adam Tooze, a Columbia University economic historian who has written extensively of the aftermath of the financial crisis. “When it comes to delivering popular policies at the right moment, working on the basis of established constitutional norms, they’re doing that, which is infinitely to be preferred to an economic policy that depends on well-meaning enlightened technocrats.”Some lawmakers, especially on the left, have raised the notion that relying on congressional action to support the economy improves democratic legitimacy..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.“This legislation has everything to do with restoring the confidence of the American people in democracy and in their government, and if we can’t respond to the pain of working families today, we don’t deserve to be here,” said Senator Bernie Sanders of the Biden bill, known as the American Rescue Plan Act.Republicans unanimously opposed the Biden legislation, but it has not been quite the scorched-earth opposition to deficit-widening action seen during the Obama administration.A signing ceremony last April for one of the several rounds of pandemic relief that the Trump administration put together with bipartisan support last year.Credit…Anna Moneymaker/The New York TimesAs evidenced by previous rounds of pandemic relief, there has been enough common ground between Democrats and Republicans to reach bipartisan agreements of relatively large scale, including the $2 trillion CARES Act enacted last March.“A relief package like this one might not have been everything both parties wanted, but a compromise deal that provides help to Americans is better than no deal at all,” said Tom Cole, Republican of Oklahoma, at the outset of the House debate on a $900 billion bipartisan bill in late December.All in all, Congress and the Trump and Biden administrations have authorized about $6 trillion in pandemic relief spending over the last year, about 28 percent of 2019 G.D.P. (Less than that will ultimately be spent, because the economy’s improvement has left some programs with more money allocated than they needed.)The bipartisan agreement around many of the components of the pandemic aid legislation suggests a future model for how the United States government responds to economic crises. For example, in the past the federal government has extended the duration that jobless people are eligible for unemployment insurance payments during recessions, but has not expanded the size of those payments.The CARES Act, by contrast, increased unemployment checks by $600 a week, aiming to replace the income lost by those forced out of work. Subsequent legislation has included smaller increases. Economists generally say that this has been a well-targeted policy that has helped temporarily jobless people to keep paying their bills — and has softened the collapse of demand in the economy.“We’re at a watershed moment where this type of tool will be used in future recessions,” said Constance Hunter, chief economist of the global accounting firm KPMG. “What we did here is different and unique, and we are going to learn whether it was effective at providing a bridge to the other side of the pandemic.”There are risks in the Biden administration’s approach, of course. If the concerns described by Mr. Summers and Mr. Blanchard about the size of the new relief bill materialize, and the result is excessive inflation or some type of crisis, Democrats will pay a price for their actions.But that’s the thing about democracy: It has much clearer mechanisms for holding elected officials accountable for their economic policy decisions than it does for scrutinizing appointed experts for their interest rate policies. If Americans don’t like the results, they have a straightforward way to make it known: at the ballot box in November 2022 and November 2024.AdvertisementContinue reading the main story More

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    Gov. Phil Murphy Unveils N.J. Budget Plan With No New Taxes

    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutNew Variants TrackerAdvertisementContinue reading the main storySupported byContinue reading the main storyHow New Jersey Averted a Pandemic Financial CalamityA $44.8 billion spending plan unveiled Tuesday by Gov. Phil Murphy calls for no new taxes and fully funds the state pension program for the first time since 1996.Gov. Philip D. Murphy of New Jersey released a $44.8 billion budget on Tuesday that shows better-than-expected revenue projections.Credit…Pool photo by Anne-Marie CarusoFeb. 23, 2021Updated 3:07 p.m. ETIt has been five months since New Jersey officials issued warnings about a coronavirus-related financial calamity. The dire outlook contributed to lawmakers’ decisions to increase taxes on income over $1 million and to become one of the first states to borrow billions to cover operating costs.But the doomsday forecast has since brightened considerably, officials said, enabling the Democratic governor, Philip D. Murphy, to unveil a $44.8 billion spending plan on Tuesday that calls for no new taxes, few cuts and tackles head-on a chronic problem — the state’s underfunded pension program — for the first time in 25 years.The governor also said there would be no increase in New Jersey Transit fares.“The news is less bad,” the state’s treasurer, Elizabeth Maher Muoio, said. “I wouldn’t say it’s good, but it’s less bad.”The governor’s election-year financial blueprint relies on better-than-expected revenue from retail sales and high-earners, who have lost fewer jobs during the pandemic than low-income workers and are reaping the benefits of a prolonged Wall Street rally.The $38 billion that New Jersey and its residents have received in federal stimulus funding, a short-term extension of a corporate tax and a $504 million windfall from the so-called millionaire’s tax also helped, Ms. Muoio said.The release of New Jersey’s proposed 2022 fiscal year budget comes as Congress continues to debate President Biden’s $1.9 trillion virus relief package. The proposed package includes considerable funds for states and municipalities as well as grant and loan programs for small businesses.Other states have seen similarly strong signs of an economic rebound even as cases of the virus have spiked nationwide over the last several months and the nation’s death toll surpassed 500,000 on Monday.Earlier this month, the nonpartisan Congressional Budget Office concluded that large sectors of the economy were adapting to the pandemic better than originally expected and that December’s economic aid package had helped.Mr. Murphy, who is running for re-election in November, said the spending plan was designed to not only enable the state to scrape through the pandemic, but to help it emerge stronger.“This is the time for us to lean into the policies that can fix our decades-old — or in some cases centuries-old — inequities,” the governor said Tuesday in a budget address, which he delivered virtually.A key pillar of the budget is a proposal to fully fund the state’s public sector pension obligations for the first time since 1996.The state has not set aside the full amount of its pension obligation for 25 years, leading $4 billion in extra debt to accrue over time, Ms. Muoio said. Under a deal brokered with the Legislature, Mr. Murphy had been on track to fully fund the state’s share by the 2023 fiscal year. But the spending plan released on Tuesday sets aside $6.4 billion for the pension system, accelerating full funding by a year.“New Jersey is done kicking problems down the road,” the governor said. “We are solving them.”Under the plan, the state’s surplus, which proved to be a vital resource during the first wave of the pandemic, would not grow, officials said, but would remain at about the same level it was at the end of 2020.The Coronavirus Outbreak More