--:-- Sean Rameswaram: It's Thursday, April 2nd, 2020, and this month is already looking like it's going to be tougher than March. I'm Sean Rameswaram from Today Explained.
--:-- Sean Rameswaram: Today we got news that 6.6 million Americans filed for unemployment last week. That brings the total number to 10 million Americans who have lost their jobs in just the last two weeks. Much more detail on that in today's episode.
--:-- Sean Rameswaram: The loss of jobs in America also means the loss of health insurance. According to an analysis of state and federal data from the Economic Policy Institute, roughly 3.5 million Americans likely lost their health insurance in the past two weeks.
--:-- Sean Rameswaram: And that's, of course, scary because not only are we in the middle of a global pandemic, but the United States has the most cases of COVID-19 in the world, something like 250,000.
--:-- Sean Rameswaram: We have doubled the number of confirmed cases in Italy. In better news, Florida is finally taking this seriously. The governor there ordered residents to stay at home on Wednesday shortly after the number of confirmed COVID-19 cases there jumped by more than 1,000 in a single 24-hour period.
--:-- Sean Rameswaram: Florida now has over 8,000 confirmed cases. Nearly 40 of these United States have now issued stay-at-home notices. Texas is the biggest holdout. There are about 4,000 confirmed COVID-19 cases there.
--:-- Sean Rameswaram: Meanwhile, in New York, where this is still just the worst, the state could run out of ventilators in six days. According to the New York Times, the state has close to 100,000 confirmed cases, 13,000 or so have been hospitalized, and over 3,000 are in intensive care.
--:-- Sean Rameswaram: The governor there says that buying more ventilators has been tough with so much competition around the country and the world. Without them, doctors will be left making some very tough decisions.
--:-- Sean Rameswaram: From tough decisions to a good one, the Democratic National Convention has been postponed. It was going to be July in Milwaukee, now maybe August.
--:-- Sean Rameswaram: Remember the Joe and Bernie show? I don't. You are emailing us coronavirus questions to todayexplained at vox.com. Trust me that we see you even if we don't get to reply.
--:-- Sean Rameswaram: We see your tweets at Today Explained and at Ramis Firm. We hear your voicemails at 202-688-5944. Thank you for keeping in touch, even from far away.
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--:-- Matthew Yglesias: I get a lot of push notifications about this crisis that we're in, and they seldom scare me. But today I got a few that made me feel fear for this country.
--:-- Matthew Yglesias: We got some shocking numbers. What were they? So initial unemployment claims for the week that ended on March 28th came out, and it was off the charts. Insane. 6.6 million new people filed for unemployment benefits.
--:-- Matthew Yglesias: That was double what we saw in the previous week. And that previous week was itself a record. These newest numbers, they are 10 times the biggest figure that we've seen outside of the context of March 2020.
--:-- Matthew Yglesias: So a situation that looked incredibly bad a week ago is getting worse at a really frightening pace. So these are historic numbers just one week after we got historic numbers.
--:-- Matthew Yglesias: And this historic number is exponentially bigger than that last one? Yeah, I mean, we've had, if you take these at face value, 10 million job losses over two weeks in March.
--:-- Matthew Yglesias: That's equivalent to the first six months of the Great Recession, just packed into a single two-week period. We have had high unemployment in the past, but we have never had this kind of incredibly rapid increase.
--:-- Matthew Yglesias: And of course, you see it. I mean, if you walk around in D.C. for approved recreational activities, you see like tons of stores are closed, which, you know, we know it's what people have been putting out there.
--:-- Matthew Yglesias: But it means that people are losing their jobs. They're losing them really, really, really fast. And we've never seen anything remotely like this in past recessions.
--:-- Matthew Yglesias: Now, you pay attention to numbers like these. Most people are just trying to figure out how to live their lives in this moment.
--:-- Matthew Yglesias: Did people expect this huge jump in the unemployment numbers just from the historic numbers we got last week? You know, people expected a big number.
--:-- Matthew Yglesias: They tried to use some inferences based on Google searches and state-level data. And what I was ready for last night, you know, I was getting ready to cover this story Thursday morning, and I was prepared for maybe 5 million initial claims, which would have been crazy.
--:-- Matthew Yglesias: That would have been an all-time record. I was expecting the worst figures ever, and we got something worse than what I was expecting.
--:-- Matthew Yglesias: And the exact same thing happened the previous week. We had been looking at an estimate from Goldman Sachs that said there might be two and a quarter million initial claims.
--:-- Matthew Yglesias: That's really bad. That would be much worse than anything that happened before. Instead, we got over three million.
--:-- Matthew Yglesias: So people are expecting extremely rapid deterioration in the economy, and it keeps deteriorating faster than we expect.
--:-- Matthew Yglesias: Is part of the issue here that the counts that we're getting aren't the full picture? Is that what's going on?
--:-- Matthew Yglesias: So it's going to get worse every week as the picture becomes clearer? I mean, that's an alarming possibility here.
--:-- Matthew Yglesias: Reports you hear anecdotes are that phone lines at state unemployment offices have been jammed. Websites have crashed.
--:-- Matthew Yglesias: So it is very possible that there are hundreds of thousands of people who have been trying to file claims but haven't succeeded in doing so yet, and that we're going to see those numbers come online in the next week or two.
--:-- Matthew Yglesias: The other thing to keep in mind is that, you know, March 28th was not that long ago, but in coronavirus crisis terms, like every day is like a lifetime.
--:-- Matthew Yglesias: And a lot of large southern states, Florida and Georgia in particular, only adopted new shutdown measures after that window closed.
--:-- Matthew Yglesias: So there's plenty of more places for this economic tidal wave to hit once we get next week's data.
--:-- Matthew Yglesias: And then the thing you really have to worry about is secondary and tertiary consequences Because we assume that we looking right now at people who lost their jobs because their businesses shut down specifically because of the virus
--:-- Matthew Yglesias: But then when people lose their jobs they have less money When people hear these terrifying headlines about job losses they spend less money
--:-- Matthew Yglesias: So lots of companies that are still operating, right? You can go online today and you can buy all kinds of durable goods, right?
--:-- Matthew Yglesias: Like you could order a chair. You could order a computer. You could get a suit made by whatever custom fabricators.
--:-- Matthew Yglesias: Like, there's a lot of stuff for sale that has not been impacted by the virus. But if millions of people lose their jobs, they're not going to buy furniture.
--:-- Matthew Yglesias: They're not going to buy computers. And we're going to see more companies start to get hurt.
--:-- Matthew Yglesias: And, you know, sort of a recession that builds on itself totally separately from the public health crisis we're looking at.
--:-- Ben Kovari: My name is Ben Kovari. I was an IT project manager for an office space company in New York City, and I was laid off along with about 40% of our staff at the end of last week.
--:-- Ben Kovari: I logged on to the unemployment website to try and file immediately for unemployment, but I found out that the date that you have to file for unemployment in New York is based upon the first letter of your last name.
--:-- Ben Kovari: I assume that was because they are inundated with calls because of the current crisis.
--:-- Ben Kovari: Once I completed the application, I had to call in to complete and confirm all of my info.
--:-- Ben Kovari: So I got the phone number from the website and I called in. One in about 10 calls that I placed to the unemployment office actually connected and got me to the menu.
--:-- Ben Kovari: The other 90% of the dials that I placed resulted in either immediate call failure or an error message from Verizon telling me my call could not be completed.
--:-- Ben Kovari: So I probably called about several hundred times over the course of a couple of days.
--:-- Ben Kovari: When you did get through to a menu, you had to enter your social security number and a PIN number that you created online.
--:-- Ben Kovari: However, once you completed the social security number and PIN, you got an automatic recording that said, we are experiencing high call volume, please call back this week.
--:-- Ben Kovari: And then it just disconnected. So the only thing to do was to redial.
--:-- Ben Kovari: And of course, with only one in 10 calls even getting through to the menu, it's a timely process to try and get through.
--:-- Ben Kovari: So I kept dialing and dialing, and I kept filling out my social security number, my PIN number, and just resulting every time in the same, we are experiencing high call volume, please call back this week. Disconnect.
--:-- Ben Kovari: One time I got lucky. I entered my social security number, my PIN number, and instead of getting disconnected on, I got a new message that said, thank you for calling.
--:-- Ben Kovari: Your estimated wait time is 40 to 45 minutes. And then I was put on hold, something that had never happened before.
--:-- Ben Kovari: So I sat on hold, and when I reached about 40 to 42 minutes on hold, it disconnected.
--:-- Ben Kovari: That was obviously extremely frustrating, and I was ready to throw my phone out the window at that point.
--:-- Ben Kovari: So, I was talking to a friend of mine who was also let go from my company.
--:-- Ben Kovari: There's a bunch of us actually on an alumni Slack channel. There are people who have called over a thousand times and have not been able to get through to a human being yet.
--:-- Ben Kovari: So, I was talking to one friend of mine and I told him that I got through to be on hold and then I got disconnected.
--:-- Ben Kovari: A little bit later in the day, he called me and when I picked up, he had gotten through and he then asked the representative if he could conference in his friend, i.e. myself, to complete my application.
--:-- Ben Kovari: And to my surprise, she said yes.
--:-- Ben Kovari: So my friend conferenced me into his existing call with a representative from the New York State Unemployment Office.
--:-- Ben Kovari: And she was okay with it. She let me go through the process of confirming my information.
--:-- Ben Kovari: She gave me a warning that my friend who was still conferenced in on the phone was going to be able to hear my social security number and personal information.
--:-- Ben Kovari: I said I didn't mind. and she was able to complete my application.
--:-- Ben Kovari: And it saved me an immense amount of time.
--:-- Ben Kovari: You have to understand the strain that the system is under with millions of people in the same boat that I am in, unfortunately.
--:-- Ben Kovari: So I try to temper my temper, for lack of a better term. but it's extremely frustrating.
--:-- Ben Kovari: You know, I've seen screenshots again in that alumni Slack channel of people, you know, posting pictures of their recent call history and it's the unemployment office filling up the entire screen with hundreds and thousands of calls.
--:-- Ben Kovari: So I'm extremely fortunate that I didn't quite make it to four digits. I was only in the triple digits number of calls but I can't even imagine what it's been like for a lot of other people who have, you know, been stuck at home, you know, under a quarantine having nothing to do but hoping to get lucky and reach a person at the unemployment office.
--:-- Matthew Yglesias: Congress is out of the office right now, but luckily Matthew Iglesias has a plan to get us out of this mess and he share it with you for free after the break I Sean Ramas and this is Today Explained
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--:-- Matthew Yglesias: Matthew, you wrote a piece recently that said that we as a country need a wartime style mobilization to get out of this crisis.
--:-- Matthew Yglesias: Last week, Congress passed its big phase three stimulus package, $2 trillion unprecedented in the modern era.
--:-- Matthew Yglesias: Is that the kind of mobilization you're talking about? It's good that they did that, but it's not nearly good enough.
--:-- Matthew Yglesias: So they passed that bill. The stock market went up in response. A number of other indicators, the bond market, inflation expectations, all showed progress as a result of that bill.
--:-- Matthew Yglesias: Unfortunately, Congress brain is like they did a big thing. The response to it was positive. And then they left town for a series of weeks.
--:-- Matthew Yglesias: But if you look at all of those indicators that were positive, they didn't get us back to where we want to be with stocks, with interest rates, with inflation expectations.
--:-- Matthew Yglesias: So the real lesson they should have taken from the success of that $2 trillion package is they ought to try another $2 trillion and see where we are.
--:-- Matthew Yglesias: Maybe $2 trillion more, $2 trillion on top of that. Like when you're working on a problem of large but unknown scope, you've got to keep trying.
--:-- Matthew Yglesias: And then you've got to look and you've got to reassess. And that's not what they did.
--:-- Matthew Yglesias: So you drew up a vision for Congress because they're not doing their jobs right now. What do you think they should be doing?
--:-- Matthew Yglesias: Yeah, so I mean, I think there's three buckets of activity that Congress needs to look at.
--:-- Matthew Yglesias: One is just putting money into people's hands so that they have cash to spend. Even more money. Yes.
--:-- Matthew Yglesias: The second is looking at mobilizing industries that do relevant things. That's the ventilators that we've talked about a lot.
--:-- Matthew Yglesias: It's the N95 respirators and other personal protective equipment that health care professionals need.
--:-- Matthew Yglesias: But it's also stuff that regular people could use. You know, things like disposable surgical masks, gloves, hand sanitizer, Lysol wipes, all kinds of things where if you go online or you go to your store, you're going to see shortages right now of those things.
--:-- Matthew Yglesias: We could be and need to be producing more and the government should be leading that effort.
--:-- Matthew Yglesias: The last thing is supporting state and local governments financially, because we are at a big risk of seeing a sort of secondary and tertiary economic collapse as state governments need to start laying people off and cutting services.
--:-- Matthew Yglesias: OK, well, let's go through the three of them, starting with just putting more money in people's hands.
--:-- Matthew Yglesias: Now, Congress just did that and they did it in a historic way. But you're saying that's not enough. They need to do more of it.
--:-- Matthew Yglesias: Yeah, I mean, $1,200 checks is nice. And the unemployment benefits to people who've lost their jobs is very important.
--:-- Matthew Yglesias: But, you know, people could use more money. There are lots of goods and services that remain for sale today.
--:-- Matthew Yglesias: You can get food delivered to your house. You can get takeout. You can buy different things at the grocery store.
--:-- Matthew Yglesias: You can order a new computer. You can make a remote appointment with a therapist. You can do a telemedicine consultation with a doctor who doesn't specialize in coronavirus.
--:-- Matthew Yglesias: You could subscribe to extra streaming services, right?
--:-- Matthew Yglesias: And a lot of the discourse around this has been dominated by experts, which is good, but people who are in relatively privileged positions in life.
--:-- Matthew Yglesias: And their sort of main personal experience of the economic situation is, oh, I might like to go out to eat with my friends, but I can't because of social distancing.
--:-- Matthew Yglesias: But you kind of think about typical people who are just cash constrained all the time in their ability to get takeout food, in their ability to just buy durable goods for the house.
--:-- Matthew Yglesias: And if we have more money in more people's hands, those industries that are still functioning can function better, as opposed to a situation where everybody gets poorer, and then nobody can buy things, and then industries that aren't impacted by the crisis start to collapse.
--:-- Matthew Yglesias: Well, let's talk about those empty shelves and the things people really want. I haven't seen toilet paper at the grocery store I go to in weeks.
--:-- Matthew Yglesias: Luckily, I have a stash because Terry next door invited us to Costco once last September.
--:-- Matthew Yglesias: What could the government do to fix this?
--:-- Matthew Yglesias: So right now we have a lot of government efforts to prevent price gouging, right? Because we're trying to manage shortages.
--:-- Matthew Yglesias: And that's good. I mean, you don't want to see shortages managed poorly, but you would really like to see is addressing the shortages.
--:-- Matthew Yglesias: And that means identifying key commodities. I would say hand sanitizers, surgical-style masks, gloves, disinfecting wipes, other things like that, and say, look, we are going to guarantee purchase at a slightly elevated price.
--:-- Matthew Yglesias: Not like a crazy 7,000% markup, but like, yeah, you can get 15% higher prices than you normally would for hand sanitizer, and the government will buy it if you can't sell it to stores.
--:-- Matthew Yglesias: And that is what gives companies the incentive to run the factory 24 hours a day, right, to actually increase production.
--:-- Matthew Yglesias: Because the problem with doing everything on a price control basis is that ramping up is expensive.
--:-- Matthew Yglesias: We got a number of stories I seen them locally and nationally of distilleries you know places that make booze saying we going to make hand sanitizer because you use alcohol in both cocktails and cleaning equipment
--:-- Matthew Yglesias: But often what they doing is sort of a stunt where they making it and they giving it away which is great It a great charitable endeavor
--:-- Matthew Yglesias: But to really go on a large scale, you need to mobilize greed and the profit motive.
--:-- Matthew Yglesias: You need people to be saying, yes, I am going to undertake the expense of retooling my distillery to make hand sanitizer.
--:-- Matthew Yglesias: I am going to hire some of the people who have recently lost their jobs to work extra shifts so that we can make more of this sanitizer.
--:-- Matthew Yglesias: And to do that, you do need to offer a premium over regular prices, but then it can be okay because the government can pay the premium, right?
--:-- Matthew Yglesias: Instead of talking about protecting people from price increases, we should just be spending the money to get what it takes.
--:-- Matthew Yglesias: It feels like we've been talking about initiatives the federal government could take thus far, but your third point was that we need to bolster state and local governments to help them help people too, I imagine?
--:-- Matthew Yglesias: Yeah, absolutely. Because right now you are looking at a real crisis in state and local government finances.
--:-- Matthew Yglesias: A lot of state and local governments rely very heavily on retail sales taxes.
--:-- Matthew Yglesias: Most of them put extra sort of taxes on restaurant meals or an alcohol that's sold, which makes a lot of sense for sort of tax theory reasons.
--:-- Matthew Yglesias: But it means their revenue is getting hammered.
--:-- Matthew Yglesias: At the same time, they have additional expenses, right? Governments that are trying to do the right thing, are trying to deliver food to kids who normally get school meals.
--:-- Matthew Yglesias: They have police officers working extra shifts in hazardous conditions.
--:-- Matthew Yglesias: They are trying to disinfect their buses and their metros.
--:-- Matthew Yglesias: They're doing stuff like that. But really soon, they're going to hit the wall, and they're going to have to start furloughing workers or laying people off.
--:-- Matthew Yglesias: We saw this during the Great Recession of 2008-2009, where the federal government did a trillion dollars in stimulus.
--:-- Matthew Yglesias: But more than 100 percent of that was offset by state and local governments doing cutbacks.
--:-- Matthew Yglesias: New York, we know, is in this incredible emergency right now.
--:-- Matthew Yglesias: And earlier this week, they passed a budget that's going to cut Medicaid because they have no choice.
--:-- Matthew Yglesias: Only the federal government operates free of budget constraint and can just sort of hand out huge buckets of cash to state and local governments so they can keep providing essential services.
--:-- Matthew Yglesias: So the federal government right now needs to shore up people, needs to shore up business, needs to shore up state and local governments.
--:-- Matthew Yglesias: It basically needs to shore up everything.
--:-- Matthew Yglesias: Can we afford to engage in a stimulus at this level?
--:-- Matthew Yglesias: I mean, I'm sure Congress passed the $2 trillion thing and said like, well, we've never done something like that before.
--:-- Matthew Yglesias: Let's go back to our families and practice safe social distancing or whatever. was that a terrible mistake?
--:-- Matthew Yglesias: I mean, I think you have to ask, can we afford to not do this stuff?
--:-- Matthew Yglesias: Can we afford to not mobilize fully?
--:-- Matthew Yglesias: Can we afford to have healthy, able-bodied people sitting at home, losing income, becoming depressed when they could be making things that are useful to fighting this virus?
--:-- Matthew Yglesias: And, you know, I use the analogy of wartime, which a lot of people have thrown around sort of loosely, but I think we should take fairly literally.
--:-- Matthew Yglesias: During World War II, the Federal Reserve and other central banks around the world, it coordinated very directly with the Treasury to essentially print money and cover the costs of things to ensure that if we lost a battle, it would be because we didn't have enough tanks or we didn't have enough planes, not because we didn't have enough money, right?
--:-- Matthew Yglesias: What matters in a wartime mobilization is what are the actual resources of your country.
--:-- Matthew Yglesias: We are not out of textile factories. We are not out of distilleries. We are not out of people who are capable of working in those places.
--:-- Matthew Yglesias: It does seem like we are out of ventilators and N95 respirators, and we need to do the work to increase our capacity to produce those things.
--:-- Matthew Yglesias: But in all of these cases, it's the real resources that matter more than money, and we need a central bank that is willing to say that.
--:-- Matthew Yglesias: The Fed has done a lot of stuff, dramatic kinds of things, basically to make sure that anybody who wants a loan can get one at a cheap interest rate.
--:-- Matthew Yglesias: And that's fantastic. But they need to say really clearly that it does not matter how much debt the federal government takes on.
--:-- Matthew Yglesias: They will provide that infinite backstop until this crisis is passed.
--:-- Matthew Yglesias: And I guess just to be clear to people, how do we get the money to pay for all of this stuff?
--:-- Matthew Yglesias: How do we get the $2 trillion to fund that stimulus?
--:-- Matthew Yglesias: Sure. All right, so the technical way that this happens is right now Congress spends money and the Treasury Department sells bonds at auction.
--:-- Matthew Yglesias: And those bonds carry an interest rate. And then the Fed has said recently that it will go buy bonds.
--:-- Matthew Yglesias: So essentially they create money out of thin air and use it to purchase bonds.
--:-- Matthew Yglesias: And those bonds finance the federal government.
--:-- Matthew Yglesias: So that's what they're doing.
--:-- Matthew Yglesias: What I'm calling for is a clear statement from the Fed. That says it doesn't matter how much Congress spends, that if they go to $4 trillion, if they go to $10 trillion, whatever they want to do, the Fed will buy up all those bonds, right?
--:-- Matthew Yglesias: So that there is a guarantee that they will be able to sell them, that there will be a market.
--:-- Matthew Yglesias: And in essence, they would be, quote unquote, printing money.
--:-- Matthew Yglesias: They don't actually print anything. It's just all done on computers.
--:-- Matthew Yglesias: But, you know, pure financial constraints should not be what limits us here.
--:-- Matthew Yglesias: Is it fair to say what you're talking about is is sort of printing money against faith in the united states
--:-- Matthew Yglesias: Yeah i mean again you know you look at something like i i was taking my son to a old civil war battlefield because i was trying to find someplace that would be empty um and one thing that happened there is the confederate government they printed money to finance their war effort
--:-- Matthew Yglesias: And it was fine until it became clear that they were going to lose. At that point, their money lost all value.
--:-- Matthew Yglesias: If people think that the virus is going to crush the American economy and American society, then our money will become worthless.
--:-- Matthew Yglesias: But printing too much is not going to do that, as long as we have confidence that we are going to beat this thing.
--:-- Matthew Yglesias: And I fully believe that we can. I mean, we have the scientific resources. We have the production resources.
--:-- Matthew Yglesias: What we need is to actually do the work. just as we have in other moments of great national crisis.
--:-- Matthew Yglesias: Worst case scenario, if we look back two years from now and we say the really bad thing that happened in the fall and winter of 2020 is that prices went up 4% or 5% because we printed too much, that would be an incredible success story, right?
--:-- Matthew Yglesias: What we are worried about now is large-scale deaths and mass unemployment. If we can avoid those fates at the cost of a little bit of inflation, that would be an incredible success.
