It’s beginning to look a lot like stimulus

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Sean Rameswaram: It's Today Explained. I'm Sean Rameswaram from Remember March, when a lot of us stopped going into work, school, shutdown, sports league, suspended play? It was way back then when Congress passed the last major economic stimulus. It's been nine months since the pandemic got super serious in the United States and since Congress decided to help people out financially. I remember the $600 in enhanced unemployment benefits ran out at the end of July. And the PPP loans are drying up. It's been a long time. Since then, there have been lots of failed efforts to follow up with economic relief. Then the election happened. The efforts to steal said election are ongoing. But now, in an end-of-year plot twist, there might actually be some support for stimulus. Lee, Zoe, you've been covering this for Vox.

Zoe: Yeah, it's looking like something might get done in the next couple of days. We're seeing a lot of momentum over a new bipartisan proposal in the Senate. It's a proposal that includes about $908 billion in funding. So that's somewhere in between what Democrats have wanted, which was $2.2 trillion, and what Republicans have asked for, which is $500 billion. So it is kind of squarely in between those two. And it combines some of the demands that both sides have been interested in. The plan includes a pretty hefty chunk of money for state and local governments, which is a longtime priority for Democrats. It also includes funding that would add $300 weekly to people's unemployment insurance benefits and extends that program for a couple more months. And then on top of that, it also includes a decent amount of funding for small businesses, which will go through the Paycheck Protection Program and help businesses kind of deal with the economic fallout from the pandemic.

Sean Rameswaram: Over the weekend, there was a lot of discord in California, for example. where California Governor Gavin Newsom is issuing shutdown orders for regions that reach an 85% intensive care unit capacity. It is not just me in this boat. There's so, so many. I'm speaking on behalf of the small businesses and the bars and the restaurants. After this shutdown, some of them will make it one month longer. You know, small business owners, restaurants were complaining about shutdown orders across the state and in Los Angeles and San Francisco specifically. The way that things are going is just terrible, very terrible. Everything I own is being taken away from me. And they set up a movie company right next to my outdoor patio.

Zoe: How might this stimulus help people who are having to shut down their businesses but aren't being compensated currently by the government in any way, shape or form?

Sean Rameswaram: The additional money in the stimulus is intended exactly to tide these businesses over. A lot of businesses that were able to get loans the first time around earlier this year would be able to apply for more additional support to basically help them get through the winter and make sure that they would be able to cover operational and payroll costs. On top of that, the additional small business funding that lawmakers are looking at is focused more on businesses that are legitimately small. So they've tried to add certain restrictions to limit the size of the businesses that are able to apply and who's eligible for this money. And of course, one of the reasons state and local governments aren't compensating small businesses themselves is because they're kind of broke.

Zoe: How might this stimulus help local governments that are experiencing all sorts of deficits and issues with providing schools with PPE or in the case of Washington, D.C., who have public transportation systems that are experiencing enormous deficits and failing even?

Sean Rameswaram: Yeah, this money is just intended for them to cover those basic costs that you listed. It's aimed at helping cover shortfalls in social service programs across the board and basically make up for the lost tax revenue and the additional costs that states are facing because of demands on health care.

Zoe: And are like your big name Democrats and Republicans into this thing, like your Pelosi's and Schumer's and McConnell's?

Sean Rameswaram: As you can see, we have with us a bipartisan, bicameral group of people who have been working diligently for the last 30 days or more. So the plan is being driven actually by an interesting group of more moderate Democrats and Republicans in the Senate, including Mitt Romney. This is a crisis. We want to help people. Susan Collins. Businesses are closing. Hospitals are overwhelmed. Mark Warner and Joe Manchin. We've worked in the best interest of what we believe is great for our country. It good for our states and we can all go home knowing that we have worked diligently to make sure that the unemployed the small businesses the state and local funding students And what we heard so far is that Pelosi and Schumer think the proposal they offered is a good starting point. And McConnell has been kind of a bit more, a bit less vocal in what he thinks so far. He's actually still stuck by a different plan that he's offered, but he hasn't necessarily indicated that he's closed off to the new option that people are pushing.

Zoe: I mean, stimulus seemed to be pretty popular the last time around. Is there any reason with the holidays coming up, with COVID cases setting brand new records and looking really bad for the holidays, that they wouldn't get on board with some more stimulus?

Sean Rameswaram: The issue is that McConnell's previous proposal is around $550 billion, which is still less than what we saw from the bipartisan senators. And there's potential that he might continue to want to drive that number down because a lot of the Republican senators remain concerned about adding to the deficit and passing something that's on the larger side. And so we've come together and we've been very careful. This is not a $1.8 trillion stimulus bill. This is a relief measure, half that amount, $908 billion.

Zoe: I'd also make this note, and that is liability protection is critical. One of the things that's contentious is this liability shield, which is in the proposal. That's something that's intended to protect businesses from getting sued by their employees over how they handled coronavirus response and protections. Republicans have basically argued that small businesses would be totally ruined if their employees were able to sue them over this protocol. So they've wanted this to be included. whereas Democrats have really said this is a way for corporations to protect themselves from potential accountability over how they messed up their response.

Sean Rameswaram: So might this liability accountability issue hold up this stimulus from getting passed?

Zoe: It could be an ongoing problem. The way that the bipartisan group has tried to solve it is they've offered a temporary liability protection so it wouldn't be a permanent shield. and they're hoping that that might be one way to get around it. And you'll see in the chart, if it ever gets here from the printer, that we did negotiate a liability provision that provides a temporary suspension of any liability-related lawsuits, the state or federal level, associated with COVID, giving states enough time to put in place their own protections.

Sean Rameswaram: Huh. Okay. So what happens next?

Zoe: The next thing is we wait to see what I think McConnell says about this and what Trump finally says about it. And if they are ultimately on board, that's effectively a green light for this measure to move forward. And they haven't weighed in yet?

Sean Rameswaram: We haven't heard a definitive statement that they would ultimately support putting this bill to a vote.

Zoe: What happens if they don't pass this bill?

Sean Rameswaram: The risks of not passing the bill are pretty staggering. For one, there are several programs that are expiring at the end of the year. So there were provisions on unemployment insurance that were included in the CARES Act, which expanded the length of time that people could receive UI for and which opened up the program to contractors, freelancers and gig economy workers. And both of those provisions will expire by the end of the year, which could put upwards of 12 million people off of unemployment insurance. And those are people that might be relying on it at the moment to cover financial shortfalls that they're seeing. Other programs that are expiring include an eviction moratorium, as well as a program for people to defer student loan payments. So both of those expirations could also put millions of people in much greater financial jeopardy than what we're seeing right now.

Zoe: And so we're going to see the existing problem get worse with very little ultimate help for people. And that doesn't bode well for individuals or the broader economy. The first stimulus may have saved the country from economic catastrophe, but it still left people behind. That's after a quick break.

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Sean Rameswaram: Andy Lowry you a staff writer at The Atlantic I think before we talk much more about the stimulus and how it could go and what needs to happen it probably worth talking about the economy in general How is the American economy doing right now?

Andy Lowry: It's interesting because if you look at the sort of general state of the economy, it's not good, but it's also not as bad as we thought it might be. And that is kind of damning it with weak praise. But we're going to end up with a GDP loss of about four percent this year. The unemployment rate has come down into the six percent range. So we're not sort of seeing the catastrophe exactly that we thought that we might if we were talking eight months ago.

Sean Rameswaram: The coronavirus pandemic is slamming the U.S. workforce like an iceberg striking the Titanic. A stunning report just out. It shows a record shattering 6.6 million Americans filed for unemployment benefits last week. That is double last week's record report. The Dow collapsing around 1,900 points today. It's worst single day loss ever. That said, all of these indicators right now are really flashing red. So the unemployment rate has kind of stopped dropping much. Initial unemployment claims, so how many people in a given week are claiming unemployment for the first time, is higher than it ever was during the Great Recession. Some signs of employee hiring and mass layoffs are raising. So the economy is kind of going sideways instead of recovering strongly like it did in the summer, which is sort of what economists expected given the fiscal situation. That being said, though, why is the economy doing OK? Is the outgoing president due some credit here for handling this well?

Andy Lowry: Yeah, absolutely. So back in March, Congress passed something called the CARES Act. And this will deliver urgently needed relief to our nation's families, workers and businesses. It sent $1,200 checks to most American adults, though not all of them. It expanded the unemployment insurance system massively to include gig workers. It added $600 a week top-up payments to state unemployment payments. It had this small business rescue plan, the PPP. And this was a really big stimulus, $2.2 trillion, whereas the Obama-era stimulus from the Great Recession, which in a lot of ways was a much more profound and big recession, was about $800 billion. So this is just absolutely massive. To the American public, we hear you and we're working for you. And it does a great job at helping people. And the problem now is that the help is run out and that people are kind of spending down their savings. Some have reconnected with their employers, but others are getting laid off for the first time. And so we need more stimulus, but it's not really forthcoming. But we've known for literally months that we needed a second stimulus and Congress has not managed to pass it yet. And that's the big reason that we're slowing down.

Andy Lowry: How does the U.S. stimulus compare to what other countries have done, countries like, say, I don't know, Canada with a stronger social safety net?

Sean Rameswaram: It's interesting. So we in the United States, we have a weaker, patchier safety net than other countries do. But our stimulus was way bigger. So basically, the U.S. plan was to let workers get fired or put on furlough or temporarily let go, but to support them with really big cash payments. And that was just kind of a philosophically different thing than what happened in Europe, where you have really strong unions and much stronger labor policies, where they basically said, look, we'll pay you to stay on the job, but most people are going to take a pay cut. So what happened was that we had a much worse unemployment outcome, but a much better GDP outcome because we gave people all this cash to sustain their spending. Whereas you can look at, you know, the UK is a good example. So right now, the OECD projects that we will lose 3.7% of our GDP this year. The UK is going to lose more than 10%. But we have unemployment that is up in the 6-7% range and is perhaps going to go back up again. In the United Kingdom, the unemployment rate is like 4% right now. And so it's just a really different approach. And which one is going to be better in the fullness of time? We don't know yet. These European countries just have really different infrastructure for this kind of thing. So it was really easy for like Denmark to have the government just pay people to stay home but not work through their employer. Like we didn't have that set up here. So a lot of our European peers have tended to have worse GDP outcomes but better unemployment outcomes.

Sean Rameswaram: Were there winners and losers of that stimulus or did like everyone win? I remember after it was signed into into law, there were there were some controversies about major organizations like Shake Shack or the L.A. Lakers getting money when so many people were struggling. But how did that all shake out in the end?

Andy Lowry: It worked pretty well. And I'll say this, it worked pretty well for something that they put together really fast on the fly. That's like a pretty big, difficult thing to literally throw together. They hadn't done anything like it before because our small business authority is like, you know, fairly limited in scope. I wouldn't describe it as like the most efficient and best agency in government. And so, you know, it really did help. But I think if it hadn't been paired with those big payments to workers, we would be seeing a much bigger business catastrophe right now. One thing that's kind of interesting is that we haven't seen a rise in bankruptcy rates yet, and that's probably coming. We know that now a number of small businesses have closed in a sort of an unofficial capacity. So they've shut down and they're likely to stay shut down, but it not exactly showing up in hard and fast statistics just yet But yeah we are seeing a really dangerous consolidation in which big businesses are getting bigger and independent small businesses are getting wiped out And a lot of businesses at this point are kind of just like hanging on by their fingernails and they're not expecting much additional aid. So I'm here in San Francisco and my husband and I went out on Friday night just to walk around in one of the big commercial streets near us where there's a lot of outdoor dining and outdoor bars. and as of last night, all of that is shut down in San Francisco because we've gone back into shelter in place. And so I was talking to the bar owner where we were getting drinks and they were saying, yeah, they just told us that we had to shut down again. They didn't offer us anything. They didn't give us payments to help us get through it. They didn't say like, we're going to help you with your rent. It's literally just a shutdown order and that's it. And I think that that's a really big failing that we've taken all of these small independent businesses. We said, hey, you have to change your business practices or shut your doors. But we really haven't offered them much help since the spring.

Sean Rameswaram: I mean, were there people who didn't really benefit from the stimulus who were still struggling even April, May, June, July this summer after that stimulus was passed?

Andy Lowry: Absolutely. So there were a number of workers who the stimulus was sort of insufficient or it still didn't reach them. Disproportionately, job losses have fallen on black workers and Latino workers. disproportionately women, disproportionately younger people. And those $600 top-ups on unemployment checks, those ended months and months and months ago. So a lot of people, they saved the money or they used it to pay down some debt. But at this point, they have nothing else. And a lot of them are still jobless. So we're seeing rising rates of people who are not on a temporary furlough, but are actually now at this point permanently laid off. And that's a really bad sign. And in terms of businesses, businesses that didn't have a pre-existing relationship with a bank, didn't have a pre-existing credit relationship, were a lot less likely to get PPP loans. And as you point out, those loans were not like ideally distributed. A lot of big chains ended up getting them. But we needed to do better to reach those smaller institutions. And I'm particularly worried about businesses owned by Black business owners, by younger business owners, by Latino business owners, more informal businesses with no banking relationships. Those have just been absolutely wiped out.

Sean Rameswaram: Yeah. So, I mean, will this current stimulus that Congress is debating address the people who have been most hurt in this economy this year? Minorities, minority-owned small businesses, small businesses in general?

Andy Lowry: I don't think so. You know, what they're debating, the sort of $300 a week top up to unemployment is a really, really good and powerful thing. And at this point, Congress should be thinking of this as a bridge to get everybody to the post-vaccination world. And it's looking like, you know, in roughly eight months from now, something like that, many people will be vaccinated and will kind of be a little bit on the other side of this. But we have all of these flashing red signals and we're not doing enough. The stimulus isn't big enough. It's not reaching out to those people that we know perfectly well have been hardest hit. And so I really worry about that. And the question is, who are you leaving on the sidelines, even if the economy recovers pretty well, even if we start to see, again, a decline in unemployment and an increase in GDP? You're going to have some pocket of people that kind of carry that hurt with them. And I don't think that anything in the bill that's being currently debated addresses that.

Sean Rameswaram: Well, obviously, there is a new president coming in in, what, just over a month. Does he have plans to address the larger issues at play here?

Andy Lowry: Absolutely. So I think there's a lot that the Biden administration would like to do in terms of making people whole and starting to think about addressing deep racial inequalities. There's a question is what he can do without Congress. So if Democrats take those two Georgia Senate seats and Democrats control the Senate, it's just a radically different world than if that doesn't happen and you have a Republican Senate that is going to be the choke point for all Democratic legislation. In which case, really, the only things that the Biden administration will be able to do are things that they can do through sort of unilateral executive action. And so that's why people are talking a lot about student loan debt relief, because that's something that the Biden administration can do without Congress. So it's going to be really hard for the Biden administration because their kind of like ideal blue sky policy is going to look really different from what they can pass.

Sean Rameswaram: But all told, I mean, if this gets much worse, I mean, you alluded a couple of times to these flashing red lights. Do you think it might be an issue that someone like Mitch McConnell might be more interested in taking up the way he did with the initial CARES Act stimulus?

Andy Lowry: Possibly. So back in the spring, the CARES Act, a lot of the reason that got done was because the stock market was freaking out. And since then, it's very much recovered and volatility has gone down. And we really don't need to worry about public companies that are listed on the stock exchanges. But it's a really big motivator in a way that kind of kitchen table economic pain is never a big motivator. I know that congressional offices are getting a lot of constituent calls about this. But, you know, again, they've known about this for months, right? It was clear in May that they were going to have to do this and they still haven't done it. You know, this is a real make or break week right here.

Sean Rameswaram: Annie Lowry is fittingly the author of a book titled Give People Money. It's all about universal basic income. We made an episode about it a few years ago. If you want to find it, it was titled Dollar Sign, Dollar Sign, Free Money, Free Money, Dollar Sign, Dollar Sign. Good evening.