What does the economy need now? 4 suggestions for Biden's coronavirus relief bill

Editor’s note: The Biden administration has made it clear it wants to inject more money into the U.S. economy and provide more aid for priorities like vaccines, reopening schools and state governments. We asked four economists to share what’s on the top of their wish lists for Biden and Congress, and why.

A better way to save businesses while helping workers

Steven Pressman, Colorado State University

Since March, 20,000 U.S. businesses have failed every month^[1], on average. Small companies, which employ nearly half of all workers^[2], have been hit hardest^[3]. The U.S. economy will struggle to recover without significant support for small businesses and their workers.

One way Congress addressed these problems back in March is by offering small companies forgivable loans^[4] if they kept workers on their payroll for 10 weeks. While helpful, the Paycheck Protection Program came with major flaws, such as a design that led to lots of fraud^[5]. In addition, billions of dollars went^[6] to companies that didn’t need it^[7], while some of those in greatest need couldn’t secure adequate funds^[8].

The U.K. had a different solution. Its government created the Coronavirus Job Retention Scheme^[9], a form of wage and job insurance for workers. The government pays up to 80% of usual wages – subject to an income cap – to furloughed workers that companies retain as employees. Companies cover another 20% of usual wages. Low-income workers also receive additional monthly payments of up to the equivalent of about US$500.

Workers can be partially furloughed, working three or four days per week rather than five. This solves the problem of what to do about workers whose hours get cut or who go from full-time to part-time status.

The plan has helped companies reduce their labor costs, while maintaining flexibility to bring workers back when conditions allow. Importantly, aid goes to workers – not companies – which has ensured workers and their incomes have been protected^[10] throughout the crisis. And aid goes only to workers whose companies experience problems due to the coronavirus pandemic.

Unemployment rates in the two countries tell part of the British success story. In the U.K., unemployment increased gradually last year^[11] from 4% pre-pandemic to 4.9% in October. U.S. unemployment, in contrast, almost doubled^[12] from 3.5% to 6.7% in the that same period, peaking at nearly 15% in April.

The U.K. program has provided support to workers^[13] throughout the pandemic’s ups and downs. The Paycheck Protection Program was meant to be temporary, although more funds were added in December^[14].

In the U.K., fraud has been limited because companies don’t get the money. And the government has encouraged workers to become whistleblowers^[15], while imposing large penalties on the officers of companies engaged in fraud.

Rather than continuing to fund the Paycheck Protection Program, Congress and the president should switch gears and enact a program like the U.K.‘s that will see America through the crisis, however long it lasts.

Addressing the eviction crisis

Melanie Long, College of Wooster

The sharp rise in unemployment due to the pandemic has left many Americans struggling to pay the bills^[17]. Renters have been among the most vulnerable.

Compared with homeowners, renters are more likely^[18] to be poor, young and either Black or Hispanic – the exact same demographic^[19] of those who have suffered the most from the pandemic’s economic fallout.

The result has been a looming eviction crisis^[20] that has been staved off by a patchwork of federal, state and local moratoriums^[21]. Millions of renters^[22] could face homelessness once existing moratoriums expire and accumulated back rent comes due.

About 9 million households^[23] have fallen behind on rent payments, with over 1 million^[24] estimated to owe $5,000 or more. This could also worsen the public health situation^[25] and slow the economic recovery^[26].

To address this crisis, I believe Congress needs to both provide short-term solutions and long-term fixes.

For starters, it’s vital that the Centers for Disease Control and Prevention’s eviction moratorium continue. On Jan. 20, Biden extended the moratorium – which was set to expire at the end of January – to March 31^[27]. But that will likely need to be extended further.

Another critical need is rental and housing assistance. Biden’s proposed stimulus package already includes $30 million^[28] to help renters and support struggling landlords^[29]. Adding even more assistance could have major economic benefits as low-income beneficiaries especially are likely to spend every extra penny on food and other goods, stimulating the economy.

Access to affordable housing has been worsening for years, especially in communities of color. The gap between black and white homeownership rates^[30] has widened since the 1960s. The fact that only 42% of Black Americans own their homes, compared with 72% of their white peers, means most of them are renters, making them more vulnerable^[31] to losing their homes. It’s also largely to blame for the stark racial wealth gap^[32] in the U.S., which in turn reduces economic growth^[33].

Congress could begin to address these deeper problems by providing down payment assistance^[34] in historically redlined^[35] communities, which would help households that are not currently on the edge of a financial cliff take advantage of historically low interest rates^[36] as so many others have^[37].

Helping women get back to work

Veronika Dolar, SUNY Old Westbury

During the pandemic, unemployment has been felt most acutely^[39] by women.

Women in the U.S. lost a total of 156,000 jobs^[40] in December, even as men gained 14,000. There were nearly 2.1 million fewer^[41] women in the labor force at the end of 2020 than there were pre-pandemic.

One reason for this is that women are more heavily represented in sectors that saw the biggest job losses in December, such as hospitality and private education. But another important one is that women generally have been expected to increase^[42] their already disproportionate share^[43] of household child care duties after COVID-19 shut down schools.

All of this could lead to a significant decline in women’s total wages over time – one estimate puts it at $64.5 billion a year^[44]. This would result in a sharp drop in economic activity and billions in lost tax revenue for state and federal budgets.

But Congress could help offset this outcome in several ways.

One of the most critical is helping parents find affordable child care facilities. More than a quarter of child care centers in the U.S. remain closed^[45] because of the pandemic, and those that are open are often unaffordable^[46]. Child care costs have increased 47% during the pandemic^[47].

Biden wants to address this^[48] by providing $25 billion to directly support child care providers and $15 billion to help low-income families afford care^[49].

While this funding would go a long way to ensuring mothers have access to affordable child care, the lack of flexibility at most providers means women with uncertain work hours or who need other accommodations will still struggle. A more comprehensive plan should include some support to hire babysitters or even child support vouchers that could be spent as needed.

The other side of this issue is ensuring new mothers and fathers can take time off work to care for their children themselves. Biden’s proposal includes^[50] up to 14 weeks of paid family and medical leave, which will help ensure women don’t have to choose between a new baby and their career.

Unemployment insurance reform

R. Andrew Butters, Indiana University

Millions of Americans^[51] who have lost their jobs as a result of the pandemic have relied on the unemployment insurance system to pay for bills, rent and food^[52].

But that system, in terms of staffing^[53] and technology^[54], wasn’t designed to handle^[55] the unprecedented need seen today. About 5 million people made continuing claims for jobless benefits^[56] in January. That’s down from a record 25 million in May but still near the highest the figure had ever been previously.

Aid packages passed in March^[57] and December^[58] extended the benefits to people who don’t normally receive them – such as gig workers and part-time employees – and included a federal supplement. But these changes added strain to the system^[59] and made it more difficult to prevent fraud^[60] and process legitimate claims^[61].

[Deep knowledge, daily. Sign up for The Conversation’s newsletter^[62].]

Keeping unemployment benefits flowing to people out of work due to the pandemic is essential to the economic recovery, both so that the unemployed can afford to live and also for the broader economy, which depends on consumer spending^[63].

But this requires ensuring the system is effective and reaches everyone who needs help. Lawmakers could begin to do this by making some temporary changes permanent.

For example, traditionally, independent contractors, part-time employees and some other categories have been ineligible for unemployment benefits. In March, Congress created^[64] two programs^[65] that specifically provide them with benefits. But those programs expire in March. Lawmakers shouldn’t simply extend them again but ensure these growing^[66] segments^[67] of the workforce always have access to benefits.

Lawmakers could also make sure extended benefits – that is, allowing the unemployed to receive up to 50 rather than only 26 weeks^[68] of insurance – don’t expire in the March.

And I believe the relief package should also consider investing to help state offices hire more workers, update their technology infrastructure and coordinate more effectively with other states. This should lead to timelier and more accurate payments and protect against the most sophisticated attempts at fraud.

References

1. ^{^} 20,000 U.S. businesses have failed every month (www.chicagotribune.com)
2. ^{^} nearly half of all workers (cdn.advocacy.sba.gov)
3. ^{^} hit hardest (www.businesswire.com)
4. ^{^} offering small companies forgivable loans (taxfoundation.org)
5. ^{^} lots of fraud (www.wsj.com)
6. ^{^} billions of dollars went (www.usatoday.com)
7. ^{^} companies that didn’t need it (www.washingtonpost.com)
8. ^{^} couldn’t secure adequate funds (www.nytimes.com)
9. ^{^} Coronavirus Job Retention Scheme (www.shrm.org)
10. ^{^} has ensured workers and their incomes have been protected (www.businesswest.co.uk)
11. ^{^} increased gradually last year (www.ons.gov.uk)
12. ^{^} almost doubled (fred.stlouisfed.org)
13. ^{^} has provided support to workers (theconversation.com)
14. ^{^} more funds were added in December (www.wsj.com)
15. ^{^} has encouraged workers to become whistleblowers (www.crosslandsolicitors.com)
16. ^{^} AP Photo/Steven Senne (newsroom.ap.org)
17. ^{^} struggling to pay the bills (www.cbpp.org)
18. ^{^} more likely (www.jchs.harvard.edu)
19. ^{^} the exact same demographic (fas.org)
20. ^{^} looming eviction crisis (www.cnbc.com)
21. ^{^} patchwork of federal, state and local moratoriums (evictionlab.org)
22. ^{^} Millions of renters (www.vox.com)
23. ^{^} 9 million households (www.washingtonpost.com)
24. ^{^} over 1 million (www.marketplace.org)
25. ^{^} public health situation (papers.ssrn.com)
26. ^{^} slow the economic recovery (ighhub.org)
27. ^{^} extended the moratorium – which was set to expire at the end of January – to March 31 (www.forbes.com)
28. ^{^} includes $30 million (www.housingwire.com)
29. ^{^} struggling landlords (www.cnn.com)
30. ^{^} gap between black and white homeownership rates (www.urban.org)
31. ^{^} vulnerable (inequality.stanford.edu)
32. ^{^} stark racial wealth gap (www.brookings.edu)
33. ^{^} reduces economic growth (www.mckinsey.com)
34. ^{^} providing down payment assistance (archive.curbed.com)
35. ^{^} redlined (www.investopedia.com)
36. ^{^} historically low interest rates (www.forbes.com)
37. ^{^} so many others have (www.marketwatch.com)
38. ^{^} MoMo Productions/DigitalVision via Getty Images (www.gettyimages.com)
39. ^{^} has been felt most acutely (theconversation.com)
40. ^{^} lost a total of 156,000 jobs (www.thecut.com)
41. ^{^} nearly 2.1 million fewer (www.bls.gov)
42. ^{^} expected to increase (www.nytimes.com)
43. ^{^} already disproportionate share (www.americanprogress.org)
44. ^{^} one estimate puts it at $64.5 billion a year (www.americanprogress.org)
45. ^{^} More than a quarter of child care centers in the U.S. remain closed (www.cnbc.com)
46. ^{^} are often unaffordable (www.theatlantic.com)
47. ^{^} have increased 47% during the pandemic (www.americanprogress.org)
48. ^{^} Biden wants to address this (www.washingtonpost.com)
49. ^{^} help low-income families afford care (www.ffyf.org)
50. ^{^} Biden’s proposal includes (www.huffpost.com)
51. ^{^} Millions of Americans (fred.stlouisfed.org)
52. ^{^} unemployment insurance system to pay for bills, rent and food (www.nytimes.com)
53. ^{^} staffing (www.nytimes.com)
54. ^{^} technology (www.wsj.com)
55. ^{^} wasn’t designed to handle (www.wsj.com)
56. ^{^} continuing claims for jobless benefits (fred.stlouisfed.org)
57. ^{^} March (home.treasury.gov)
58. ^{^} December (www.natlawreview.com)
59. ^{^} added strain to the system (indianapublicmedia.org)
60. ^{^} prevent fraud (www.wsj.com)
61. ^{^} process legitimate claims (www.latimes.com)
62. ^{^} Sign up for The Conversation’s newsletter (theconversation.com)
63. ^{^} depends on consumer spending (www.thebalance.com)
64. ^{^} created (www.investopedia.com)
65. ^{^} two programs (www.investopedia.com)
66. ^{^} these growing (www.cnbc.com)
67. ^{^} segments (wol.iza.org)
68. ^{^} only 26 weeks (oui.doleta.gov)