Unemployed Americans are on 'precipice of financial disaster' if Congress doesn't act now: ex-Federal Reserve official

Unemployed Americans are on 'precipice of financial disaster' if Congress doesn't act now: ex-Federal Reserve official
Michael Raphael / Public domain

In just three days, expanded unemployment insurance (UI) benefits to millions of people will end. That's the $600/week boost that has gone to millions of people thrown out of their jobs because of the coronavirus pandemic, the boost that Republicans insist is making a lazy workforce refuse to get back on the job, so they're trying to get rid of it. But those benefits are doing so much more, Joseph Vavra, a University of Chicago economist who has been studying the impact of the benefits, told The New York Times.


“These unemployment benefit checks are really doing a large job in propping up spending by these unemployed households.” If they are allowed to expire “there’s a good chance that what is now an unemployment problem becomes a foreclosure crisis and eviction crisis.” These UI dollars are circulating throughout the economy, to landlords and grocery stores and hardware stores and all sorts of other retailers, keeping them afloat and their employees on the job. That might have sunk in for Treasury Secretary Steven Mnuchin, and maybe even some Republicans, as they are now, at the last minute considering a side deal to extend the benefits while they worker out a larger stimulus deal.

That deal, Bloomberg reports, “would extend funds that were provided to millions of Americans by earlier coronavirus rescue packages, according to people familiar with the matter.” However, the scope of that is not clear because there are still Republicans who don’t think the millions of people thrown out of work out of no fault of their own deserve the assistance. There’s also some pushback, which is irritating, from at least one House Democrat. Majority Leader Steny Hoyer said he doesn’t want the short-term extension because he wants “to give people the security they are not going to be let down and fall through the cracks in September and October.” That’s a good point, so they should start negotiating NOW to extend the benefits this week and tie them to economic conditions moving forward. Do what McConnell always does and use an impending crisis to their advantage. That would remove one contentious issue for the larger package as well.

The urgency is very real. “There are people who are on the precipice of financial disaster here,” David Wilcox, a former Federal Reserve official told the Times. “We may think that the odds are that Congress will come to a reasonable conclusion. But for a person who is on the precipice of financial disaster, it’s very low comfort to be told, ‘You know, I think there’s a 70 percent chance that this is going to work out fine.’” It sure as hell isn’t going to work out by next week. In fact, the latest from Politico’s sources is that there is “0% chance there will be a bill passed by the end of July, 40% chance there is a bill by mid-August.” People can’t wait that long.

Neither the White House nor Mitch McConnell’s office commented for the Bloomberg story on the negations, but Mnuchin and Trump’s chief of staff Mark Meadows are back on Capitol Hill Wednesday. One hint that Mnuchin might be finally taking this seriously is that he met with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer Tuesday afternoon. Every previous major relief bill was negotiated ultimately between Mnuchin and the Democrats, with McConnell shuttled aside because of his continued insistence on only working within his Senate Republican conference. It could be a threat to McConnell from Mnuchin that he’s got to start including Pelosi and Schumer in his negotiations or get sidelined again.

If they’re serious about dealing with this situation, though, they’ll all set whatever posturing they need to do aside to provide for immediate relief to the millions of unemployed who have no clue what’s going to happen to them next week. Like Jacob Perlman, a Chicago resident on unemployment. He made $12 an hour working at a fitness club, and he is anxious to return to work somewhere, but says “The jobs simply are not there right now.” His normal UI benefit is $159 a week. His share of the monthly rent is $500. So if he loses the $600/week boost, he’ll have $136 a month to live on after he pays rent. “I just want security,” he told the Times. “That’s what I want. I’m not looking to profit off this. If there was a job out there, I would take it.”

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