The Economy Still Has the Virus

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S1: Remember when we were still debating about whether wearing a mask was a good thing or not? It was not that long ago. Back at the end of February, the head of the CDC, Robert Redfield, he got in front of Congress and he sounded so confident. When a member asked whether healthy people should be covering their faces, he gave a flat out no.

S2: So I do see people feeling a need to go buy mask.

S1: You can hear that he sounds a little annoyed to answer this question.

S2: And it really does displease me to find people going out. There is no role for these masks in the community, these mask.

S1: When Redfield came back to Washington to testify some more over the past few weeks. He’s been wearing a mask. So of all the politicians sitting across from him. One was even wearing a Plexiglas face shield. And I should say, this is a good thing, learning about a novel virus means constantly reassessing what you know and what you don’t. But in the last week, the change of heart about masks, it’s been especially profound for Republicans. Senate Majority Leader Mitch McConnell made a statement in support of masks. So did Vice President Mike Pence.

S3: It’s everyone but Donald Trump. And they’re making excuses for Donald Trump. Everyone around Donald Trump is explaining why he’s the only one not wearing a mask.

S1: Jordan Weissmann is a writer here at Slate covers the economy.

S3: Even Steve Manoogian recently at a press conference got up without a mask and explained when without prompting explained why he wasn’t wearing one.

S4: I meant Director Kudlow and I are not wearing masks up here because we’ve both been tested this morning. Okay. Right.

S1: He was like I was just tested.

S3: I’m D.L. He was like this morning. I was tested. Is I. So that’s why I’m not wearing one. But in general, all of you should be wearing masks. So they’re very conscientious of it right now. You know, we’re not back at square one in this country, but we’re seeing record numbers of cases again. And, you know, wave this second. What is the second wave? Is it one and a half wave? I don’t even notice new wave.

S1: I don’t know if they’re waves anymore. They’re just. It were just underwater.

S3: Yeah, right. There’s this new swell of cases is also badly undermining their plans for an economic recovery for Jordan.

S1: The sudden affinity for masks. It’s an economic indicator, a sign that all is not well with the Trump campaign promise to make American four one KS great again.

S3: They’re discovering that if you don’t beat this disease, if you don’t tame the virus, it’s very hard to restart the restart commerce. So it’s not surprising to me that now as as everything’s gone to hell in Arizona and Texas and, you know, across the south, suddenly they’re saying, yes, masks could actually today on the show, an economic reality check with the virus surging again.

S1: Washington is trying to figure out how to keep America afloat again. I’m Mary Harris. You’re listening to what next? Stick with us. Jordan says figuring out the economy right now, it requires looking past the usual numbers that you might turn to, usually to make predictions. Last week, when another jobs report came out, President Trump held a press conference to crow over it.

S4: Today’s announcement proves that our economy is roaring back. It’s coming back extremely strong, but extremely strong.

S1: That’s in the eyes of the beholder.

S3: You know, the economy is sort of a strange story right now, and it’s a little bit confusing. I think if you’re just kind of watching along at home and not paying super close attention, there been now two jobs reports in a row that were pretty good last week. For instance, they reported that there were four point eight million jobs created in June.

S1: And that’s like a record number. Right.

S3: Right. I mean, you know, record with an asterisk because we also had a record fall. Right. So a little bit of a you know, in the unemployment rate fell to about eleven point one percent. You can, you know, depending on exactly how you measure it. And if you account for some error, it might have been as high as like twelve percent, but it fell to around 11 percent.

S1: And I think there is an important point to make here, which is that back in March, economists were talking about unemployment rates at 20 percent. So if you’re looking at unemployment, that’s half of that. That does seem positive.

S3: Yeah, we did not get the worst case scenario. We do have 31 million people on the unemployment rolls right now. Right. I mean, it’s just like it’s not good. The thing is that the these stats that we’re looking at and that Donald Trump is celebrating gave yet another kind of somewhat triumphant press conference about are very backward looking. Right. Like, basically what they said is that between the middle of May and the middle of June, we created about four point eight million jobs on net. The problem is that by the middle of June and then towards the end of June, things started to really tail off. You started to see a lot of kind of Real-Time indicators flatten out some private sector sources of data suggesting that, you know, restaurant sales might have been kind of tapering a bit and that small business activity might have been doing that well.

S1: And then Texas shut down.

S3: Yeah, all these states had these massive flare ups and said, oh, crap, we have to reclose things. And so, you know, you what we kind of saw in this jobs report was that, yes, if you completely ignore public health, you can rehire a bunch of people and try to restart the economy from, you know, try to start digging out of the hole. But eventually you hit your natural limit where the virus kind of becomes this natural barrier to to recovery, to growth, to reopening. A lot of people warned this was going to happen. And it’s possible, right? It is possible that we do find a way to muddle through this, that, OK, they recalibrate, they keep the bars close, they keep restaurants close, but they allow other businesses to maybe open, yada, yada. Eventually, things start to recover a bit more. But I think it should just be crystal clear at this point to everybody that life is not going to go back to normal. Life is not going back to normal. And as a result, the economy is not going back to normal, no matter how hard Republicans wish it would.

S1: Can we talk about what you can learn from this jobs report? Like what kind of jobs came back so quickly?

S3: I mean, a lot of the shots that came back and this is this is actually a little bit worrying, were in hospitality and bars and restaurants. About two million total.

S1: And that’s worrying because these are the most vulnerable jobs.

S3: Right. These are the ones that, like it’s not clear how many more of those can come back. It’s not clear how many of those might disappear again because they have to reclose. You know, it’s not obvious that you can sustain that. A lot of the job growth was in this sector that may just have a natural limit because you cannot safely reopen all of these establishments. That’s something to be concerned about. On the other hand, yeah, you got you know, you got a recovery across other industries. Just, you know, I mean, just all of there’s kind of recovery across the board, whether it’s the local dentist’s office or construction company. You know, people are figuring out how to go back to work in this environment. And, you know, some types of businesses will be able to function at near full capacity or full capacity. That’s undoubtedly true. People will adjust. It is not clear that every industry can adjust. And that includes some really major ones, especially food, dining, some kinds of retail theaters, a lot of entertainment. Those things, it’s just not clear they can recover safely.

S1: So the economy seems pretty fragile right now. But if I’m remembering things right, it’s July. And isn’t that when unemployment benefits were set to run out?

S3: Yes. So the Keres Act, which was the giant relief bill that Congress passed in March, created these six hundred dollars per week unemployment benefits that were sort of one of the central pieces of the relief effort. And those exist through July 30 first. After that, they expire. We go back to normal, unemployed. Benefits which often cover, well, less than half of someone’s normal income. And people are worried about what’s going to happen at that point because there are so many people who probably can’t go back to their jobs as well as we’re seeing because it’s just not safe for certain places to reopen. There are millions and millions of people who just cannot go back to work. And so what happens to the economy and what happens to those families when they have their income cut in half, maybe more when these benefits expire? Democrats want to renew them. Republicans are dead set against re upping the six hundred dollars. It’s unclear where the party falls on, you know, maybe reaping a smaller amount of money. But this is going to be one of the big clashes this month as Congress tries to renegotiate or not renegotiate, but negotiate yet another stimulus or relief bill, whatever you want to call it.

S1: Yeah, the White House seems open to a second round of just checks to every American the same way they did a few months back.

S3: Will that be enough? I don’t think so. I mean, like it would be, you know, it’s great. It’s a nice way to continue helping people. And the checks were the checks were a really big deal. I mean, all the evidence suggests that they helped families across the board. They they especially helped low income families. There’s been studies suggesting that when those checks hit people’s bank accounts, lower income households immediately spent them to cover their necessities like they were really a life saver. But you need to get aid to the people, you know, to the people who are out of work. Right. So, again, there there are 31 million people who are on the unemployment rolls right now. And you can’t just cut them off cold turkey and expect they’re just going to find a job like that. Was sort of the plan initially, I think, for Republicans was their idea was, okay, well, if we just make these people go back to work, we’ll go back to work. You know, it’s like tough love. Yeah. Tough love is their usual. It’s the usual conservative shtick that’s like, well, we can’t incentivize them stay away from the job. But I’m I’m kind of hoping that they’ll though they’ll give a little ground on it now that they’re seeing how reopening is is going in states like Texas. That just seems so obvious. A lot of people can’t go back to work and won’t be able to.

S1: Chuck Schumer, you wrote about how he has this new proposal that would deal with unemployment insurance extended, but deal with it in a different way. Can you explain in a little bit?

S3: Right. So this is the automatic stabilizer or the automatic trigger idea that a lot of people in the Democratic Party and on the left have been talking about for a long while. What does that mean? The idea is that you just tie the amount of unemployment benefits, the size of unemployment benefits to the unemployment rate. You extend the current benefits past July and then as the unemployment rate falls, then the amount of money available through unemployment benefits also falls so that you kind of wean the country off them. So, you know, if the unemployment rate falls to 10 percent, then they go down to five hundred dollars a week. If it goes down to nine percent, they go down to four hundred dollars a week. If the unemployment rate goes back up, does the benefit go back up? I actually, off the top of my head, don’t know if they have answered that question. It’s meant to zero it out over time. That’s how that’s how the proposal is phrased. I don’t know if anyone has contemplated the idea of the unemployment rate significantly heading back up from like nine percent, back to 10 percent like in the course of this. If that were to happen, that would be pretty bad. I think everyone’s sort of imagining a gradual recovery.

S1: It’s hard to just keep imagining new nightmare scenarios.

S3: Yeah, yeah. I mean, I would have to see I would have to see the actual bill at that point. But the idea is to phase it down as the unemployment rate declines so that you’re not kicking the crutches out of the economy before it’s ready to run.

S1: You know, you’re gradually rehabbing it and it makes a kind of sense because it it takes the politics out of it to a certain extent. It’s not like you’re setting an arbitrary time deadline to renegotiate. You’re saying we’re going to keep this going until we don’t need it as much anymore.

S3: Right. And that’s just kind of makes common sense. Right. Like, that’s how you you would ideally run a social safety net is you don’t have arbitrary deadlines and things expire. You have it until you need it or don’t need it anymore. What’s interesting about this to me politically is it also represents a little bit of a recognition by Democrats that they can’t necessarily, I think, trust the Republican Party to negotiate in good faith over a recovery. If Joe Biden’s president, you know, everyone remembers 2009 and 2010 when Republicans stonewalled any effort by the Obama administration to try and deal with the Great Recession. I think everyone is is hoping on the Democratic side, everyone in Democratic Castle kind of hoping that not only is Joe Biden going to win, but he’s going to have a pretty decent Senate majority. But even so, you want to you don’t want to gamble on the possibility that Mitch McConnell is going to be able to just kneecap your presidency from the beginning. The idea is that if you negotiate, you know, a series of automatic triggers, you’d have to worry about that anymore. But also, it sort of represents, I think, a sort of advance in the way Democrats are looking at the social safety net and thinking about how to deal with recessions more generally, that we should have automatic stabilizers, automatic programs that kick into. Ways to deal with economic catastrophe rather than having to negotiate a new package every single time. There’s this sense, it seems like that maybe it’s time to think about recession policy that’s always there, that we don’t just have to, you know, figure out what’s the next rescue package going to be a new each time.

S1: Why do you say it’s a breakthrough?

S3: Because it’s just that’s not something we’ve talked about in the last 10 years. It’s sort of bubbled up on the think tank side of things like people have talked about recession proofing the economy and automatic triggers, automatic stabilizers where, you know, unemployment benefits move up and down with it, with the health of the job market, that that’s one of the kind of central ideas that people have proposed. Other. You could also do things like automatic checks when things get bad enough. There are all sorts of things you could roll out. But this is one of the first times it seems like Democrats are really embracing a part of that program. And hopefully, you know, at least I hope as someone who’s now, you know, spent a good chunk of my my adult life hopping from one catastrophe to the next, I kind of hope that they take that idea seriously and that this is the beginning of them thinking about how to deal with recessions long term in a more systematic way and less ad hoc way.

S5: This plan, it makes it kind of sentence when you have a conversation we’re having right now where we talk about how this coronavirus situation is so fluid. States are opening. States are then closing.

S1: People are going back to work and then they’re getting laid off or losing work again. What’s the Republican opposition to this plan?

S3: I haven’t seen their response yet to the automatic stabilizer plan. This particular one. But more more broadly, you know, they believe or at least up until now, they’ve insisted that generous unemployment benefits are going to discourage people from returning to work or are going to make it more difficult for businesses to rehire, in part because some workers are earning more from these benefits than they were at their old job because of the way they’re structured as the flat six hundred dollar payment. But it’s a little hard to take that argument seriously. Why? Well, one, it’s because we obviously don’t want everyone going back to work right now. Like, that’s that’s part of it. I mean, just look what’s happened with the outbreak to these benefits existed in May and June when we added all these jobs back. You know, Donald Trump was touting the these record jobs reports and people were going back to work when they still could theoretically be collecting the 600 dollars. It’s there’s just no evidence that these are these benefits are actually really stopping large numbers of employers from finding help when they need it. There are obviously instances and anecdotes. You know, you can find newspaper stories and there are some businesses that have had, you know, have found themselves in legit dilemmas about whether to bring people back or to allow them to keep collecting these generous checks. But there is no evidence of a wide scale problem insofar as it even would be a problem that people didn’t want to go back to work.

S5: What are the chances you give, though, for this Chuck Schumer idea of automatic stabilizers actually getting through Congress?

S3: I know that now. It’s just I’m not a I hope it does. I’ve been pretty pessimistic and oftentimes things have gone better on in these negotiations than I thought they would. So it could happen maybe. You know, I’ve heard some people seem like they’re kind of optimistic. I don’t know. I can sort of imagine a deal happening where maybe Democrats say, OK, we’ll back down off the six hundred dollars. But give us the automatic triggers so you get like three hundred and fifty dollars or four hundred dollars and you get automatic triggers. So you don’t have to worry about them disappearing at an arbitrary date. Maybe there’s a deal like that to make. I don’t know.

S1: Here’s my worry, which is even if this Chuck Schumer plan passes and there’s this sort of buffering of the economy in this way, will it be enough? Because isn’t the unemployment system a wreck right now?

S3: It was a wreck early on. But at this point, so many people are just in it already, you know? I mean, obviously, they’re people cycling in and out of it, too. There are new people applying and, you know, people leaving it. But my sense is it’s working better now just because the the initial crush was kind of pet. We’re past it. Early on, it had a lot of problems. Right. I mean, like, I think everyone would. Not everyone. Everyone knows at this point that they the early going was extremely, extremely rough. And there are still people who are probably waiting for their benefits at this point. I don’t want to pretend that it’s going 100 percent smoothly. The bigger question, rather than whether the UI system will continue to function, is just what else is going to be in the next recovery package. Right. Like how much aid to states? Where will there be? Will there be enough money for schools so they can reopen schools safely? Are they going to do another round of checks? The outlines of it are still a little bit fuzzy and we haven’t really seen the sides begin to negotiate hard core. That said, there was one really, I think, encouraging moment during Trump’s jobs day press conference where Manoogian again got up and Manoogian is is really the main negotiator for the administration. Right. Like he’s the treasury secretary. Yes. Even Utian is sort of the central figure there. He was upbeat about the numbers, but he said our job is not done until everyone has gone back to work.

S4: Our work is not done. Our work won’t be done until every single American who lost their job because of Kovac gets back to work.

S3: He seems to understand that the economy is not going to heal on its own entirely and that there needs to be another major effort to shore things up. So that seems promising. Whatever Trump is thinking, whatever is going on in Trump’s head, the guy who’s actually in charge of negotiating is tough for the for the White House seems to be operating back here in reality.

S5: Here’s what it caught me, though, when I read your writing about this, which is you talked about how there’s this evidence that some Americans are holding off on paying their debts right now, that in spite of these stimulus checks, in spite of this boosted unemployment insurance, we’re looking at people holding off on paying their car loans and their mortgages and. How long can that last?

S3: Yeah, I mean, that’s a huge question, there’s how many people are holding off on paying debts right now because they simply don’t have the money? We don’t know. Because when you look at incomes in the aggregate, people seem to be OK. If you look at the averages, you know, average incomes have actually risen since the beginning of this crisis because of the sheer amount of relief money that the government has just poured out and handed to households. They’re actually even paper suggesting that we have cut the poverty rate because we have given households so much money. And so that would lead you to think that maybe the debt problems aren’t really so bad and that people are, you know, maybe they held off on paying them because their unemployment benefits hadn’t shown up yet. But once they did, they were able to pay them. You know, maybe it was it was more of a timing issue than people just really being in trouble. But we don’t know. It’s possible that we’re going to see maybe we will see a wave of defaults and we’ll find out. We didn’t do as good a job protecting families as we thought.

S1: Jordan is a glass half full kind of guy. He says the way he looks at it, Congress deserves some credit for working it all.

S3: Congress is working better than I think a lot of us expected during this. Like they’ve managed, right? I mean, they have managed to to negotiate a series of fairly large relief bills in response to this. And even with Donald Trump in office, the fact that anything constructive is happening while Donald Trump is president is a little bit shocking right here. And the you know, the Congress has managed to do some things right. I mean, they’ve managed to provide enough financial relief that incomes actually rose during the thick of this. I mean, that’s kind of nuts that that that that actually happened when you had Mitch McConnell in charge of the Senate and Donald Trump in the White House, like bipartisan negotiations, have managed to yield some good things. Jordan Weissmann, bring in the hope. Yeah, that’s me. It’s my optimistic day. Not everything is failing all the time on everything.

S1: Jordan Weissmann, thank you so much for joining me, Mary.

S3: As always, it’s been a pleasure.

S1: Jordan Weissmann is Slate’s senior business and economics correspondent. And that’s the show. What Next? Is produced by Mary Wilson, Jason de Leon and Daniel Hewitt. We get help everyday from Alicia McMurry and Allison Benedicte. Thanks for listening. I’m Mary Harris. I’ll catch you back here tomorrow.