As Americans approach the first anniversary of the World Health Organization that declared COVID-19 a global pandemic, it is worth taking a look at how the US government's economic response has gone.
Early data make it clear that the massive aid sent by the government to families and businesses in 2020, especially under the CARES law, has prevented the economic crisis from getting much worse. One of the most effective parts of that federal aid has been direct payments to individuals. Direct payments quickly brought in money for families so that they could continue to buy essential goods such as groceries, petrol and medicines
That is the good news. The bad news is that COVID-19 has amplified the profound inequalities already built into the fabric of American society and economy. In this recession, as in others, unemployment rates peaked at higher levels for black and Latinx workers than for white workers. Furthermore, a large number of Black and Latinx people work in jobs, which puts them at an increased risk of exposure to the corona virus. Among American families earning less than $ 50,000 per year, a group that includes a disproportionate number of families of color is more than half – 40 million people – have lost wage income.
Government controls have been critical in reaching families in difficulty, including many who have not received any other form of assistance. But the scale of the crisis, especially for people of color, calls for additional direct payments.
A challenge so far has been that financial aid is disconnected from the real circumstances. Direct checks were a one-off deal and the additional unemployment benefits were running out. As a result, too many Americans have gone hungry and too many unemployed have had even fewer to make ends meet.
Congress should now take a different approach. Aid must be linked to conditions on the ground: if the US economy picks up faster than expected, aid will stop and money will be diverted to other priorities. If the economy remains weak longer than expected, the federal government will spend more.
Linking the duration of aid to the strength of the job market would provide greater security for all, while ensuring that black, Hispanic and Indigenous families in need do not lose their support prematurely as a result of a standoff in Washington. Linking this support to the combined unemployment rate for black, indigenous and Latinx workers would further increase racial equality, similar to what has been proposed for the Federal Reserve
Some have argued for more funding for highly targeted programs such as unemployment insurance and food aid instead of direct payments. This is not an either-or situation. Highly targeted programs are successful because they reach those who need it most, and their automatic stabilizing properties mean they expand in recession and contract during economic expansion.
But the highly targeted nature of these programs also leads to the exclusion of many people who need them. Of the low- and middle-income families who lost work-related income last year, two-thirds have not had access to unemployment benefits. Direct payments are an important addition to these more targeted programs as they help fill in the gaps and reach people left out by these programs, especially black workers, who hardest time access unemployment benefits.
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The evidence shows that combining controls with targeted programs is extremely effective. Recent analyzes of the Urban Institute and the Institute of Economic Policy found that combining controls with comprehensive unemployment benefits in the summer of 2020 prevented more than 12 million people from falling into poverty – the majority of whom benefited from direct controls.
Direct payments have been an incredibly powerful tool during the pandemic, but one-time checks are running out – forcing families to take credit cards, borrow, or spend savings. Congress should ensure that those checks are repeated when local conditions indicate that more support is needed.
These efforts will substantially improve race equality outcomes, drastically reduce poverty, provide security for marginalized families and boost local economies. Recurring direct checks are a powerful complement to other essential long-term structural measures of racial equality, such as the Baby Bonds proposal one of us wrote. Such funding is part of a long tradition of civil rights dating back to The calls from Dr. Martin Luther King Jr. for instant cash assistance as a thrifty and humane approach for those struggling to meet their basic needs.
The risk that the government will not do enough is greater than the risk that the government will do too much. Now is the time to make a quick, complete and equitable recovery. We urge Congress to provide relief – including additional controls – tied to economic indicators, and have these payments repeated until the economy recovers. The strength of the economy and the well-being of all Americans depends on it.
Darrick Hamilton is Henry Cohen professor of economics and urban policy and founder and director of the Institute on Race and Political Economy at The New School David Wilcox is a senior fellow at the Peterson Institute for International Economics and former Assistant Secretary of the Treasury for Economic Policy
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