WASHINGTON – Experts from the Center for Economic and Policy Research (CEPR) critiqued the proposed CARE Act introduced last night to mitigate the economic and human impact of the pandemic. The full text of the critique is below. The authors will be available for comment.
“The (no-one-in-the-GOP) CARES Act introduced last night by Senate Republicans is a stunning indictment of the Republican Party. Its failure to propose measures to protect the health of Americans and prevent the historic wave of joblessness that will soon crest if nothing is done to hold it back demonstrates a willful ignorance of how the economy works and the steps needed to protect workers and businesses.
“Again, the CARES Act demonstrates the Republican party’s complete disdain for the health or economic well-being of American workers. It provides no additional money beyond what is in the recently passed Families First Act to enable Medicaid to deal with an explosion of poor people who fall ill with COVID-19, the disease caused by the novel coronavirus. While insurance, Medicare, or Medicaid will cover the full costs of diagnostic testing for covered individuals, the government will not cover out-of-pocket costs of care for insured and uninsured individuals who have contracted the disease. This is a huge public health threat as many cases will go undiagnosed, and many who are sick will forego treatment.
“No provisions in the Senate bill fix the huge holes in emergency paid leave benefits in the Families First Act. That bill provided 10 days of paid sick leave for a worker made ill by the coronavirus or to care for someone who was quarantined or sickened by it. There is no paid family medical leave for workers who contract COVID-19 or to care for a family member who is quarantined or contracts the disease. Only parents who have to stay home because their children’s school has closed are eligible for 12 weeks of leave, two weeks unpaid and 10 weeks at two-thirds pay up to a maximum of $200 a day. Employers with 500 or more employees are excluded from both measures, and those with less than 50 employees can request a hardship waiver from the Department of Labor. Workers at Walmart, Target, Amazon, Whole Foods, McDonald’s, Dunkin Donuts, and many other large employers are left out of emergency paid sick days and paid leave, while workers at small retail and restaurant establishments may work for employers who get a waiver.
“No funds are allocated in the CARES Act to increase hospital beds, allow the federal government to order and pay for ventilators, or otherwise improve health care infrastructure apart from an expansion of telehealth. There is no provision for a public option for the Internet that would let kids in poor neighborhoods and rural areas access educational instruction from home. So much more needs to be done to protect the health and well-being of families.
“Beyond its cavalier approach to public health, the CARES Act does not address the fallout from COVID-19 on the economy. First and foremost, Congress must adopt measures to keep workers attached to their jobs. The highest priority is for the federal government to subsidize employers’ payroll costs so large and small businesses don’t have to lay off workers. Denmark is paying 75 percent of payroll to employers that retain workers, the United Kingdom is paying 80 percent of wages to keep people working, and Canada is providing a wage subsidy to employers to keep workers on their payrolls. The US, where delay by the Trump administration in fighting the novel coronavirus has led to expectations of massive dislocations, should do no less. In work sharing arrangements, workers face reduced hours rather than layoff and the state unemployment insurance systems pay unemployment benefits for the lost hours. This helps keep workers attached to their jobs. Maintaining employment through the health emergency will pave the way for a rapid recovery once the crisis is past, as firms will be spared the time and expense of recruiting and training workers and can quickly ramp up production.
“Instead, Senate Republicans offer measures for businesses and workers that are little more than a bad joke. Checks to Americans — at best, a stopgap measure to see the most vulnerable workers and families through until meaningful legislation can be passed — turn out to exclude those who need financial assistance the most. People who were jobless in 2018 or earned less than $2,500 won’t get a check. Those with earnings of $2,500 or more get a check for what they paid in income taxes in 2018, with no one getting less than $600 or more than $1,200 ($2,400 for a two-adult household). These folks will also get $500 for each child. Households with the lowest incomes get little to nothing from the Republican proposal.
“State unemployment insurance (UI) funds are short-changed in the CARES Act and receive no help from the federal government beyond the $1 billion already included in the Families First Act to help meet the rise in jobless claims due to the coronavirus. This is clearly inadequate. It provides no funds to increase the UI benefit to meet minimum family needs or to extend the length of payments if steps to preserve jobs are not undertaken, and unemployment remains stubbornly high for a protracted period.
“Sales tax and other revenue sources that states and municipalities rely on are drying up as people shelter at home and spend little on hotels, restaurants, or retail establishments. Without a massive infusion of funds from the federal government, reduced revenues mean states and municipalities will have to cut needed services and lay off workers to balance their budgets at a time when the need for these services is rising sharply. It is essential to get large-scale assistance to state and local governments immediately to stave off austerity measures that will worsen the economic contraction. The federal government should provide funds at a minimum equal to 10 percent of the budgets of these jurisdictions to enable them to maintain services. A back-of-the-envelope calculation suggests they will need an immediate infusion of about $250 billion.
“The CARES Act provides no funding for state and local governments beyond what is in the Families First Act. That legislation provides $1 billion to meet increased UI claims due to the coronavirus, and $1 billion in food support for kids who rely on school lunches, nursing mothers through the women, infant and child program, and expanded demand for SNAP (food stamps). The 6.2 percent increase in payments to state Medicaid programs to cover free diagnostic testing for the Medicaid-eligible population is much more substantial and may be as high as $65 billion. This leaves a substantial gap in state and municipal budgets of $183 billion that must be filled. This can initially take the form of no-interest loans from the Federal Reserve Board. But the federal government will ultimately have to make up the shortfall in state tax revenue for the duration of the crisis.
“As for relief for small employers, the CARES Act makes businesses with fewer than 500 employees eligible for loans that can be used for payroll and health insurance benefits as well as for mortgages/rent, utilities and debt obligations. With little certainty about where the economy will be when these loans need to be repaid, take-up is likely to be problematic. Moreover, business owners who do take loans may prioritize capital — mortgages/rent, utilities, and debt repayment — over workers when thinking about how to protect their investments in their businesses. The proposed legislation fails to preserve jobs at small and medium-sized enterprises.
“The bill also proposes a $50 billion bailout for passenger airlines and $9 billion for cargo airlines, along with $150 billion for other still-to-be-determined hard-hit industries. That’s $209 billion to bailout big business. While protecting the wages and benefits of workers in these industries is a high priority, there is no public interest in protecting shareholders or overpaid CEOs. If these businesses are unable to survive through this crisis, the remedy is prepackaged bankruptcies, along the lines of the auto industry bailout in 2009. The shareholders will lose their stake, creditors will take a haircut, and workers will be largely protected.
“Under no circumstances should Congress give the Trump administration control of any discretionary bailout fund. Trump has explicitly shown that he can and will use any powers at his disposal to advance his political campaign and family business interests. It would be incredibly irresponsible to allow Trump to have more public funds to abuse in this way.
“The GOP proposed CARE Act fails to protect the health or jobs of working families. Americans deserve speedy enactment of meaningful legislation that rises to meet the extraordinary crisis we face.”