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A note from EPI’s Kirstyn Flood: The coronavirus pandemic has brought the U.S. economy to its knees; but what needs to be done to curtail a deep recession from turning into a deep depression? EPI’s experts weigh in.
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Congress is currently debating a new relief and recovery package—the HEROES Act—that would deliver significant amounts of fiscal aid to state and local governments—more than $1 trillion over the next two years. This is a very welcome proposal. The incredibly steep recession we’re currently in is guaranteed to torpedo state and local governments’ ability to collect revenues.
This blog post highlights a couple of findings from the Great Recession of 2008–2009 that should inform policymakers’ decisions this time around.
- Growth in state and local spending was far slower during the recovery following the Great Recession than in any other post–World War II business cycle on record.
- This state and local spending austerity dragged heavily on growth during that time. If this spending had instead followed the trajectory it established following the recovery from the similarly steep recession of the early 1980s, pre-recession unemployment rates could have been achieved by early 2013 rather than 2017. In short, this austerity delayed recovery by over four years.
- Recent justifications for denying aid to state and local governments sometimes rest on claims that this spending has been profligate in recent years. This is absolutely not so—growth in state and local spending has been historically slow for nearly two decades. Given the importance of what this spending focuses on (education, health care, public order), this decades-long disinvestment should be reversed, not accelerated due to an unforeseen economic crisis.
- If federal aid is passed that is sufficient to close the enormous revenue shortfalls the economic crisis will cause for state and local governments, it will create or save roughly 5–6 million jobs by the end of 2021. Without this aid, we will remain at least that far away from a full economic recovery by then. Read the blog post »
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A prolonged depression is guaranteed without significant federal aid to state and local governments
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The coronavirus recession is well upon us. In the U.S., layoffs related to the coronavirus began to intensify around the middle of March. By mid-April, the labor market had shed more than 20 million jobs, by far the most dramatic job loss on record—about two and a half times the job loss of the entire Great Recession. And the situation continues to deteriorate—an additional 12 million workers have applied for unemployment compensation since mid-April. There has never been anything like this. Federal lawmakers get to choose which path we take. They must act quickly and boldly. Read the blog post »
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While the coronavirus pandemic has shut down much of the U.S. economy, with over 33 million workers applying for unemployment insurance between March 15 and May 9, millions of workers are still on the job providing essential services. Nearly every state governor has issued executive orders that outline industries deemed “essential” during the pandemic, which typically include health care, food service, and public transportation, among others. There are roughly 55 million workers in industries deemed “essential” at this time. Many of these workers are required to work without protective equipment. They have no effective right to refuse dangerous assignments and are not even being granted premium pay, despite working in difficult and dangerous conditions. Policymakers must address the needs of working people in relief and recovery legislation, and that should include ensuring workers have a meaningful right to a union. Read the blog post »
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The Department of Labor released the most recent unemployment insurance (UI) claims data this morning, showing that another 2.2 million people filed for regular UI benefits in the week ending May 16 (not seasonally adjusted) and 1.2 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers. To mitigate the economic harm to workers, the next federal relief and recovery package should extend the across-the-board $600 increase in weekly unemployment benefits well past its expiration at the end of July. The package should also include substantial aid to state and local governments (without which a prolonged depression is inevitable), worker protections, investments in our democracy, and resources for coronavirus testing and contact tracing, which is necessary to reopen the economy. Read the blog post »
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Join authors William A. Darity Jr. and A. Kirsten Mullen on May 27 at 2:00–3:00 p.m. ET / 11:00 a.m.–12:00 noon PT for a discussion of From Here to Equality: Reparations for Black Americans in the Twenty-First Century. Through their assessment of the intergenerational effects of white supremacy on black economic well-being, Darity and Mullen confront the injustices of slavery, Jim Crow, and modern-day discrimination to make the most comprehensive case to date for economic reparations for U.S. descendants of slavery. EPI Director of the Program on Race, Ethnicity, and the Economy (PREE) Valerie Wilson will moderate the discussion. Register for the event »
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EPI President Thea Lee will join a panel of experts on May 27 at 6:00–7:00 p.m. MT / 8:00–9:00 p.m. ET for a discussion of life after the economic crisis. In addition to Lee, the panel features Robert Pollin, co-director of the Political Economy Research Institute, and Noam Chomsky, renowned linguist, historian, and philosopher, discussing their projections of how the crisis will unfold in the months and years to come. This webinar is a part of the Just Transition Listening Project, launched by the Labor Network for Sustainability and partners. Register for the event »
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The current public health and economic crisis has affected older people—especially older people of color and those who were already poor before the crisis began—in a disproportionate and unprecedented way. Their health, work, and savings are all at a higher risk of decline than other groups in the labor market. Teresa Ghilarducci, labor economist at ReLab at The New School, will be a speaker and will moderate a panel of experts on May 28 at 2:00–3:00 p.m. ET / 11:00 a.m.–12:00 noon PT, including Kilolo Kijakazi, institute fellow at the Urban Institute; Monique Morrissey, economist at the Economic Policy Institute; and Richard Johnson, senior fellow at the Urban Institute. Register for the event »
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Watch recent EPI webinars
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In this online event hosted by EPI on May 13, former U.S. Secretary of Labor Robert Reich discussed his new book, The System: Who Rigged It, How We Fix It. In the book, Reich, an Economic Policy Institute founder, explores America’s power system, which he says is designed to bail out corporations rather than people—even in times of crisis. Corporations and the wealthy few benefit from what he calls a socialism for the rich—in which they hold nearly all of the country’s economic and political power—while everyone else is left to endure the harsh realities of capitalism. Watch the video »
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Economist Anne Case and Nobel Prize winner Angus Deaton discussed their book, Deaths of Despair and the Future of Capitalism, at an online event earlier this month. This disturbing and eye-opening book is among the first to unearth a shocking increase in what are known as “deaths of despair”—including suicides, drug overdoses, and alcoholism—among middle-aged white Americans. Watch the video »
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Global GDP could shrink as much as $1 trillion if a predicted 31 million women lose their jobs during the coronavirus pandemic, Citi has warned. Read more »
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Thwarting a prolonged depression: Here’s how
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