Unsanitized: The COVID-19 Report for July 13, 2020

Yes, the CARES Act Really Did Induce
Premature State Reopenings
Also, state unemployment systems still delaying claims

 

If you're interested, the data from the model. (Philip Rocco)

First Response

The coronavirus pandemic is spinning out of control in much of the
United States. In early June new cases were dropping to around 20,000 a
day; yesterday there were 15,300 new cases just in Florida
.
This could be due to backlogged cases all being completed at once;
because of that the precise nature of the curve is obscure.

But we do know that in the last week, death counts are rising
,
reversing a three-month trend. And while cases may be hitting a plateau,
we have weeks of increases to work through that could be translated into
more death. Rising cases in nursing homes

again, when the new surge was thought to be mostly among young people,
is really worrying. "We do expect deaths to go up
,"
said Adm. Brett Giroir, the administration's testing czar, yesterday.

The initial location of many of the surges-Florida, Texas, Arizona,
South Carolina-has led partisan Democrats to comfort themselves with
thinking that this is somehow a Republican problem, a story of
incompetence and rushed reopenings that put the public in contact with
one another again. (You didn't hear this out of Democrats when the
initial outbreaks were mostly in blue states in the northeast, but let
that go.)  

There's no question that many Republican governors, particularly ones
loyal to Trump, wanted to jump-start their economies, and were slow to
recognize the public health impact. But last week I posited a different
theory
,
that the paucity of state and local fiscal aid in the CARES Act created
a desperate situation, where states and cities had to consider an early
reopening so their budgets didn't completely nosedive. This worked at
cross purposes with the CARES Act provisions that induced unemployment
so people could stay home. The PPP-which was formally silent on
whether workers kept on payroll had to come to work but functionally
probably did induce business owners to recall people to get something
out of them-didn't help matters.

Could you test this theory? Could you see whether states that rely on
tax revenues that weren't coming in during the early months of the
crisis were more likely to reopen? Philip Rocco, an assistant professor
of political science at Marquette University, gave it a try. And he
found a persistent correlation there. It does appear to be the case that
state budget desperation was a factor in premature reopenings. And that
makes the CARES Act's missing piece-a state rescue-a proximate
cause.

Read all of our Unsanitized reports here

Click to Support The American Prospect

Rocco explains his experiment and shows his results here
.
It's a nifty little model. He used the Kaiser Family Foundation
database for reopening

and assigned a value to states that have reopened.  He then measured
this against state income tax policies, while adding controls for
taxable resources, rates of cases, state population totals, and even
whether the state has a Republican governor and how heavily it voted for
Trump. Holding all of that constant, here's what he found: "a shift
in states' revenue share derived from the income tax from 5 to 10
percent is associated with a 43 percent increase in the probability of
reopening." And even if you look at only Republican governors-so
testing the idea that the real reason for premature reopenings is
political party-there is still an effect (an increase of about 12
percent in probability within the same changes in reliance on income
tax).

That's a statistically significant result. It's definitely a crude
model. It misses the handful of states that don't charge an income
tax, which happens to include Texas and Florida. At the city level you
could say that sales tax is a greater variable, though that would be
rather laborious to test. (Anecdotally, the surprising swiftness of
reopening in Los Angeles could have something to do with cratering sales
tax revenues, which fund improvements to mass transit that are scheduled
to be completed before the 2024 Olympics).

"The instructive thing to take away," Rocco told me, "is that even
in solidly blue states, you see differences" tied to reliance on
income tax. And it makes intuitive sense. For example, it was May 7 when
California Governor Gavin Newsom announced

that the state faced a $54 billion revenue shortfall. That same week, he
announced a phased reopening
,
and phase 2 came just days later
,
with phase 3 by the end of the month
.
There's at least a correlation between the reality of the shortfall
sinking in and the move to reopen.

If economic precarity played a role in reopening, and induced states to
reopen early, then the CARES Act could have put states at ease by
ensuring fiscal support. Nearly four months later, no such support has
arrived, practically every state has reopened, and we have virtually the
same level of outbreak we did then, completely wasting the lockdown. The
CARES Act structure helped lead to that outcome. "This is, I think,
very much the story," Rocco said.

You can put on a partisan hat, blame it on Trump
,
blame it on idiots like Ron DeSantis and Greg Abbott and Doug Ducey.
They certainly all were bad at their jobs. But you can't discount that
the CARES Act's lack of fiscal aid nudged states to reopen early. We
now have some evidence suggesting that to be true. And the effect of
that was catastrophic.

Support Independent, Fact-Checked Journalism

Unemployment Stories

Given the state of the virus and subsequently the economy, we
desperately need to maintain enhanced unemployment benefits. Michael
Sainato has a great piece at our site today

talking to several people getting the benefits and how they have little
hope if it runs out. But we do have to acknowledge that running this key
welfare transfer through state unemployment systems has its problems.
Here's the sad story

of a freelance ad copywriter in Los Angeles trying "thousands of
times" to get his claim processed, and so far failing, 10 weeks after
initially applying.

Yes, eventually, most people get through, and they get the money owed
from the initial claim at that time. But two things on that. First, if
it takes weeks, people might run out of money, lose their apartment or
their car, and a real parade of horribles while they wait. That delay is
not costless.

Second, this is where the CARES Act follow-up comes into play. If
Congress changes, as has been suggested, from a $600 enhancement to,
say, $300, what happens to all of those people who've been trying for
weeks to get processed? In theory they should get the $600 enhancement
for the weeks they missed, and then $300 when it changes over. But state
unemployment systems are antiquated
and I
could see problems with them adding one flat benefit for some weeks and
a different flat benefit for others. This will be something to watch.

We Depend on Your Donations

Days Without a Bailout Oversight Chair

108
.
The Wall Street Journal reports

that the Treasury Department and the Federal Reserve were fighting over
how to set guidelines for the slow-moving Main Street Lending Program,
with Treasury favoring a "more conservative approach." In real
terms, this means that Treasury didn't want to lose any money on the
loans, when Congress' full and stated intention was that they
authorized the money to be used, aka "lost." This is a real scandal,
with the executive branch implementing a legislative directive wrongly,
holding back funds that were supposed to go toward economic rescue.
Sounds like a job for that bailout oversight chair!

We Can't Do This Without You

Today I Learned

* We have a Trump mask sighting
. It actually looks
pretty good with the presidential seal, this could have happened months
ago. (Associated Press)

* Mark Meadows, former head of the Freedom Caucus, which sought to blow
up any legislation that spent more than 10 cents, is now running point

on the next coronavirus response bill. Lord help us. (Washington Post)

* Nearly 3 million young adults have moved back in with their parents

since the crisis began. (Zillow)

* Failures of fracking companies will lead to unsealed wells and climate
disaster
.
(New York Times)

* Cruise ship crews in particular are vulnerable to the virus
.
(Wall Street Journal)

* This obituary in the Arizona Republic
is
on fire. (via Twitter)

* Fascinating look at Day 1 inside the NBA bubble
from
Philadelphia 76ers rookie Matisse Thybulle. (Instagram)

**Click the social links below to share this newsletter**

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

YOUR TAX DEDUCTIBLE DONATION SUPPORTS INDEPENDENT JOURNALISM

Copyright (C) 2020 The American Prospect. All rights reserved.
_________________

Sent to [email protected]

Unsubscribe:
[link removed]

The American Prospect, Inc., 1225 I Street NW, Suite 600, Washington, DC xxxxxx, United States