Those federal COVID-19 checks: What they mean and who might get left out

Odds are, you’re probably wondering when the direct cash assistance passed by Congress last week as part of the CARES Act is going to hit your mailbox or bank account. Issuing direct cash payments was without a doubt the right move, but it won’t fill the yawning financial hole facing many families and it leaves some serious questions unanswered. Cash payments won’t meet families’ needs for long Direct cash payments are the single fastest way for government to support families in a time of crisis, whether that be a pandemic, illness, job loss or other unforeseen event. The CARES Act creates a $1,200 one-time payment for all U.S. residents or $2,400 for married couples, with an additional $500 per child dependent, which phase out for high income people.

That’s certainly nothing to sneeze at, but it won’t address the long-term economic fallout of the COVID-19 outbreak — particularly given that roughly 2 out of every 5 households in North Carolina can’t survive above the poverty line for three months without income, and many of those families are the low-income workers first to lose their jobs to the COVID-19 crisis.

Based on our most recent Living Income Standard report, the direct aid provided by the CARES Act will pay for the basic necessities for roughly two to four weeks. As can be seen here, families will burn through the aid faster in the more expensive urban parts of North Carolina, and it also depends on family size and how travel and child-care costs change during this time. Regardless of the details, many families will certainly use up the cash aid and need additional support before this crisis is over.

Direct payments to people in need are the best economic stimulus, but these checks won’t pull us out of the COVID-19 recession

Putting money in people’s pockets is the best way to stabilize a quaking economy. As we saw during the Great Recession, direct payments to individuals had a significantly larger economic return on investment than tax cuts. Thankfully, these cash payments are not the only provision of the CARES Act that puts money in the pockets of people and families. The package boosts the amount and duration of Unemployment Insurance payments for people who lose jobs or hours due to the outbreak. Particularly in states like North Carolina where existing UI benefits are grossly inadequate, the UI provisions will prove far more important than one-time checks for many families.

That said, we are confronted with a sobering reality. The CARES Act will not pull us out of a downturn that is getting worse by the day and will almost certainly end up being one of the most severe economic collapses in American history. More than 300,000 North Carolinians have filed for unemployment since March 16, the fastest spike in job losses on record, and that’s just the first wave of impacts, which is mostly concentrated in customer services.

The rebate aid is really about immediate financial survival, so leaders from the federal to the local level need to be setting up the economic stimulus we need to actually recover and avert a prolonged recession. Read more

Commentary, COVID-19, NC Budget and Tax Center

What to watch now that Congress has passed the America CARES Act

Image: Adobe Stock

There’s a lot to digest in the $2 trillion rescue package Congress just passed. The wide-ranging bill contains some vitally needed aid in this moment of crisis, some dubious handouts to multinational corporations, and some provisions that could be helpful or irresponsible depending on how they are implemented. With all that remains uncertain, there are, however, some things we know already.

The COVID-19 pandemic has achieved the recently unthinkable, forcing bipartisan compromise and cooperation. The America CARES Act evolved rapidly over the past several days as Democrats and Republicans in Congress negotiated over both substance and scope. A Congress often girdled by rancor managed to overcome partisan disagreements and deliver needed tonic to a nation in distress. We’ve become unused to seeing our most powerful institutions respond to the pressing needs of the day, so take some solace in this moment that Congress stepped up to the plate.

For a bipartisan response to be most effective will require swift implementation of the America CARES Act and recognition that there are still gaps in relief and emerging issues that will require further response to fully address the country’s pressing needs.

Among the implementation considerations will be the speed with which cash gets into the pockets of people who need it the most and how we provide relief to impacted people who are not provided adequate relief in this bill, as well as whether corporate executives use it to enrich themselves and their wealthy shareholders.

Moreover, while many important provisions were included like unemployment insurance enhancements and small business supports, some issues like paid sick leave and much-needed health care supply shortages were not addressed. Finally, some of the provisions like aid to state and local governments were valuable, but they will likely not address the full impact of the pandemic. Read more

Commentary, NC Budget and Tax Center

COVID-19 pandemic reveals North Carolina’s economic vulnerability 

Just as it is doing with our health care system, the COVID-19 pandemic is revealing North Carolina’s economic fragility. A reliance on low-wage jobs has left families with no financial cushion, and elected leaders are scrambling to make up for our lack of an adequate social safety to save people in a moment of crisis.  

The hammer is going to fall first and hardest on poorly paid workers in restaurant, retail, tourism and other recreation jobs. After a decade of job growth being concentrated in low-wage service jobs, over one-quarter of all private sector jobs in North Carolina are now in leisure, hospitality and retail. Sadly, these are precisely the workers who can least afford to lose income and often don’t have employer-provided health care, paid sick leave or other benefits that would soften the blow. 

To make matters even worse, the collapse of service sector jobs will likely hit particularly hard the communities that were already economically struggling. Roughly half of North Carolina’s counties never recovered all of the jobs lost during the Great Recession, and many of them are the most heavily reliant on the low-wage service jobs at most immediate risk of disappearing. 

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COVID-19, NC Budget and Tax Center, public health

State and federal policy responses to the COVID-19 virus

This blog post will be regularly updated to capture key policy responses to the COVID-19 virus. (Last updated 1:45 p.m. Tuesday, March 24)

Reports from Budget & Tax Center Staff

This post summarizes steps taken thus far at both the federal and state levels. Scroll down to see a list of steps taken so far, or click on the following links to bring you directly to a specific section:

COVID-19 provides a sobering reminder of how much we need effective and well-resourced governance at the state and federal levels. Particularly in times of crisis, we need an infrastructure that delivers a coordinated, seamless response and reaches each and every person in the community.

The coming months will test federal and state leaders’ ability to blunt the impacts of this global pandemic and contain the harm to the health, well-being, and economic security of people.

Decades of tax cuts have left us vulnerable to a moment like this. Conservative leaders in Raleigh and Washington have given huge tax breaks to rich people and multinational corporations instead of building the systems we need to respond with a coordinated and collective set of programs.

Years of policies that attacked the very institutions that are so critical now have made the response more fragmented and challenged.  Our public health agencies are under-resourced for the growing complexities and services needed in the face of this new coronavirus pandemic coming on top of a very bad flu season. Our public schools haven’t received adequate resources to provide classroom materials and technology in school, let alone outside of it, and many school personnel are worried about their ability to make ends meet in this time. Indeed, many workers will struggle to make ends meet if their hours are scaled back, they get sick, or they lose their jobs because our policy choices have failed to provide access to affordable health care, paid sick days, and a strengthened unemployment system.

COVID-19 is likely going to have an even broader economic impact going forward and could push the United States into a full-blown recession.  Strengthening our programs that can automatically stabilize the economy by helping people make ends meet is critical, as will be aid for states to maintain balanced budgets without dramatic cuts to programs and services needed now.

In short, North Carolina will need a robust policy response at the state and federal level.

Read more

Commentary, COVID-19, NC Budget and Tax Center

Trump should focus on people being hurt by pandemic, not just businesses and industry

On Tuesday, President Trump took a trip over to Capitol Hill to personally pitch Republican lawmakers on his ideas for stimulating the economy and propping up industries already feeling the effects of the new coronavirus, COVID-19. Dramatic stock market losses and the looming risk of a full-blown recession has Trump reaching for the panic button, but the solutions he’s peddling would entirely miss who’s going to feel the real pain.

Low-income, hourly workers, without health insurance or paid sick leave are among the people facing the most immediate risk. That’s where our urgent economic focus should be, but the President’s attention is elsewhere.

Trump’s team is floating a range of tax cuts for businesses and bailouts for industries like travel and tourism. What’s more, his singular idea for the people — a payroll tax cut —  probably will not provide the needed stimulus effect fast enough and definitely won’t give workers with low incomes the help they need to cope with this growing crisis.

We know who will bear the brunt of the economic fallout in the near term:  It’s the people who serve coffee and scrub dishes for $7.25 an hour, clean homes and offices, work retail counters, drive for ride-sharing services, and similar low-wage work. The past decade has seen an explosion of low-paid service jobs and gig work with no benefits, precisely the type of work most likely to be lost if consumers stop spending and school closures become widespread. With not enough pathways to good jobs and economic stability, many North Carolinians have been left extremely vulnerable to even the shortest dip in consumer demand.

Other countries are already moving to make people who lose wages whole, prevent evictions, feed people trapped in their homes, and other measures focused on their most vulnerable residents. Years of tax cuts for rich people and big companies have undermined our ability to help people most exposed to this kind of disaster, so the severity of COVID-19’s health and economic impact is likely to be deeper than in more resilient countries.

Economists are talking about the potential need for a big, quick, stabilizing package for the economy, and Trump would do well stay focused on what will help people first. We’re already woefully behind in supporting health care professionals on the front lines of this crisis and need to be simultaneously preparing if COVID-19 pushes the United States into a recession. People-first policies like food assistance, unemployment insurance, housing assistance, and aid to state governments were essential to pulling the United States out of the Great Recession, and had a larger return on the investment of public funds than tax cuts passed at the time.

Instead of using this crisis as an excuse to give tax cuts to businesses and bailouts to multinational corporations, federal and state governments should be gearing up with a quickness to blunt the immediate effects barreling down on people.

Patrick McHugh is a senior economic analyst at the Budget & Tax Center, a project of the NC Justice Center.