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.

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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.

Commentary, NC Budget and Tax Center, Trump Administration

Donald Trump promised manufacturing and construction jobs. He didn’t deliver.

President Trump

The gap between what comes out of President Trump’s mouth and reality is often big enough to drive one of the Mack Trucks he so adores through.

Trump promised manufacturing and construction would blossom under his tutelage and has recently turned to claiming he’s delivering on that pledge. Problem is: Reality tells a decidedly different story.

North Carolina job growth in manufacturing and construction collapsed over the past few years. North Carolina construction employment in 2019 was essentially flat, and we lost nearly 2,000 manufacturing jobs last year.

It would be one thing if both industries were already roaring along at peak output, but neither has recovered to anything close to the levels of employment they provided before the Great Recession. The construction trades employ 33,000 fewer North Carolinians than before the recession, and our state has lost 62,000 manufacturing jobs over the same period of time. The scale of these middle-class job losses in the 13 years since the start of the recession is staggering. The combined decline in manufacturing and construction employment is larger than the total working population of cities like Fayetteville, Wilmington, or Cary.

The President did not single-handedly cause the collapse of manufacturing and construction job growth in North Carolina, but his policy record isn’t anything to write home about. President Trump couldn’t muster the leadership to pass his promised infrastructure initiative that could have boosted both manufacturing and construction employment. Not only has imposing tariffs on friends and adversaries alike failed to bring manufacturing back from overseas, Trump’s trade wars have hurt North Carolina manufacturers who export to other countries. It’s difficult to say precisely how much of the drop-off in manufacturing employment is directly due to the President’s trade conflicts, but his policies have certainly cut into North Carolina’s billions of dollars in exports.

However much of the responsibility he directly bears, both industries posted larger gains in 2014 and 2015 than during any year of the Trump presidency. For a president who claimed that only he could fix our upside-down economy, that’s a poor showing.

As outrageous as Trump’s promises were, the real tragedy is playing out in communities and living rooms across North Carolina. Many of the people who once made a good living in construction and manufacturing have lost the economic security they fought so hard to achieve.

The good-paying jobs being created in North Carolina today are highly concentrated in a few metropolitan areas and generally require advanced technical training in fields far removed from manufacturing and construction. As a result, many of the North Carolinians who used to earn enough to get by and save a bit for the future have been forced into low-wage jobs that don’t pay the bills.

Patrick McHugh is a senior policy analyst for the N.C. Justice Center’s Budget & Tax Center. Policy Watch is a project of the Justice Center.