U.S. is two weeks away from going off the economic cliff because of Senate Republicans

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Back in May, the House passes $3 trillion relief package – the Heroes Act – that the “Grim Reaper” of the Senate, “Moscow Mitch” McConnell, declared DOA in his legislative graveyard.

“It is important to note that more than 80 percent of the priorities in the Heroes Act have been supported by the Republicans in the four previous COVID-19 acts of Congress. We are proud of how we built on that bipartisanship and look forward to negotiations For The People,” House Speaker Nancy Pelosi wrote.

The proposed legislation includes a second round of direct cash payments to Americans, $1 trillion in aid for local, state and tribal governments drowning under the strain of the novel coronavirus, assistance for essential front-line workers, an extension of unemployment benefits and various other Democratic measures [i.e., rental assistance].

The proposal, if it clears both chambers, would become the largest, most expensive spending package in U.S. history — surpassing the $2.2 trillion measure Congress passed in March.

Senate Republicans have refused to act, preferring to maintain the fiction that the economy is “roaring back” after the Great Reopening in May – an economy reopened too soon which has had tragic and predicted consequences. Coronavirus update: U.S. death toll rises as new infections reach record levels:

The daily coronavirus death toll in the United States increased this week after months of decline, as new infections soared to record levels and hospitals in the South and West faced a crush of patients.

More than 4,200 deaths were reported nationally in the past seven days, and experts warn that the trend could continue to get worse. Texas, Arizona and South Carolina have all seen their death toll rise by more than 100 percent in the past four weeks. Four more states — Mississippi, Tennessee, California and Louisiana — have seen at least a 20 percent jump in that time span.

The weekly new unemployment claim filings continue to exceed one million a week despite workers who have temporarily reported back to work. Job losses remain ‘enormous’: Coronavirus unemployment claims are worst in history:

Out-of-work Americans filed 2.3 million new claims for unemployment benefits last week, according to Labor Department data issued Thursday.

That includes about 1.3 million claims for traditional unemployment insurance, and an additional 1 million through the new federal Pandemic Unemployment Assistance program for the self-employed, freelancers and other workers generally ineligible for standard state benefits.

It was the 16th week in a row — since the week of March 21, when states began imposing lockdown measures — that new applications for jobless benefits exceeded 1 million.

Axios adds (see below):

First-time PUA claims rose above 1 million for the first time since the week of May 23 last week, while the number of people approved for and receiving PUA benefits increased to 14.4 million, as of June 20, the last week for which data are available.

The small decline in the number of Americans applying for and receiving traditional unemployment benefits is being more than offset by the increase in PUA beneficiaries, resulting in more people on unemployment.

The highest prior weekly total for new unemployment claims was 695,000, in October 1982, according to Labor Department data. During the Great Recession, the country’s last downturn, weekly claims peaked at 665,000, in March 2009.

Put another way, new unemployment applications during each week since mid-March have been at least three times as high as their worst week of the Great Recession.

In all, nearly 33 million people were collecting unemployment benefits as of June 20, according to most recent Labor Department data — five times the previous high of 6.6 million hit during the Great Recession.

And yet, Senate Republicans are cool to a 2nd round of stimulus checks, direct deposits. They wanted to wait and see if the economy is recovering before giving you “takers” any more stimulus checks (even as they helped themselves to Paycheck Protection Program funds not intended for members of Congress).

The unemployed may soon see a large drop in household income. A $600-a-week federal supplement to unemployment benefits enacted early in the recession is scheduled to expire after July 31, barring an extension from Congress, which seems unlikely given Republican opposition.

Note: States can only pay this enhanced benefit through the week ending on July 25 or July 26.

Many businesses may have already or will soon extinguish funding they received through the federal Paycheck Protection Program, which has helped prop up small-business payrolls. Business aren’t currently able to apply for a second round of loan funding.

* * *

Brooks Brothers, a high-end retailer, filed for bankruptcy on Wednesday and will close at least 51 of its roughly 250 stores in North America. Bed Bath & Beyond said Wednesday it would permanently close 200 stores over two years.

“With more bankruptcies and job cuts announced in the retail sector, for example, the economy remains at significant risk in the weeks and months ahead,” said Mark Hamrick, senior economic analyst at Bankrate.

Axios reports that “We have entered round two of the jobs apocalypse“:

This week, United Airlines warned 36,000 U.S. employees their jobs were at risk, Walgreens cut more than 4,000 jobs, it was reported Wells Fargo is preparing thousands of terminations this year, and Levi’s axed 700 jobs due to falling sales.

Those announcements followed similar ones from the Hilton, Hyatt, Marriott and Choice hotels, which all have announced thousands of job cuts, and the bankruptcies of more major U.S. companies like 24 Hour Fitness, Brooks Brothers and Chuck E. Cheese in recent days.

While round one was a swift reckoning that left 20.5 million Americans without a job after one month, part two will be a slow burn that sees millions more jobs lost as some businesses reduce headcounts and others shut down for good.

In the first half of 2020, more than 3,600 companies filed for bankruptcy, according to legal services provider Epiq. Just over 600 filed in June, up 43% from June 2019.

The initial jobs apocalypse was due to the mandated and temporary closures of businesses across the country in an attempt to contain the coronavirus pandemic.

Part two is the fallout from the decline in consumption that resulted and will likely include the wreckage from wide-ranging business closures and a reckoning for white collar jobs, experts say.

What we’re seeing in the numbers so far is more an outcome of the cumulative negative effect of March, April and May than anything worsening with the pandemic in the last few weeks,” Wendy Edelberg, director of the Hamilton Project and a senior fellow at the Brookings Institution, tells Axios. “The numbers are probably going to get worse.”

“The pickup in COVID is going to increase uncertainty and make people cut back on spending, but … even without that pickup in the pandemic, the economic weakness will lead to layoffs and failures from businesses that are only being indirectly hurt” by the pandemic, says Edelberg, who was previously chief economist at the Congressional Budget Office.

An out of control coronavirus pandemic is forcing states to roll back the Great Reopening of their economy, and some states are even considering imposing a full lockdown to save their hospital care system in a desperate attempt to get the spread of COVID-19 under control. This roll back of the economy will inevitably lead to reduced demand and more layoffs. The economy is not “roaring back” until the government first addresses this coronavirus pandemic, which it has failed miserably to do.

And there is already another economic catastrophe currently underway. Salon reports, More than 20 million people face eviction by the end of September as GOP threatens to cut aid: study:

One in five Americans who live in rentals could face eviction by the end of September as Congressional Republicans move to cut off unemployment assistance and other coronavirus relief, according to an analysis by the Aspen Institute.

More than 20 million people — roughly 20% of the 110 million Americans living in rented homes — could face homelessness by the fall, according to the analysis, which used data from the COVID-19 Eviction Defense Project.

“We’re… going to face the biggest homelessness crisis that this country has faced in decades, probably since the Great Depression,” former Democratic presidential candidate and HUD Secretary Julián Castro said in an interview with Salon. “We’ve never seen anything like that in our lifetime… Mitch McConnell and Donald Trump — it’s not surprising that they’re so disconnected from the lives of everyday people. That’s what people are thinking about. That’s what they’re worrying about. How am I going to pay the rent?”

The federal government and many state and local governments have issued partial emergency eviction and foreclosure moratoriums, though these vary in degrees of protection and are set to expire in the coming weeks.

“Arizona, California and Nevada are among those states with the highest share of renters at risk” of eviction according to the Aspen Institute, according to this CNBC report.

This week some asshole Phoenix-area landlord sued Arizona Gov. Ducey over the eviction moratorium:

The lawsuit argues Ducey’s eviction moratorium exceeds his authority, violates the Arizona Constitution and fails to pay landlords for the losses they are experiencing. The suit was filed in Maricopa County Superior Court in June, and the governor was scheduled to be served Wednesday.

The governor’s order provides all accumulated rent and late fees would come due once a tenant’s health or income improved or the order expires July 22, whichever came first.

More than 20 states, including hard-hit Texas and South Carolina, have already allowed eviction proceedings to resume and only about a dozen states will have any eviction protections by the end of the summer unless further action is taken. The federal moratorium, which was implemented under the CARES Act, is set to expire on July 25, after which renters will get 30 days notice of eviction proceedings.

Do the math: this is two weeks from today.

The moratoriums paused evictions but provided no rent relief, meaning that renters unable to pay during the pandemic will be on the hook for months of back rent once they expire.

House Democrats approved a $100 billion rental assistance and $75 billion homeowners’ assistance program last month – the Heroes Act – but it was rejected by Republicans, who called it a non-starter in the Senate. Senate Majority Leader Mitch McConnell, R-Ky., has already vowed not to extend the $600-per-week federal unemployment benefits in the next phase of coronavirus relief as Senate Republicans and the Trump administration declare premature victory over the pandemic.

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Though Trump has touted recent jobs reports as proof that the crisis has ebbed, economists argue that the economy has been buoyed by unprecedented federal relief, which is now set to expire.

The economic crisis has left millions unable to pay rent, a fact that will not change when crucial relief programs expire. The Congressional Budget Office projects that the unemployment rate is not expected to fall below its pre-pandemic level until at least the end of 2030.

The eviction crisis poses an unprecedented economic threat because of housing instability issues that predate the coronavirus.

“There’s a housing supply problem of just not enough units being built, and so that compounds over time,” said Reina, who co-authored an upcoming report on the eviction cliff for The Justice Collaborative with Kathryn Howell, the head of the RVA Eviction Lab at Virginia Commonwealth University. “It’s driving up rents at all ends of the spectrum so you have that reality of the fact that the supply response to the demand for housing in many markets has been insufficient.”

There has been a “distinct lack of federal intervention” on housing affordability, he said.

“We rely on one major production program for affordable housing, the longterm Housing Tax Credit Program, and while that produces really important housing units, a lot of households who live in those properties may still find themselves housing cost burdens because… they’re so low income that they’re well below the income threshold, and therefore they’re still paying a fair share of their income towards rent or a disproportionate share of their income towards rent,” he said. “The private market’s not supplying the units enough and there’s a lot of factors that drive that, not the least of which is nimbyism and restrictive land-use practices and owner processes that drive up costs and kind of delay production time. There is a lack of federal support, particularly for the development of low-income housing. There’s a lack of federal safety nets.”

The government has offered vouchers and other programs to help low-income renters but these programs have been “largely oversubscribed,” Reina said.

“The number of eligible households, the number of households who actually receive these subsidies is way disproportionate,” he said, adding that estimates show there are “four eligible households for every one subsidy.”

Not only have affordable housing programs been “largely insufficient,” the US population is rapidly aging.

“The number of people who are elderly and disabled and poor is only going up, and these are households who aren’t going to make more money,” Reina said. “These are households who are largely past the wage-earning ages, or at least the age where their wage is going to increase at a meaningful level to reduce their housing cost burdens, and so there’s a large compounding reality that essentially built over time without an adequate market or government response to it.”

These issues have been exacerbated by the economic crisis. The Census Bureau recently found that 25.9% of households reported that they missed last month’s rent or mortgage payment.

Some cities are developing rent relief programs to respond to the unprecedented housing crisis, relying on a mix of local tax dollars, federal aid, and even donations. But these programs are “still insufficient,” Reina said, because federal unemployment benefits are set to expire at the end of the month and “the level of those benefits going forward are a big element of keeping people at a level of income where they can afford their housing.”

“There is absolutely a need for very meaningful federal support in housing policy, both in stabilizing markets, in creating incentives for more products for the private market to provide, but also indirect subsidies to households to production and essentially across the spectrum,” he said.

But local governments are being asked to develop novel rent support programs without federal support. Senate Republicans have pushed back against providing relief to local and state governments who are facing a historic revenue shortfall and any state and local aid in the upcoming relief bills is expected to fall far short of the $1 trillion approved by House Democrats last month.

The local programs being developed are not enough to make up the shortfalls felt by landlords, leaving cities to also contemplate “programs that target owners specifically,” Reina said.

The scale of the crisis requires significant federal intervention.

“When you get this meaningful level of federal infusion, you’re relying a lot less on local dollars, particularly while local dollars are diminishing at a rapid rate,” Reina said. “It places a lot of strain on the ability of localities to really respond to everything meaningfully, particularly in areas like housing, and so that’s where those federal dollars become all the more crucial in the current moment.”

Without federal assistance, millions of people will be plunged into turmoil.

* * *

Landlords would also face default on their mortgages. In areas where housing prices are stagnant or falling, landlords may simply decide to walk away from housing units or choose to defer maintenance and repairs, which would lead to lower housing quality.

“One thing that is very clear is that the need for assistance existed before COVID and it’s been really amplified during COVID…  the immediate implications are for the lowest income households, particularly the lowest income renters who are most at risk of losing their housing,” Reina said. “What that means for their personal welfare, their economic welfare, their kids’ welfare, their overall health, but then it has much larger systemic implications for what it means for the owners of these properties, what it means for revenue for cities… So those amplifying effects become overwhelming when you think about… the scale of households we’re talking about right now.”

Mass evictions could also worsen the health crisis.

“We’re telling people to socially distance and shelter in place when, in many cities across the country, having a home or a roof over your head was actually something that people were struggling to have at all, and then when you think of issues of doubling up, the issues of needing to move, the issue of you need to find housing, potentially moving multiple times, the challenge around living on the street, accessing shelters,” Reina continued. “When you put that in the context of a global health pandemic where one of the biggest recommendations people are landing on is consistently social distance from people, what you realize is that the social distancing becomes almost like a luxury that low-income households can’t afford so therefore they’re even more susceptible to the virus itself.”

* * *

The current crisis, Reina argued, magnified longstanding problems that have gone unaddressed for years.

“I don’t want to be too hyperbolic about some of this but there’s a lot of uncertainty… The level of need is quite large and it’s not going away. It’s building off of past unmet need and essentially accelerating it,” he said. “If this plays out, even for a fraction of these households the way we might expect it to, that’s a staggering number of people who are being negatively affected by our current housing challenges.”

Congress is back in Washington, D.C. on Monday. Call your senators and demand that they pass the Heroes Act passed by the House this week, before the U.S. economy goes off the cliff in two weeks, threatening the lives of millions of Americans.




1 COMMENT

  1. The Washington Post reports, “After the fastest recession in U.S. history, the economic recovery may be fizzling”, https://www.washingtonpost.com/business/2020/07/11/after-fastest-recession-us-history-economic-recovery-may-be-fizzling/

    “If there were still hopes of a “V-shaped” comeback from the novel coronavirus shutdown, this past week should have put an end to them. The pandemic shock, which economists once assumed would be only a temporary business interruption, appears instead to be settling into a traditional, self-perpetuating recession.

    After two surprisingly strong months, the economy could begin shedding jobs again this month and in August, Morgan Stanley warned Friday. Many small businesses that received forgivable government loans have exhausted their funds while some larger companies are starting to thin their payrolls in preparation for a longer-than-expected downturn.

    “ ‘Stalling’ is the word I’m using,” said Jim O’Sullivan, chief U.S. macro strategist for TD Ameritrade. “But the risk there is that the numbers start turning negative again.”

    Several regional Federal Reserve officials last week expressed concerns about the recovery petering out. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, warned that economic activity “is starting to level off.” Thomas Barkin, who heads the Richmond Fed, cited “air pockets” in new business orders.”

    Delusional Trump: This is “the fastest economic comeback in history.”

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