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Federal Money Saved Economy as Pandemic Exposed Weak Safety Net

While $5.2 trillion brought swift recovery, U.S. workers still lack the security of those in other advanced economies.




Groceries are loaded into a car at a drive-through food pantry in Anaheim in April 2020. Photo courtesy Second Harvest Food Bank of Orange County.

In March 2020, more than 2,500 cars and trucks wrapped around the Honda Center sports arena in Anaheim, California, as people struggling during the COVID-19 pandemic lined up for free rations of rice, beans, oatmeal, noodles and canned goods. Anaheim is home to Disneyland, and a hub of low wage tourism jobs. As theme parks, hotels, restaurants and retail stores closed or drastically cut back their operations, their idled workers joined others trying to survive being suddenly without paychecks.

Over the next few months, the line of cars would grow to 6,000. “We had not seen anything like that before,” said Claudia Bonilla Keller, CEO of Second Harvest Food Bank, which organized the massive food distribution operation. There was, she said, a “whole new layer of people” queueing up for food, people with “nice cars and mortgages.”

At the same time in rural Maine, Roxy Kai-Petrovich, who suffers from an autoimmune disorder, had already left her part-time job as a line cook at a breakfast diner in Mechanic Falls out of fear for her health.

And in Boca Raton, Florida, Linda Orlick, who lacked the savings to retire, lost a job she loved selling jewelry at Neiman Marcus. “I was completely lost. I didn’t go out of my house,” she said. “It was a very, very, very sad time.”

Federal emergency spending helped make the COVID-19 recession — which caused the loss of 20 million jobs in March 2020 alone — the shortest on record.

Seeing the threat of that kind of dislocation and misery, federal lawmakers would approve massive levels of economic relief over the next two years. They pumped $5.2 trillion into the economy through several bills to keep families afloat while also responding to the health crisis caused by the deadly virus. The most significant pieces of legislation were the $1.8 trillion Coronavirus Aid, Relief and Economic Security Act (CARES Act), enacted in March 2020, and the $1.8 trillion American Rescue Plan, which was enacted in March 2021 as the country was rolling out its vaccination program.

The federal government’s aggressive response helped restore the country to economic health, according to a broad consensus among economists. Two studies released on Feb. 24 — one by the Center on Budget and Policy Priorities (CBPP), a D.C.-based think tank, and the other by Moody’s Analytics — underscore the benefits of the economic aid provided by six bills enacted by Congress between March 2020 and March 2021.

The federal emergency spending helped make the COVID-19 recession — which caused the loss of 20 million jobs in March 2020 alone — the shortest on record, according to both reports. The U.S. economy’s rapid recovery was due not just to the scale of the fiscal support, according to the Moody’s report, but also to how quickly lawmakers responded to the pandemic. The unemployment rate fell from a height of 14.8% in April down to its current 4.0% rate. It “reduced poverty, helped people access health coverage, and reduced hardships like inability to afford food or meet other basic needs,” according to the CBPP study. Indeed, the expanded child tax credit would briefly cut child poverty nationwide by more than a quarter before it was phased out in December.

Volunteers with Second Harvest Food Bank of Orange County load boxes of groceries to be delivered to food-insecure households in April 2020.

Even so, the economic and personal lives of American workers have been full of stress over the past two years, as they confronted illness and loss, unsafe work environments and the challenges of balancing work with remote schooling for their kids. The economic distress has been hardest on women and on Black and Latino workers — those with the least economic security and those concentrated in professions that suffered the greatest job loss or offer the least assurances of safety.

“It’s not like everything is totally rosy,” noted Heidi Shierholz, president of the D.C.-based Economic Policy Institute, who also gives the federal relief effort high marks. “We still have a long way to go. So I don’t want to make it seem like I’m trying to convince people who are living in what is a difficult time that everything is great. But our recovery is much faster than what it would be if Congress hadn’t acted.”

The government’s response, however aggressive, was hampered at every turn by the weakness of its social welfare system.

When COVID arrived, the U.S. was without the kind of safety nets seen in most advanced industrialized economies. The country has the highest percentage of people living in relative poverty among the 37 members of the Organization for Economic Cooperation and Development. Indeed, it was the absence of a strong social insurance system that in part motivated lawmakers to launch such a large fiscal policy response when the economy shut down.

The relief plan also had to rely on creaky state unemployment programs that had been starved of funds for decades and, in some cases, were designed to restrict people’s access to benefits. The underinvestment in the unemployment system left it open for abuse by sophisticated cybercriminals, and also kept people waiting weeks for unemployment checks.

During the first year of the pandemic, more than one in four workers received at least one unemployment payment.

Meanwhile, the Paycheck Protection Program, a forgivable-loan program for small businesses, benefitted large businesses more than small ones and wealthier neighborhoods more than poorer ones. It “was essentially untargeted because the United States lacked the administrative infrastructure to do otherwise,” according to the National Bureau of Economic Research.

During the first year of the pandemic, more than one in four workers received at least one unemployment payment, with benefits expanded to cover gig workers and the self-employed.

Nowhere was the fight to wrest those benefits from overwhelmed state agencies more intense than in Florida, where Gov. Ron DeSantis blamed his Republican predecessor Rick Scott for designing a system intended to discourage people from collecting unemployment insurance. Vanessa Brito, a political consultant for both Republicans and Democrats at the time COVID struck, left that work behind to help connect Floridians suddenly out of work to services.

Brito’s Facebook page reads like a catalog of pandemic assistance programs and includes posts about rental assistance, mortgage assistance, utility assistance, the child tax credit and, of course, unemployment insurance. Her Facebook and Twitter accounts became a major source of information, at times attracting as many as a million views, she said.

Brito hopes the new awareness of the problems with the safety net will lead to change. “I think we’re entering the phase where we can actually achieve real reform,” she said. People “want their unemployment system to work, they want their SNAP [Supplemental Nutrition Assistance] programs to work. They realize how hard it was.”

One of the people she helped navigate Florida’s unemployment insurance system was Linda Orlick, 76, who lost a job selling jewelry at Nieman Marcus during the pandemic. It took the Boca Raton resident six weeks to collect unemployment insurance from Florida’s state agency. “I don’t want to say that I was depressed. But I was sad all the time,” said Orlick, who was also grieving the loss of her ex-husband, one of the early casualties of the pandemic. He died from COVID in a Riverdale nursing home in the Bronx on her son’s birthday in May of 2020. Later, Brito would help Orlick fight off a false claim by the state unemployment agency that she’d been overpaid, Orlick said.

Roxy Kai-Petrovich, right, with her husband and 9-year-old daughter.

Roxy Kai-Petrovich, who is 30, lives with her husband and 9-year-old daughter in Oxford County, Maine, where one in five children live in poverty. She says hers is a “paycheck to paycheck” family.

When COVID kept her husband, a line cook, from working for two weeks in spring 2020, he applied for unemployment insurance. But it took him several months and hours waiting on hold to collect his benefits.

“It wasn’t our knight in shining armor,” she said. Her first stimulus check was, though.

Her husband had been in an accident and their car was totaled. With her check, “We were able to get a little beater off the side of the road. And that’s what we currently drive,” she said, referring to their Ford Fusion. With the family living in an area with minimal public transportation,“That was a huge stress relief for us.”

Some of the workers hardest hit by the pandemic were excluded from most pandemic relief. There are an estimated 7 million undocumented workers in the United States, and 74% of them are essential workers, employed in fields like meat processing, agricultural work, child care and health care. Many, like Natali, a 37-year-old single mother of three, were employed in tourism when that industry became one of several particularly hard hit by the pandemic in March 2020.

She was laid off from her job as a hotel housekeeper in Beverly Hills that March. The hotel, where she had worked for nine months, did not provide her any severance. For several months, she subsisted by selling face masks that she made. “It was so hard for me,” she said. Her landlord gave only a two-month break on her rent. “This country offers a lot of help, but some people don’t take advantage because, like me, they are scared,” said Natali, who asked that only her first name be used. Her youngest son, who is autistic, struggled with online schooling.

By the summer of 2020, Natali had found full-time work as a cook nearer her home at a restaurant that has developed a brisk takeout business. She was eventually able to take advantage of a California-funded stimulus program aimed at helping undocumented immigrants. She used it to pay off bills. Natali, who lives in a one-room apartment with her three children, is upbeat about the future. “We will be fine,” she said of her family.

Nationally, the caseloads for the Supplemental Nutrition Assistance Program (SNAP), an indicator of food insecurity, were 12% higher in November 2021 than they were in February 2020.

But Orlick and Kai-Petrovich are afraid to return to their previous jobs for fear of getting sick. Orlick is looking for online work but has so far come up short. Kai-Petrovich dreads an impending expense: upgrading her septic system, which is failing.

Over the past two years, Keller, who runs Second Harvest, the food bank network in Orange County, saw the number of households her organization serves every month balloon to 640,000 in the summer of 2020 and then steadily decline. But then she saw an uptick in November as inflation began to rise. “Prior to COVID, we had been serving about 249,000 individuals [per month] through our pantry network,” she said. Currently, Second Harvest is serving about 340,000 per month, a 38% increase over the number served prior to the pandemic.

Nationally, the caseloads for SNAP, another indicator of food insecurity, were 12% higher in November 2021 than they were in February 2020, according to the CBPP study.

Some economists argue that the size of the American Rescue Plan, signed by President Joe Biden in March, significantly contributed to inflation, now at a 40-year high, by jacking up consumer demand just as supply chains became stressed. But not all experts agree. On a conference call in late February, Mark Zandi, the chief economist of Moody’s Analytics and an author of the recently released study, argued that “the real uncomfortably high inflation happened beginning last fall and into this year and that’s related to the delta wave of the pandemic, which significantly disrupted … global supply chains.”

And he contends that a less robust response to the COVID recession would have lengthened it. “There would have been many more business failures, personal bankruptcy. There would have been a lot more scarring in the labor market,” he said.

Of course, the argument that it could have been worse is slim comfort for those struggling in an economy where jobs have become less safe, inflation is on the rise, and the future still looks uncertain. Sharon Parrott, president of the Center on Budget and Policy Priorities, is hoping to see some of the programs that were part of the economic relief bills — like the child tax credit and rent support — included in federal legislation, known as Build Back Better, now stalled in a closely divided Congress because of opposition from two Democratic senators. The relief has “dramatically reduced hardship,” she said. “We should learn from those lessons and apply them both to a compromise Build Back Better legislation and to future crises,” she said.

Copyright 2022 Capital & Main

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