The U.S. economy entered rapid free fall in March as Covid-19 cases spiked and states began issuing stay-at-home orders. Thus far, at least 22 million Americans have filed for initial unemployment benefits, essentially wiping out all the job gains of the past 10 years. Most economists estimate the April jobs report will show tens of millions in total job losses and an unemployment rate of 20 percent or more.
The federal government responded in the $2.3 trillion CARES Act to send stimulus checks of up to $1,200 per citizen and Congress also approved an unprecedented expansion of unemployment benefits, giving many workers assistance equal to their paychecks. But many newly eligible people, including gig workers, have found themselves in an endless queue of jammed phone lines as state agencies struggle to deal with the influx.
In cities across the country, thousands of people with nowhere left to turn braved miles-long lines at food pantries, conjuring images of bread lines during the Great Depression. Unlike many other western Democracies, the U.S. gives temporary loans — not direct payments — to small businesses in order to keep workers on payroll.
Small business support
Congress has thus far approved $350 billion in emergency loans for small business and is poised to add $320 billion more, getting closer to the $1 trillion many banks and small business owners say will be necessary to prevent even more widespread job losses.
Banks and small businesses owners fear even this new money set aside for them will run out in just a few days. And as a percentage of the total economy, the U.S. still lags far behind other nations including Germany, Italy, France, the United Kingdom and Japan in terms of injecting federal funds into the system to battle the crisis, according to data compiled by Deutsche Bank.
Small-business owners may be eligible for forgiveness if they spend 75 percent of their Paycheck Protection Plan loan on worker salaries, but there’s increasing doubt that it will be enough for businesses to weather the pandemic, given that the loans last only eight weeks. And businesses that didn’t already get loans are stuck waiting for Congress to replenish the fund, which ran out of money last week.
There have also been multiple problems with the rollout of the loans, and some small businesses are suing large banks, saying the financial institutions favored making larger and more lucrative loans over smaller ones. European countries, meanwhile, have far more robust efforts to keep workers attached to their jobs, which economists say will be key to speeding up a recovery when the contagion lifts.
The Tory government in Britain pays business owners 80 percent of their workers’ wages to keep them on payroll, up to a monthly cap of £2,500. France, Spain and the Netherlands have taken similar steps, and Germany’s “Kurzarbeitergeld” system of paid furloughs is credited with helping the economy snap back from the Great Recession faster than other European nations.
Democrats heap most of the blame for these failures on Trump and congressional Republicans. But they also failed to secure in the latest rescue bill many of their major priorities, including aid to states and cities, enhanced congressional oversight off all the rescue funds, limits on fossil fuel bailouts or expansions in food stamp benefits.
The energy market
Oil prices have been in free fall since the onset of the coronavirus crisis, as supply vastly outstrips demand.
A deal that Trump helped broker among the major oil producers to reduce global supply by 10 million barrels per day did little to stop the carnage.
On Monday, the contract to receive West Texas Intermediate crude oil in May closed at -$37.63, the first negative price in history. That contract recovered on Tuesday to close at $10.01 per barrel, an 84 percent drop from its high point in January.
Traditionally, the U.S. has fought the opposite problem — rising oil prices driving up gas costs and damaging consumers’ ability to spend on other things. Theoretically, lower gas prices now should act as an economic stimulus. But few people are driving anywhere or spending on anything beyond groceries and other basic needs.
Trump has promised to bail out energy companies slammed by the drop in crude prices. “We will never let the great U.S. Oil & Gas Industry down,” Trump said on Twitter. “I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!”
A broken civic culture
The U.S. is now locked in a rush to reopen that appears driven mostly by political expediency rather than public health even as the number of Covid-19 cases and deaths grows, revealing that the United States, once uniquely positioned to lead the world in all things, is tragically far behind.
Protests are springing up around the country from those — many supportive of Trump — who want to reopen the economy immediately. The president, while supporting leaving the decisions up to governors at his daily news briefings and fresh federal guidance, has used Twitter to support the protests.
Polls, however, continue to suggest that most Americans favor keeping stay-at-home restrictions rather than rushing to reopen. That has not stopped some red state governors like Georgia Republican Brian Kemp from announcing that he would allow certain businesses, including gyms, bowling alleys, tattoo studios, barbers, hair and nail salons, and massage therapy businesses, to reopen as early as Friday.
Unlike previous American crises, like World War II, there is a very limited shared public square or faith in major institutions. A recent Kaiser Family Foundation poll found just 46 percent of Americans trust Trump for information about the virus and just 47 percent trust the news media. Unlike in the past, Americans can easily cocoon themselves in their preferred media bubbles, making a collective response far more difficult.
“The seams of our country have frayed and there is nobody like Walter Cronkite around anymore that everyone listens to and trusts,” Brinkley said. “One hopes the country will come out of this unified in preparations for the next pandemic, but I’m afraid that because this is happening in the 2020 election year that all the partisan divides are just deepening.”
Ian Kullgren, Jason Millman and David Lim contributed to this report.