In a sign that the GOP is having a somewhat difficult time coming up with a coherent proposal for a new virus relief package, Senate Republicans were said to consider a “side deal” that would extend extra federal unemployment benefits at risk of lapsing before a bipartisan agreement comes to fruition.
Republicans are working with the White House to hammer out the details of a counteroffer to House Democrats, who passed the $3 trillion HEROES Act months ago.
Nancy Pelosi has repeatedly said Mitch McConnell will come around to the reality that a package capped at “just” $1 trillion (the figure Senate Republicans and the White House are currently working from) will be wholly inadequate.
Read more: Starting With A Trillion
In the meantime, it’s a race against the clock to avert a scenario where pandemic unemployment insurance, seen as crucial to avoiding another economic swoon, expires.
“Most of us agree that there needs to be something in its place, and most of us also agree that the $600 flat amount for every worker is not a good idea going forward because it’s a disincentive to get back to work”, Senator Rob Portman told Bloomberg TV, perpetuating a silly canard that is, at best, only partially true.
As documented in the linked post above, the idea that the extra benefits are disincentivizing large numbers of unemployed Americans from going back to work is questionable. For many workers, the combination of federal and state benefits simply doesn’t match their old wage (it depends on the sector).
Even for those who might be making more to stay home (to be fair, Goldman’s estimates suggest the average laid-off worker did indeed “earn” a comparable amount while being out of a job), it does not necessarily follow that they would choose that reality for themselves. The idea that most jobless Americans would prefer to remain jobless as long as their nominal wage is comparable, ignores all manner of considerations, including health benefits, 401(k) matching, and the loss of dignity that goes along with being unemployed.
In any event, too much dithering on this risks the realization of a potentially disastrous fiscal cliff. The latest “Economic Average” report from Yelp (out Wednesday, conveniently), shows that while the number of business closures is falling, the percentage of permanently closed businesses is going up.
“Even as total closures fall, permanent closures increased with 72,842 businesses permanently closed, out of the 132,580 total closed businesses, an increase of 15,742 permanent closures since June 15”, the site said, adding that,
This also means that the percentage of permanent to temporary business closures is rising, with permanent closures now accounting for 55% of all closed businesses since March 1, an increase of 14% from June when we reported 41% of closures as permanent. Overall, permanent closures have steadily increased since the peak of the pandemic with minor spikes in March, followed by May and June.
That is a big deal. To reiterate, the percentage of all business closures marked permanent on Yelp has risen 14 percentage points in the last month.
Last week, I showed readers the breakdown by business type from Yelp’s data. Out of restaurants which have closed since March 1, 53% were permanently shuttered. That figure rose to 60% in the latest update. Similarly, the percentage of shopping & retail businesses classified as permanently closed rose to 48% from 35%.
In fact, permanent closures (as a percentage) rose across all business types.
For the restaurant industry, things are especially dour. Not only is the percentage of permanent closures rising, so is the total number of closures.
“The restaurant industry now reflects the highest total business closures, recently surpassing retail”, Yelp goes on to say, noting that “as of July 10, there have been 26,160 total restaurant closures, an increase of 2,179 since June 15”. Out of those shuttered locations, 60% were permanently closed.
The figure (below), shows that other types of businesses were able to re-open over the past month (e.g., 1,544 shopping & retail businesses re-opened), but the percentage of those closed forever rose across every category.
This is not wholly scientific, and I make no claims as to the broader applicability of these numbers. The information above is presented in the same fashion (and in the same terms) as Yelp presents it. With those caveats, the numbers should serve as a wake up call to lawmakers on Capitol Hill. The rise in permanent business closures mirrors last month’s increase in permanent job losses, and it’s all indicative of structural damage to the economy.
And yet, some Republicans are recalcitrant on extending extra federal unemployment insurance. Lindsey Graham, for example, said he would not support a short extension of the $600 benefits. Some of that could be due to his desire to find a durable, longer-term solution, but whatever the case, this isn’t the time for brinksmanship. CNBC reports that the Republican proposal amounts to just $400/month.
Democrats don’t want a short-term extension either. “[We want] to give people the security they are not going to be let down and fall through the cracks in September and October”, House majority leader Steny Hoyer said.
Meanwhile, Trump is still inexplicably obsessed with a payroll tax cut, which neither side is enamored with. “McConnell is working to overcome divisions with the White House, as Trump has insisted on the inclusion of a payroll tax cut that is deeply unpopular with Senate Republicans”, The Washington Post said. “Whether to include that provision remained a critical outstanding question Wednesday, a day after Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows encountered a barrage of criticism on the issue during a private lunch with GOP senators on Capitol Hill”.
“Republican intra-party negotiations pushing a vote until after the August recess is a key event risk for equity investors”, Bloomberg’s Benjamin Dow wrote. “Similar to 12 years ago, Congressional Republicans and a White House held by the same party don’t see eye to eye”.
Democrats, meanwhile, have little choice but to watch from the sidelines as Mnuchin, Meadows, and McConnell haggle over anything and everything, with the economic future of millions of Americans hanging in the balance.