economy

Closed Forever

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.


 

14 comments on “Closed Forever

  1. FuriousA says:

    Explain to me why the Democrats are insisting on saving the Republicans from driving the country over the fiscal cliff. If the Republicans think it’s all corporations/the economy or bust and virus be damned, why not let them die with their experiment?

    • Darkstar says:

      Maybe because the Democrats actually care about people, even if it’s just a little bit, even if it would help the Republicans too? Meanwhile, so many Republicans, conservatives and libertarians subscribe to the “I got mine, fuck you” philosophy. Unless of course you’re a major corporation, many of whom have spent the last 10 years like sailors on shore leave. Sorry to sound so partisan, because there’s plenty of blame to go around on “both sides” (in scare quotes because let’s face it – left wing, right wing, same bird) but $100 a week? That’s just damned heartless. It’s not like 30MM people decided to live off the government tit.

    • Anonymous says:

      Just spitballing a few related ideas:

      1) Maybe Democrats see an opportunity to demonstrate that government intervention has a place, potentially reducing resistance to future policy pitches that involve more government involvement.

      2) Maybe this can be seen as an inverse of “starve the beast” (overfeed the beast?) where an increase in government spending will have to be paid for in some way (whether through taxes, inflation, etc), any of which could result in wealth redistribution.

      3) Spending money in these situations is generally in line with Democratic objectives. If there is an opportunity to push for an objective with control of only one branch of government (and all the gridlock), maybe you accept the compromise that it could reflect positively on the other party.

  2. If poor are not provided with what they need, they will burn American cities and barbecue the rich. When you have nothing, you have nothing to lose.

    • joesailboat says:

      They have debt. Thats something to lose. Marx may have mentioned debt slavery. I would hate to see Marx proved right.

    • runamok says:

      If they are polite about it, they’ll increase capital gains tax for the super rich and install an inheritance tax on the super rich. If they are not polite about it, they will have a BBQ.

      I’m still not sure if our country was looted and abandoned by our elites. Or, looted and they are so out of touch as to seem like they abandoned the country. That said, they will not make concessions willingly. They never do.

    • Joey says:

      Just tossing out ideas for why the Republicans might not fear letting the fiscal stimulus lapse:
      1) a perverse belief that markets would see such a move as a genuine effort to control the federal debt and avoid future inflationary etc consequences?
      2) a willingness to let the situation devolve to widespread rioting in the streets, with a subsequent declaration of martial law, deployment of Federal troops–er, agents–and a possible suspension of the November election

    • BBQ Soylant Green anyone?

  3. derek says:

    It’s like the old Tea Party crowd is coming out of hibernation, stretching their limbs and getting ready to fight President Joe Biden, under the proud banner of fiscal rectitude.

    Will we see “rising GOP star” Paul Ryan rolled out again?

  4. Joey says:

    “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.” Add to this the uncertainty about future jobless benefits, and nobody would reasonably turn down a decent job now in the hope of sitting on the couch for another month. Not to mention that if you have an opportunity to take a decent job now, would you really let it pass by thinking that such an opportunity will always be available when the jobless benefits run out? On the other hand, if you perceive that your job options right now are terrible, or you’re in fear of getting COVID in the workplace, then yeah, I can see how you would try to wait it out. I haven’t done the research, but I wouldn’t be surprised if very few members of the Senate (especially Republican members) have ever really had a conversation with working class people, much less worked alongside them.

  5. gale wilson says:

    What this country (and the entire planet) needs now is job creation……….not just continued unemployment benefits. I suggest that the government give financial incentives to anyone willing to open new factories in the United States (that would create jobs) to manufacture many of the products that were made in China in the last decade. We will have shortages of many of these products soon because these products are not being shipped from China any longer.The government could also start infrastructure projects that are desperately needed in the United States. It is time that we repaired the bridges, highways, dams, levies and airports that are falling apart (that would create jobs). Creating new jobs is a better long term solution than the band aid approach of unemployment benefits.

  6. ” band aid approach” is simply emergency treatment; you break your leg skiing, and they put a splint on it while still on the hill…the solution comes later at the hospital. The economy is still lying on the hill.

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