How About $200 And A Get Well Soon Card?

“Time is running out”, Nancy Pelosi said Monday, in a statement as more specifics of the GOP virus relief proposal came to light. “We have stood ready to negotiate for more than two months”, she added, for emphasis.

As expected, Republicans are angling to slash extra federal unemployment benefits from $600/week to just $200/week while states establish the administrative capacity necessary to implement the system teased by Steve Mnuchin, which will entail unemployed workers receiving 70% of their normal pay.

This isn’t surprising. Or at least not the idea of reducing compensation to 70% in order to ensure the jobless aren’t “paid more to stay home”, to parrot the GOP disincentive talking point.

“All states currently provide close to 50% wage replacement”, Bloomberg writes, in a recap. “The federal government would come in to make up the difference to bring a recipient’s wage up to the 70% level once the transition is complete”.

But the $200/week bridge sounds like a non-starter for Democrats. States would have two months to make the transition to the new 70% system. In the event they have difficulty figuring out how to do the math, they can ask for two additional months in the form of a waiver.

That sounds comically haphazard and destined to go awry. Generally speaking, you’d imagine a transition period would simply entail preserving the existing system (in this case the $600/week) to avoid the deleterious effects on the economy of deliberately driving the car off the fiscal cliff.

In addition to risking a near-term hit to consumer spending, cutting the benefits to just $200/week before state officials have worked out the specifics, means that if states have problems rolling out the new system (i.e., developing the calculation to arrive at 70% of a given worker’s old pay), those workers will exist in a prolonged period of limbo.

On average, a typical worker would get around $200/week under the 70% system anyway, but that varies from occupation to occupation. “In other words, a typical unemployed American’s benefits would drop $400 per week from the benefits currently in place”, The New York Times notes. “But the change would affect different workers in different ways, with the lowest earners faring the worst”. (Of course.)

Trusting that officials at any level of government are going to implement a new system expediently and efficiently is extremely naive, and we already know this process will be fraught with technical difficulties. As The Times reminds you, “the idea of basing benefits on workers’ previous wages isn’t new [and] it’s what Democrats initially proposed when the supplemental benefits were first approved in March [but] Labor Department officials told them that plan was impossible because of the antiquated computer systems in many state unemployment offices”.

This comes at a time when the benefits from previous relief packages have already lapsed, and jobless claims are starting to rise.

The countdown to the summer recess is now under two weeks. On Monday afternoon, Republicans unveiled a series of bills which together comprise a $1 trillion proposal. That officially starts the bargaining process with Democrats, whose HEROES Act costs $3.5 trillion.

Amid reports of GOP infighting and divisions between Steve Mnuchin and Mark Meadows on one side, and Senate Republicans on the other, Chuck Schumer called the process a “slow-motion train wreck”. “They can’t even put one bill together, they are so divided”, he sighed.

I’m a broken record on this, but then again, so is every other observer with a pulse and a brain. It isn’t complicated. When nearly 32 million people are still claiming some form of unemployment insurance (the reference is the total claimants figure from the week through July 4), the idea of stripping away the federal assistance which everyone knows is responsible for the rebound in consumer spending, is political suicide.

The hit to disposable incomes has been almost completely offset by transfer payments. You don’t have to be an economist to draw a connection between that and the “V-shaped” recovery in retail sales. The US economy lives and dies by consumption, and if consumer spending falters, it will cripple the services sector just when things were starting to improve.

All of that is to say nothing of the impact from new lockdown measures across hotspot states.

This is not a partisan debate precisely because it isn’t debatable. Either these benefits get extended and eviction moratoriums put in place, or the economy will suffer.

It’s not politics. It’s just math.

And remember, the correct chart to consult when it comes to nonfarm payrolls is not the month-on-month change chart. Rather, the image lawmakers should have seared (figuratively) into their brains is the one below.

Not everyone gets it though. “Half the Republicans are going to vote no [on more stimulus]”, Lindsey Graham told Fox over the weekend.

Ted Cruz echoed those sentiments on Monday. “There is significant resistance to another trillion dollars”, he told the media. “I think it’s likely you’ll see a number of Republicans in opposition to this bill”.

Meanwhile, Anthony Fauci told reporters on a call Monday that the earliest possible date for determining whether Moderna’s COVID-19 vaccine works or not is November. Just in time for the election.