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Views on recovery weigh on debate over extending unemployment benefits

Many Republicans see the $600 weekly benefit as a disincentive to work, but as the pandemic spreads, will the economy be strong enough?
People wait to speak with representatives from the Oklahoma Employment Security Commission about unemployment claims in Midwest City, Okla., on July 9, 2020.
People wait to speak with representatives from the Oklahoma Employment Security Commission about unemployment claims in Midwest City, Okla., on July 9, 2020.Sue Ogrocki / AP

To hear President Donald Trump tell it, the coronavirus will soon disappear, jobs are coming back, and Congress needs to let a $600 weekly unemployment benefit expire July 31, which he calls a "disincentive to work.”

But even with some jobs lost to the pandemic beginning to return, over 30 million people are still receiving the unemployment assistance and some fear the president's rosy assessment could leave them destitute if it goes away.

Depending on the state they live in, recipients could lose well over half of their income overnight.

Katherine Henry, a 37-year old Massachusetts resident who lost her job as a trainer for a professional rugby team due to the pandemic, told NBC News the weekly $600 payments have been a “lifesaver” so far.

But with gyms and live sports among the industries hardest hit, and her wife’s food truck struggling to regain business, Henry’s been looking for other jobs but says the situation is bleak. She’s been writing and calling lawmakers asking them to renew the $600 benefit.

“My industry is just shuttered at this point,” she said. “I'd have no trouble working at our local Starbucks, but they aren't hiring. Republicans say it's an excuse not to go back to work, but there isn't any work.”

The benefit was included in the CARES Act passed by Congress and signed into law by Trump in March when the economic devastation wrought by the pandemic became clear.

But it’s now become the subject of an intense partisan debate that is in some ways a proxy fight over how each side views the state of the recovery.

Trump, pointing to a net gain of 2.5 million jobs in May and 4.8 million in June, has called the economy a “rocket ship” and his advisers are touting a “V-shaped recovery” in which workers will be able to rapidly return to their jobs as the economy reopens.

“Today's announcement proves that our economy is roaring back, it’s coming back extremely strong” Trump said after the June numbers came out.

To many Republicans, the $600 payments are simply too generous and will discourage recipients from quickly returning to the labor force.

In particular, critics complain that the $600 weekly benefit means many low-wage workers are making more than what they were before the pandemic. The Congressional Budget Office estimated that 5 out of 6 recipients would make more from unemployment than they could expect to earn from work if the payments were extended.

Michael Simpson is one. The 45-year-old Delaware resident was furloughed from his job at a women’s formal wear company in March when the pandemic struck. But now, between state unemployment assistance and the $600 weekly federal aid, he’s earning $150 more per week than he did at his job.

“I can see the argument that you’re just soaking it up, that you’re making more money from unemployment than from working. But trust me, I’d much rather be working than sitting around doing nothing,” Simpson said.

Democrats point to a worsening pandemic and dire long-term forecasts that suggest many Americans will be unable to safely go to work or find a new job and will require further aid to make rent and put food on their table.

“If we fail to renew the $600 per week increase in UI [unemployment insurance], millions of American families will have their legs cut out from underneath them at the worst possible time — in the middle of a pandemic when unemployment is higher than it's been since the Great Depression,” Senate Minority Leader Chuck Schumer, D-N.Y., said last week.

Given the persistence of the virus, economists are increasingly worried about a “checkmark-shaped recovery.” In that scenario, the economy would see an initial wave of job growth as businesses reopen and adapt to the crisis, but millions would still be left out of work once the wave recedes. Recent gains still aren’t close to overtaking the more than 20 million jobs lost in April. Even last month's strong jobs report included 588,000 new layoffs that were permanent, rather than temporary furloughs.

The Federal Reserve projects unemployment will remain over 9 percent at the end of the year, and that estimate came before the recent surge of cases in states like Arizona, Texas, Florida, and California that has prompted officials to pause or roll back reopening plans.

Fed Chairman Jay Powell and many economists have warned that a potential prolonged “second wave” could dampen the recovery. The latest jobs report only covered the period up to the week of June 12, before the latest rise in cases, which prompted analysts like banking giant Goldman Sachs to lower their growth forecasts.

While some businesses are reopening, others have closed or laid off workers, perhaps permanently. Since the jobs report, over 1.3 million people have submitted new applications for unemployment benefits every single week, still far above normal levels. Small businesses may also begin to exhaust federal loans and grants that were designed to keep workers on payroll, potentially setting off a new wave of layoffs.

Workers could face new headwinds in the fall as well. Many schools are unlikely to return full-time, cutting off a crucial source of child care that will make it difficult for parents to find and maintain a job.

“We know the economy is not going to return to full potential until the virus is gone. There are going to be jobs that people simply cannot do,” Martha Gimbel, manager of economic research at Schmidt Futures, said. “If we screw this up, it’s about whether or not people will be able to feed their kids."

Trump in recent days has demanded schools fully open, threatened to cut off funding to those that don’t, and criticized his own administration’s safety guidelines as too “tough” and “very expensive."

While Republicans and Democrats debate the best course ahead, neither side denies that enhanced unemployment benefits, along with other CARES Act provisions like business loans and stimulus payments, have had an enormous impact on Americans’ livelihoods so far. In many ways, they’ve shielded families from a Great Depression-level collapse.

Personal income actually rose 10.5 percent in April as much of the country was shut down to fight the pandemic, and Americans also managed to save 33 percent of their earnings, a rate far higher than normal.

The benefits were especially helpful to lower income Americans: One study by Columbia University researchers credited the CARES Act with keeping the poverty rate nearly the same as it was before the pandemic, even as tens of millions have been forced out of work.

But some businesses, which are required to bring back workers to fulfill the conditions of their own federal aid, have also complained that their employees are reluctant to return, given the benefits. Republicans see this as a sign benefits have overshot the mark.

“Right now our policy is we’ll give you $600 a week only if you don’t work, but if you do work, you don’t get it,” Stephen Moore, a White House adviser, said. “That’s a stupid policy. Don’t pay people for not working.”

Instead, Moore favors temporarily suspending payroll taxes, which would boost incomes for workers and business owners — but not the unemployed.

Trump has also talked up the idea of cutting payroll taxes, along with a variety of targeted breaks for different industries affected by the pandemic. Last week, he told Fox Business News that while he is open to a new round of stimulus payments as well, he wanted a “great incentive to work.”

In the Senate, McConnell has said lawmakers should continue “adequate” benefits for those who can’t work, but the $600 weekly payment was a “mistake” that encouraged people to remain unemployed. Some GOP lawmakers have suggested legislation that would pay bonuses to employees who return to work.

Adding to the stress on the unemployed: Other provisions to protect them could be running out at the same time.

Millions of renters are also protected from eviction under the CARES Act, but that measure is set to expire on July 25. A recent analysis by Urban Footprint warns that without some government assistance, upwards of 7 million renters are vulnerable to losing their home. Some similar measures at the state level are already expiring.

“It should be really clear this week that forcing people into homelessness is not in the public interest or our health interest,” said Shamus Roller, executive director of the National Housing Law Project.