The CARES superdole was a huge success
Progressives should learn to be happy when good things happen!
|Matthew Yglesias||Dec 29, 2020||137||325|
With the relief bill squared away, the time is right to consider a question the Roosevelt Institute’s Mike Konczal asked the day after Christmas: why didn’t the success of enhanced Unemployment Insurance ever enter the narrative as a progressive success story?
Mike Konczal @rortybombUnemployment insurance expansion was a big victory for progressive priorities: social insurance, fighting labor fissuring, empowering workers, especially low-wage ones. It's also helping to fight a depression. Why isn't the Left rallying on its extension? https://t.co/Q6ochwcOhT
I think there are a lot of specific ingredients that went into this, some good and some not so good. But I also think those specifics came together the way they did because there’s a norm in American progressive politics of looking at every glass as half empty.
Basically, the understanding is that whoever can paint the darkest possible portrait of the status quo is the one who is showing the most commitment to the cause. And you see this norm at work across climate change, health care, criminal justice reform, the economy, and everything else. If you’re not saying the sky is falling, that shows you don’t really care. A true comrade in the struggle would deny that any progress has been made or insist that any good news is trivial.
I tend to think this approach to politics is counterproductive — it’s psychologically and emotionally exhausting, out of touch with people’s lived experience of the world, and ultimately demoralizing and un-motivating. But even if it does in some sense work, it’s simply not true.
Progressive catastrophism is everywhere
In my recent post “A better way to cure recessions,” I noted that the personal savings rate is up in the United States (down from its peak when everyone got their $1,200 but still well above the pre-pandemic baseline) and also that “unlike during the Great Recession, the 67 percent or so of the public who owns a home and the 55 percent of Americans who own stock have seen their net worth rise.”
In the very next paragraph, I acknowledged that this is happening “amidst stories about overwhelmed food banks from San Antonio to Miami and beyond” but I got a lot of blowback for pointing out that most people are doing okay as if that was a way of dismissing the suffering of the minority of people who’ve lost their jobs and are now in desperate need of relief.
Similarly, back in late May, I ran into accidental intra-office controversy by pitching a piece about how police killings of African-Americans had become less common since Ferguson. My thought was that this was good, it showed that political pressure for reform was delivering results. But it was heard by many people as dismissing the problem, or ignoring the lived experiences of people who’ve suffered at the hands of the police.
And of course you see this on climate change, which is legitimately A Bad Thing but where the most keyed-up activists want you to believe it’s literally an existential threat to continued human existence.
When Barack Obama first took office, his administration enacted a bunch of progressive legislation. Bouts of activist legislating normally generate a thermostatic backlash, and Obama’s was no exception. But he managed to end his term popular, and has remained popular since, and most of his legislative achievements remain on the books. Everyone — including Obama — concedes that these achievements were not perfect. But to actually celebrate them as big achievements worth clapping for and taking credit for would be to mark you out as very much not a true progressive.
So I think the left’s attitude toward CARES needs to be seen in that light. Do you judge the Affordable Care Act on how much it helped people compared to the status quo ante or on how far it diverged from a hypothetical perfect health care bill? I’d be inclined to say the former, but the conventional left approach is the latter.
The CARES Act was really good
So what was the CARES Act?
Well, it spent about $300 billion sending direct checks to most American households. It also sent $500 billion to the Fed to capitalize some lending programs targeting large businesses. The funds there overwhelmingly didn’t actually get spent, but their existence likely helped keep corporate borrowing costs low. The law provided an increase in SNAP benefits, more money for child nutrition programs, money for food banks, student loan relief, money for schools, money for mass transit agencies, etc. There was also the Paycheck Protection Program which essentially gave small businesses free money to keep their staff on payroll.
But another huge chunk of it was to set aside normal concerns about incentives and give people who lost their jobs $600 per week in extra Unemployment Insurance benefits, over and above what they would normally be eligible for.
There were a million viral tweets about the bozos in Congress somehow expecting people to subsist on $1,200, but that’s not what happened. The $1,200 was a nice little stimulus sent out to everyone with the expectation that most people would subsist the way they’d long been subsisting — by doing their jobs or perhaps by retiring on Social Security and savings. If you lost your job, you got $600 per week — in other words, $15/hour on a standard workweek — in addition to your normal Unemployment Insurance benefits.
This was a huge, albeit temporary, expansion of the social safety net. But instead of celebrating its success and calling for it to be extended and used as a model in the future, a lot of people on the left seemed committed to pretending that it never happened. Note, for example, that $2,000 Canadian dollars per month is a lot less than $600 American dollars per week.
This was a very successful program. So successful that personal income actually rose during the pandemic.
And that’s not a “rich get richer” kind of thing — the poverty rate fell. And it’s no surprise. Peter Ganong, Pacal Noel, and Joseph Vavra found that under the CARES superdole, “two-thirds of UI eligible workers can receive benefits which exceed lost earnings and one-fifth can receive benefits at least double lost earnings.”
Indeed, in wonk circles this was the conversation — were CARES benefits too generous? Which makes the lack of enthusiasm for telling the story of how these generous benefits were good all the more disappointing.
A model for the future
The pandemic is, of course, a very unusual situation.
Part of the idea of Unemployment Insurance is that even during perfectly “normal” times when the economy is in fine shape, there are always some businesses somewhere that are failing or laying workers off. Under those circumstances, a UI boost that leaves the unemployed with more money than they were making during employment would be genuinely a bit perverse.
But as University of Massachusetts economist Arindrajit Dube points out, the current benefits are very low and evince a combination of stinginess and paranoia that unemployed people will just deliberately lollygag.
Prof Dynarski @dynarskiI do wish that more of the people making policy decisions about unemployment checks had ever subsisted on them
One clear message of this pandemic should be that those fears are overstated. Even with the very generous superdole in place, people did go back to work as businesses reopened in the summer and fall. People know that UI doesn't last forever and prefer a decent job to not having a job at all.
We should scrap these weekly caps, noting with Elira Kuka that more generous UI schemes mitigate the health impacts of unemployment. But we should also make the benefit boosts an automatic thing that happens any time job openings rise. Ioana Marinescu’s research during the Great Recession confirmed that it’s true that generous UI reduces the intensity with which job-seekers seek employment opportunities, but she also finds that since there was no impact on the number of actual job openings, nothing about generous UI actually reduced employment. And as demand-side policy, Unemployment Insurance is a perfect mix of targeted (the people who get it don’t have jobs, so they really need the money to meet current spending needs) and universal (everyone who works is eligible for UI if they lose their job, which is a risk everyone faces).
There is also the longstanding thought in the literature (see Acemoglu & Shimer and Marimon & Ziblatti) that it’s good that UI makes workers less eager to jump at the first job available because it leads to better matching and higher productivity in the long run.
Now of course it’s true that the pandemic also revealed serious shortcomings in our benefits administration system and a lot of people had trouble getting help. But we shouldn’t let negativity bias lead us to overstate those problems. The numbers on personal income and poverty don’t lie — millions of people in need got help. We should view the program as a success to build on for the future. Upgrade the benefits administration (probably by nationalizing the system and taking it out of state hands), bump up the “normal” level of benefits, and make the superdole—the $600 per week increase in UI and stimulus checks—an automatic part of the national macroeconomic toolkit.
Many aspects of America’s pandemic response were a disaster, but poverty went down, which underscores that the welfare state is amazing and we should have more of it.
Nothing ever ends
In my real life, I am a kind of grumpy dyspeptic person. I’m not great at looking on the bright side, at seeing the silver lining, or about living in the now. I get very frustrated by setbacks, very upset when things don’t go the way I planned, and generally speaking am very impatient.
As with any other set of personal characteristics, there are good and bad sides to this sort of mentality, but mostly I want to convey that I really do appreciate the appeal of centering your thinking on an idealized end point and then complaining about all the ways that Obama or the CARES Act or whatever else fell short. After all, compare what I am saying we should do with UI and what CARES did with UI, and CARES looks terrible:
It did nothing to address the incredibly stingy base benefits in most states.
It had no automaticity so it expired awkwardly midway through the crisis.
It not only relied on our antiquated benefits administration system, it did nothing to improve it.
But it doesn’t make sense to do politics this way. One reason is because the model where you sketch out an idealized policy endpoint, then wage political combat, then win, then implement your vision just isn’t how anything actually happens. Not only was Social Security’s rollout bungled from a macroeconomic point of view (they started collecting taxes years before they collected benefits), it wasn’t until 20 years after the original Social Security Act’s passage that benefits were expanded to huge swathes of the population. Then it took 20 more years to get automatic cost of living adjustments. And the program still has some weird lacunae that leave out certain categories of state and local government workers, and doesn’t really meet the needs of the very elderly in an aging society.
Medicaid has been a policy triumph, but the initial program LBJ signed into law in 1965 was tiny compared to today’s Medicaid juggernaut that was largely the result of dogged work by Rep. Henry Waxman in the 1980s, some judicious interventions by the Clinton administration, and then the Obama-era expansion which lives on as a series of state-by-state fights.
The point is that politics is a process, and that’s especially true in a country like the United States that has a lot of institutional veto points. I won’t redo the entire slow boring of hard boards schtick, but the idea that past victories were single decisive battles won at unique moments in time is an illusion. Brown v Board of Education was the culmination of a 15-year litigation strategy that started with a law school case in 1938. But even though the NAACP won in court in 1954, real desegregation didn’t happen until the Civil Rights Act of 1964, which in turn built upon the Civil Rights Act of 1960 and its predecessor, the Civil Rights Act of 1957.
It would of course be absurd to be satisfied with any of those interim outcomes, whether on health care or retirement security or civil rights, and it’s just the same with Unemployment Insurance. But successful movements claim victories as victories, highlight the ways in which their victories have helped people and debunked critics’ fears, and move on to build the case for new things. Politicians who do the spadework of getting things done should be praised and not ignored, and while journalists should of course highlight shortcomings, we should also bring perspective to bear. We had more articles written about benefit administration problems than we did about the reduction in poverty — that doesn’t make sense journalistically and it’s not politically constructive.
CARES was really good; it’s really good that a form of enhanced benefits is being extended by the new bill; and while none of this has been perfect, it provides a real template for further improvements.