Watch Schumer speaking a few hours ago on the Senate floor. If he’s telling the truth, he and the White House sound close to a deal that would put the federal government on the hook for as much as four months’ wages for American workers — provided that their businesses keep them on staff. Why? Watch, then read on.
SCHUMER on coronavirus emergency plan he’s negotiating: If you lose your job, you can be furloughed by your employer. That means you can keep employer-provided benefits, but the federal govt will pay four salary for 4 months pic.twitter.com/0lfAVWRw4b
— Aaron Rupar (@atrupar) March 24, 2020
The idea of the government paying wages was touted by Tucker Carlson last week on Fox as a superior alternative to Mitt Romney’s plan to just cut everyone a check for $1,000 or whatever. That’s well-meaning, said Carlson, but foolish. For one thing, it’s too meager; few of us suddenly deprived of a salary could get by each month on a thousand bucks plus unemployment. But it’s also short-sighted with respect to a critical problem: Continuity. We don’t want American workers being forced to scatter to the winds amid an economic “freeze” that’ll last a few months. We want them in place, still with their old employers, ready to hit the ground running once social distancing can be responsibly relaxed.
The German solution, which Carlson extolled, is to have businesses retain their employees during a crisis and simply reduce their hours. The government would then step in and pay the wages for those missing hours. That way the business remains intact and employees continue to get the money they need to survive. Once the crisis lifts, everyone can go right back to work. Denmark has an even more generous variation of that plan, in which 75 percent of a worker’s wages (up to a certain limit) would be covered by the government irrespective of whether they work or not. A Danish professor described it to the Atlantic:
In the German plan, the government and the employer share the cost of paying for work. Here, the government is paying companies for employees who are going home and not working. These workers are being paid a wage to do nothing. The government is saying: Lots of people are suddenly in danger of being fired. But if we have firing rounds, it will be very difficult to adapt later. This way, the company maintains their workforce under the crisis and people maintain their salaries. You are compensating people even though they have to go home.
It’s unemployment insurance plus job continuity, essentially. Britain is doing something similar, covering 80 percent of wages up to $2,900 per month. Just as most developed countries now agree on the proper strategy for mitigating the virus — aggressive social distancing to flatten the curve — there’s a consensus strategy developing on how to handle the “economic freeze” problem. Keep everyone on the job. Pay them until we’re ready to roll. Sounds like the Senate bill, with Steve Mnuchin’s cooperation, will look like that too.
There’s an added benefit to the scheme, though, which is where it gets interesting politically. The Danish professor flagged it in the Atlantic interview:
The important thing to remember is that our health system must be able to treat those who need treatment. If the virus spreads in Denmark as fast as it has in some regions in Italy and Spain, our health system will have no capacity. But by [slowing] the spread of the virus, our health system will have the capacity to treat those with the disease. That’s the health strategy. It’s not on my table, but it’s part of the overall strategy of government.
If we need to keep the lockdown for a longer period of time, we may rethink our plan and come up with new initiatives. But it’s important to say that we will do more.
Guaranteeing four months’ salary up front will make it much easier for people to comply with mass social distancing measures. Give folks a $1,000 check one time, or once a month, and the economic pressure on local authorities to follow Trump’s lead in sending everyone back to work prematurely will be intense. Someone who can’t feed themselves on scant government benefits, and who’s terrified that they’ll be out of work for months once the lockdowns lift, will naturally be frantic for “normalcy” to resume — even though it wouldn’t remain normal for long once the virus starts spreading again. But someone who’s able to make ends meet for a few months via more generous government assistance, and who knows that their job is waiting for them once a semblance of normalcy returns, won’t be as frantic. They’ll be more willing to stay put at home. Which means sustained lockdowns in the name of flattening the curve can continue for much longer.
Which … is a bad thing as far as Trump’s concerned, right? He wants everyone back to work by Easter. If Schumer’s version of the bill makes it past the Senate and then ends up earning support in the House, Trump will come under heavy pressure to sign it and get the money out the door. But if he signs it, he’s giving away a huge amount of political leverage to implement his “back to work” plan. The economic incentives to end the lockdowns quickly would diminish considerably. The human toll from economic pain that he keeps mentioning, starting with suicides, would also diminish if people know their income is assured and that there’ll be a job waiting for them when this ends. So what’s left of the “get back to work” push if he signs it? It would make no sense to take a bow for guaranteeing people four months’ of income this week and then turn around next week and say, “Okay, let’s start working again.” This is the sort of bill you sign if you’re fully committed to lockdowns, potentially for a few months, to reduce the spread of contagion. Not if you’re already fidgety about a frozen economy.
Are Mnuchin and Trump even on the same page? Or, possibly, does Mnuchin know that the “get back to work” thing is going nowhere and is wisely preparing for that eventuality by working on a generous income replacement plan now?