Mass unemployment is a policy choice. We must choose differently.
Not since the Great Depression has the United States seen such high levels of unemployment. We lost 20.5 million jobs during the last month alone. One in 4 working Americans are now either unemployed or have given up looking for a job — and these numbers are only projected to continue rising.
Our response must meet the scale of this crisis. So far, Congress passed three significant relief packages in just over a month to secure American jobs and provide lifelines to businesses across our country. But if the goal is to stop mass unemployment, we must admit that we have not accomplished what we hoped.
The primary program designed to assist small businesses, the Paycheck Protection Program, has suffered from poor implementation as many large businesses took advantage of the program and banks put favored customers at the head of the queue. This occurred while minority-owned businesses disproportionately struggled to access capital. The writing is on the wall: Many businesses will have to choose between shuttering permanently and ignoring public health guidance by reopening before it is safe. Neither is acceptable.
We must think bigger. We are sponsoring the Paycheck Guarantee Act, which offers workers as well as businesses, nonprofits and local governments of all sizes a better path forward in this uncertain environment. It ends mass layoffs, keeps workers in their jobs and connected to their health care,and prevents employers from being forced to close permanently. Many other countries — from Germany to Singapore and South Korea — have implemented similar programs to guarantee paychecks to workers and help employers weather the crisis.
Here’s how it would work: After employers file a sworn statement with the IRS on the amount of revenue lost due to covid-19, the IRS would use 2019 tax filings to calculate a grant that totals the percentage of revenue loss multiplied by payroll and benefits for workers up to a salary cap of $90,000. Businesses would also receive an additional 25 percent to cover operating costs, such as rent, so they don’t close permanently.
Rather than relying on preexisting banking connections that too often leave out small and minority-owned businesses, the bill would facilitate payments straight from the IRS to the employer. Every employer, regardless of size, would be eligible because every business deserves an equal chance at survival regardless of whether they have lobbyists and connections to big banks.
The bill would also allow employers to rehire workers laid off or furloughed after March 1, immediately shrinking the unemployment rolls. It would be renewable on a monthly basis, scaleable to revenue loss, until key economic triggers are met. To prevent employers from gaming the system, the bill includes strong worker protections and fraud prevention measures to ensure quick implementation and oversight.
A new analysis by Mark Zandi, chief economist at Moody’s Analytics, shows that such an approach is not only good policy but also also remarkably cost-effective. Zandi estimates that more than 36 million workers would benefit from this program and that the net costs of the program — accounting for savings of not paying extended unemployment insurance, Medicaid and other programs — would be $654 billion over six months. That puts the cost of this program at less than what Congress appropriated for the two rounds of loans from the Paycheck Protection Program, which has not been able to stem the tide of job losses.
Our goal must be nothing less than stopping the steep rise in unemployment and protecting the paychecks of all workers; the alternative would risk not only our economy but also our future, creating enormous devastation for workers and businesses alike and substantially slowing our recovery and competitiveness. Equally important to beating the virus is keeping people home until we have extensive testing and contact tracing in place to prevent more deaths and spread of the virus. But if we are to do that, then we must fully relieve the economic pressure that businesses and workers are reeling from right now. An unprecedented crisis is no time for half-measures.
The Paycheck Guarantee Act is a clear, simple and streamlined solution that matches the scale of the crisis. That’s why the plan is a top priority not only for dozens of members of Congress but also for Nobel-Prize-winning economists, former Federal Reserve chairs and vice presidents, business owners, labor leaders and major national groups across the country. It doesn’t allow the big banks or the federal government to pick winners and losers among businesses or industries, but rather, provides the same job-saving protection to all.
Every day that passes without the kind of relief offered by the Paycheck Guarantee Act means another round of layoffs, another small business shuttered and another family devastated. There is no time to waste. Congress should include the Paycheck Guarantee Act in its next relief package.
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