How the Coronavirus Could Damage Social Security

Plus, another 4.4 million jobs lost

House Passes $484 Billion Coronavirus Aid Package

The House just passed the $484 billion pandemic relief package, providing an additional $310 billion for the Paycheck Protection Program for small businesses as well as additional money for hospitals and virus testing.

The vote, 388-5, stretched on for more than an hour as members, most of whom wore masks while not speaking during floor debate, took turns voting in alphabetical order.

The no votes: Republicans Andy Biggs (AZ), Ken Buck (CO), Jody Hice (GA), Thomas Massie (KY) and Democrat Alexandria Ocasio-Cortez (NY). Rep. Justin Amash (I-MI) voted present.

A new committee to oversee the federal coronavirus response: The House also voted to establish a select committee to oversee the Trump administration’s implementation of the nearly $3 trillion in coronavirus relief provided by Congress. The new panel, to be led by House Majority Whip James Clyburn (D-SC), will include seven Democrats and five Republicans.

The vote approving the committee was 212-182, along party lines.

Republicans objected to the committee, saying it’s meant to generate political attacks against President Trump and redundant given that existing committees have jurisdiction over the pandemic response. But Democrats said that the trillions of dollars in emergency funding merited dedicated oversight.

“The committee will root out waste, fraud and abuse,” House Speaker Nancy Pelosi said Thursday. “It will be laser-focused on ensuring that taxpayer money goes to workers, paychecks and benefits. And it will ensure that the federal response is based on the best possible science and guided by health experts, and that the money invested is not being exploited by profiteers and price gougers.”

Cracking Down on Small Business Loans

Stung by criticism over large companies receiving federal assistance through a program targeting small businesses — including publicly traded firms that have access to alternative sources of financing — the Small Business Administration issued new guidelines for the Paycheck Protection Program Thursday.

Companies applying for loans through the SBA-administered program now must certify that they truly need the aid and have no other way to get the money.

“Borrowers still must certify in good faith that their PPP loan request is necessary,” the SBA said. “It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”

The SBA also said that the guidelines were retroactive, and that companies can return the loans they already received, no questions asked. “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith,” the SBA said.

The PPP exhausted its initial $350 in funding in less than two weeks, before millions of small business owners could apply. The latest funding package will provide another $310 billion in additional funds — an amount that is expected to be claimed in a matter of days.

Another 4 Million Jobs Lost, Lifting Total to 26 Million Over Five Weeks

The coronavirus pandemic continues to crush the labor market, as more than 4.4 million Americans filed new claims for jobless benefits last week, according to seasonally adjusted data released by the government on Thursday.

The latest report, which covers the week ending April 18, brings the total number of jobs lost over the past five weeks to 26.4 million, more than were added in the years since the Great Recession. Even without the Labor Department’s adjustments to even out seasonal changes, 24.4 million workers applied for benefits over the five-week span. Nearly one in six American workers has lost a job in the coronavirus shutdown.

“For comparison, in the period before the coronavirus hit, just over a million workers would apply for UI in a typical five-week span, and in the worst five-week stretch of the Great Recession, it was less than four million,” Heidi Shierholz of the Economic Policy Institute says.

A slow downward trend: The latest figures represent a decline from the previous three weeks. “A bit less awful,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note. “Another horrendous number, but at least the trajectory is clearly downwards.”

Shepherdson expects claims to decline again next week, but notes that the pace of “file for unemployment” searches on Google means that it may still be several more weeks before new filings drop below 1 million — a level that would still be far higher than the 665,000 claims filed in the single worst week after the 2008 financial crisis.

These numbers still understate the true toll: Millions of workers affected by the pandemic still haven’t been able to apply for unemployment benefits.

An unemployment rate approaching 20%: Economists expect the unemployment rate for April will climb to between 15% and 20%, or possibly even higher. “All else equal, job losses of this magnitude would translate into an unemployment rate of 18.3%,” Shierholz writes. “However, the official unemployment rate, when it is released, will likely not reflect all coronavirus-related layoffs. This is due to the fact that jobless workers are only counted as unemployed if they are actively seeking work. That means many workers who lose their job as a result of the virus will be counted as dropping out of the labor force instead of as unemployed, because they are unable to search for work due to the lockdown.”



The squeeze on state budgets: A new analysis by researchers at the Urban Institute estimates that an unemployment rate averaging 12% over one year would mean a $340 billion revenue decline for states and a $385 billion shortfall in state budgets, even without factoring in the direct pandemic-related costs states face. “Medicaid enrollment will grow at the same time that tax revenues are falling, putting the squeeze on state budgets,” said Kathy Hempstead, senior policy adviser at the Robert Wood Johnson Foundation. The researchers say that increasing the federal matching rate for Medicaid and the Children's Health Insurance Program would ease fiscal pressure on states, and that linking that financial support for health programs to unemployment rates would increase health coverage and give states greater budgetary certainty.

Quote of the Day: 'One of the Really Dumb Ideas'

“This is one of the really dumb ideas of all time. … I don’t believe they want to fund state and local governments, and not to fund state and local governments is incredibly short-sighted. They want to fund small business, fund the airlines, I understand that, but state and local government funds police and fire and teachers and schools. How do you not fund police and fire and teachers and schools in the midst of this crisis?”

New York Gov. Andrew Cuomo, responding during his daily press briefing to Senate Majority Leader Mitch McConnell’s comments in favor of allowing states to declare bankruptcy rather than receive federal bailouts.

Politico reports that McConnell’s allies say the Republican leader “is, broadly speaking, representing a Senate Republican Conference that’s bone tired of spending, and beginning to gain religion again on the ballooning federal budget deficit. … But it’s increasingly clear that resisting assistance for state capitals is going to be difficult, as it has quickly become a priority on both sides of the aisle in state capitals like Albany and Annapolis, and in Washington itself.”

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How the Coronavirus Could Damage Social Security

The trustees for Social Security say the program’s long-term outlook for hasn’t changed much in the last year — but that’s ignoring any potential negative effects from the coronavirus.

The latest report from the Social Security trustees was released Wednesday. Same as last year, the trustees calculated that the two Social Security trust funds are fully funded for another 14 years.

Separately, the Old-Age & Survivors Insurance trust fund will be depleted in 2034, while the Disability Insurance trust fund will last until 2065. Once the old-age trust fund is exhausted, the retirement program will be able to pay 76% of scheduled benefits, while the disability program will be able to pay 92% its benefits when its trust fund runs dry.

Over a longer time horizon — and assuming no changes are made on either the revenue or payment sides — the funding levels deteriorate. Taking the two trust funds together, roughly 91% of the costs are funded over 25 years, 85% over 50 years, and 82% over 75 years.

The trustees also said that the Medicare trust fund for hospital care is fully funded until 2026, the same as in last year’s analysis.

Coronavirus changes the picture: The trustees report comes with a warning: “The projections and analysis in these reports do not reflect the potential effects of the COVID-19 pandemic on the Social Security and Medicare programs. Given the uncertainty associated with these impacts, the Trustees believe that it is not possible to adjust their estimates accurately at this time.”

A Trump administration official told The Wall Street Journal’s Kate Davidson that the pandemic will likely darken the outlook. “The actual status of the program in the near term is almost certainly somewhat less favorable than is presented in this year’s trustees’ report,” the official said. “It’s clear that employment, earned income and payroll-tax revenue will be significantly affected, and lower for at least a portion of 2020 than estimated for the report. Additional claims for retirement, disability and survivors’ benefits might increase costs.”

Nancy Altman, president of Social Security Works, agrees that the coronavirus crisis will change the outlook, but not by much. “Even with what’s going on in the economy now, with such a large reserve the benefits will keep being paid and continued through the 2030s,” she told MarketWatch.

A new analysis from the Bipartisan Policy Center comes to a more pessimistic conclusion. If the current recession is similar to the downturn in 2007-2009, the retirement trust fund could run dry by 2028 and the disability trust fund could be tapped by 2024. “These projections reflect a substantial further deterioration in the finances of a program that was already facing a large mismatch between income and outlays, making the need for action by policy makers even more urgent,” the BPC report says.

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