Does the US Spend Too Much on Police?

By Yuval Rosenberg

Unemployment Claims Top 42 Million

About 1.9 million people filed for unemployment benefits
last week, the Department of Labor
announced Thursday, bringing the total for initial
claims over the last 11 weeks to 42.6 million.

Continuing claims rose by 649,000 over the previous week,
for a total of 21.5 million. Adding independent contractors, the
number of people receiving unemployment benefits comes to roughly
30 million.

The good news: Initial jobless claims for state
benefits continue to fall. Torsten Slok, chief economist at
Deutsche Bank Securities,
said the job market appears to have bottomed out
and is “crawling out of the hole now,” adding that we “have the
worst behind us.”

Earlier this week, Mark Zandi, chief economist at Moody’s
Analytics,
said he thinks the coronavirus recession is
technically over, with growth resuming this month. “This Covid
recession will go down as the shortest and arguably the most severe
in history,” Zandi
told The Washington Post.

The bad news: The unemployment numbers are still
shockingly high, and the economy is in bad shape by any measure.
“Even as states reopen, claims in the millions are an indicator
that the economic pain of the Covid-19 crisis is still acute,”
Daniel Zhao, senior economist at Glassdoor, told
CNBC.

Recovery is expected to be slow and painful. Economist Ed
Yardeni said Thursday in a note to clients that he expects it to
take more than two years to recover all of the lost jobs, with a
return to the February 2020 employment peak not coming until
October 2022.

The even worse news: The official unemployment numbers
are almost certainly underestimating the damage.

In addition to the state unemployment filings, there were about
623,000 newly reported claims from independent contractors, who are
eligible to receive federal aid temporarily under the Pandemic
Unemployment Assistance program. But at least half a million
filings for pandemic relief payments have yet to show up in the
official data,

Bloomberg
reported Thursday, due to lags in the system. And
the weekly unemployment reports tell us nothing about the people
who may still be working but are earning far less than they were
just a few months ago.

Up next: On Friday the Labor
Department will release its employment numbers for May. Economists
surveyed by Dow Jones project 8.3 million job losses and an
unemployment rate of 20.5%.

GOP Rethinks Opposition to Unemployment Benefits

The $600-per-week boost for unemployment benefits that
Congress passed in March expires at the end of July, and
Republicans have vowed not to renew it, saying the payments are too
generous and encourage workers to stay at home.

The Congressional Budget Office said in a
report Thursday that extending the $600 payments
for six more months would increase unemployment, as five out of six
workers would receive more in benefits than they would earn on the
job.

But as the severity of the unemployment situation for millions
of Americans becomes increasingly clear — and likely to linger
through the election — some GOP lawmakers reportedly are having
second thoughts about simply letting the program expire.

According to
The Hill, a growing number of Republican senators
are discussing an extension of the extra unemployment benefits past
July, though at a lower level. A federally funded back-to-work
bonus of $450 is also on the table, part of an effort to ensure
that workers are encouraged to return to their jobs.

The recent protests over police violence and racism are also
playing a role in changing minds among Republicans, who are worried
about maintaining their control of the Senate. “I don’t think we
can ignore the fact that this civil unrest is happening against a
backdrop of 20-plus percent unemployment,” said Sen. Josh Hawley
(R-MO).

Whatever form the additional aid takes, it’s becoming clear to
Republicans that Congress will have to provide help to the
unemployed for some time beyond July, stretching perhaps to the end
of the year. “I’m very open-minded about how to supplement
unemployment benefits,” said Sen. Lindsey Graham (R-SC), one of the
most outspoken critics of the $600 unemployment
payments.  

The Senate announced Wednesday that it will hold a hearing
next week on how to handle unemployment benefits in the next and
perhaps final coronavirus relief bill.

Chart of the Day: Rising Spending on Law and Order

The Washington Post’s Christopher Ingraham writes that,
in the wake of protests over George Floyd’s death, tensions over
funding differences for
police departments and social services lie at the
heart of many calls for police reform.

New York City Comptroller Scott Stringer, for example, is
calling for a $1.1 billion cut in NYPD spending over the next four
years, with the money going “toward vulnerable communities most
impacted by police violence and structural racism.” Similarly, the
Los Angeles Police Department budget could be cut by $100 million
to $150 million as part of a plan by Democratic Mayor Eric Garcetti
to reinvest $250 million in communities of color, the L.A. Times

reports.

To illustrate the nationwide divergence between funding for law
and order and that for cash welfare, Ingraham highlights a
statistic, detailed in the chart below, pulled from the work of
liberal Berkeley economists Emmanuel Saez and Gabriel Zucman: The
United States spends more than twice as much on police, prisons and
the courts as it does on food stamps, Temporary Assistance for
Needy Families and supplemental Social Security.

That wasn’t always case, Ingraham explains:

“Up until about 1980, American governments spent roughly the
same amount on criminal justice and cash welfare: a little over 1
percent of total national income for each. But those trend lines
have steadily diverged ever since: Welfare spending has been on a
long, uneven decline, while law and order spending ballooned almost
unabated until about 2010, when it amounted to nearly 2.5 percent
of national income. Since then, law and order spending has fallen
to a hair under 2 percent, while welfare spending stands at about
0.8 percent of national income. …
“Taken together, the two lines trace a dramatic shift in
national priorities. We funneled money away from poverty prevention
to beef up our response to one of
poverty’s biggest consequences: crime. We now
treat the symptoms rather than the underlying disease.”

The protests and debates now roiling the nation might change
that balance, as they’ll likely color the budget choices made by
cities, states and the federal government.


Read the full story at The Washington Post.

Senate Passes PPP Changes Providing More Flexibility

The Senate on Wednesday evening passed a bill modifying
the Paycheck Protection Program of forgivable coronavirus relief
loans to small businesses. The bill, which sailed through the House
last week in a 417-1 vote, now goes to President Trump’s desk for
his signature.

Among its provisions, the new Paycheck Protection Program
Flexibility Act extends from eight weeks to 24 weeks the period
that small businesses have to spend their emergency funds while
still qualifying to have their loans forgiven. It also provides
more flexibility in how the loans can be used, lowering the minimum
percentage required to be spent on payroll from 75% to 60%. See
more details
here.

An earlier snag: Republican Sen. Ron Johnson of Wisconsin
had objected to an earlier effort Wednesday to pass the bill by
unanimous consent, but he reportedly agreed to the evening vote
after getting a letter entered into the record clarifying that an
extension of the loan program to the end of December would only
lengthen the deadline for business owners to spend their funds, not
the application deadline.

“We don't want to see this program automatically reauthorized
until the end of December,” Johnson said, according to
Roll Call. “Now there's some dispute as to whether
the language actually does that. Sounds like the intent was not to
do that, it was just to allow people to spend money through the end
of December, which we have no problem with.”

Sens. Marco Rubio (R-FL) and Susan Collins (R-ME) will
still be pursuing technical fixes to the program.

Two Former CBO Directors on Covid-19 Response and the National
Debt

A pair of former Congressional Budget Office directors
testified Wednesday before the House Budget Committee at a
hearing on the economic impact of the Covid-19
pandemic.

Douglas Elmendorf, who led the CBO from 2009 to 2015 and
is now dean of the Harvard Kennedy School and, urged Congress to
learn from the response to the Great Recession: "The premature
tightening of federal fiscal policy in 2011 was a significant
mistake of economic policy. I hope that policymakers do not make
the same mistake again," he said, adding that, as Congress
considers another coronavirus relief package, “more than $1
trillion of additional fiscal support is warranted,” with fiscal
help needed until at least 2022.

Elmendorf also said that exceptionally low interest rates give
the government room to take on more debt. “We will ultimately need
to raise taxes and reduce spending substantially,” he said. “But we
can wait to do that until we have rebuilt a vibrant economy with
full employment.”

Douglas Holtz-Eakin, the CBO director from 2003 to 2005
who is now president of the American Action Forum, similarly said
that the aggressive response by Congress and the corresponding
large increase in the deficit was necessary and appropriate — but
that lawmakers would need to pay attention to the debt going
forward.

"There is now a large amount of debt, and the minimum thing that
a country has to do is to stabilize its debt relative to GDP. This
country has not done that in the 21st century," he said. “It now is
faced with doing that in the aftermath of this crisis with a much
higher level of debt. I encourage members to focus on that task in
the years to come.”

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