Bernanke, Yellen and More Than 140 Top Economists Call for Massive New Coronavirus Relief Bill
A group of more than 140 top economists, including former Federal Reserve chairs Ben Bernanke and Janet Yellen as well as Nobel laureates and former chairs of the Council of Economic Advisers, is calling on Congress to pass another aggressive coronavirus relief package.
"Congress must pass another economic recovery package before most of the support in the CARES Act expires this summer," the economists write in a letter to congressional leaders published Tuesday by the Washington Center for Equitable Growth, a think-tank focused on inequality.
"Given current projections of economic need, this new bill should provide, at a minimum, continued support for the unemployed, new assistance to states and localities, investments in programs that preserve the employer-employee relationship, and additional aid to stabilize aggregate demand. While the signers of this letter have different views on the optimal size and composition of the package, we all agree that an adequate response must be large, commensurate with the nearly $16 trillion nominal output gap our economy faces over the next decade, according to CBO estimates."
Besides Bernanke and Yellen, other notable signatories include Jason Furman, Austan Goolsbee and Christina Romer, who led the Council of Economic Advisers under President Obama; Martin Neil Baily, who headed the council under President Clinton; Alan Blinder and Donald Kohn, who were vice chairs of the Fed; and economists Heather Boushey, J. Bradford DeLong, Emmanuel Saez, Robert Solow and Cecilia Rouse.
The economists warn that, absent further congressional action, "state and local governments face potentially disastrous budget shortfalls" and the unemployment rate is projected to stay in double-digit territory through the end of the year. And, they say, lawmakers should try to learn from the response to the 2008-2009 recession:
"Insufficiently bold congressional policy responses to the Great Recession unnecessarily prolonged suffering and stunted economic growth. Congress should not make this mistake again. … Congress should address this risk, and the already occurring economic damage, by passing, as soon as possible, a multifaceted relief bill of a magnitude commensurate with the challenges our economy faces."
Conservatives say it’s time to stop spending on coronavirus relief: The economists’ statement comes on the same day that a group of 20 conservative leaders, some with close ties to the White House, urged President Trump and Senate Majority Leader Mitch McConnell to stop deficit spending on coronavirus relief.
"Government spending – and policies such as paying millions of workers more money to stay unemployed than to go back to work, and paying states more money to enable them to stay shut down – is inhibiting the fast recovery we want in jobs and incomes, not stimulating it," the conservatives wrote in a letter. "In short, runaway government spending is the new virus afflicting out [sic] economy."
The conservatives, including economists Stephen Moore and Arthur Laffer, anti-tax activist Grover Norquist and Tea Party Patriots co-founder Jenny Beth Martin, write that a repeal of the payroll tax would be "the best way to supercharge the economy." President Trump has pushed for a payroll tax holiday, though the idea has met with resistance from lawmakers in both parties.
Congress and the administration have provided $4 trillion in emergency coronavirus relief so far. Both Trump and McConnell have indicated that another round of pandemic legislation is likely, though lawmakers are still debating the proper size and scope of an additional package. White House trade adviser Peter Navarro told cable news networks in recent days that Trump wants the next bill to be "at least $2 trillion." Formal negotiations on the next bill are expected to begin next month.
Quote of the Day: Powell on the Recovery
"[T]he levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery. Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it. Until the public is confident that the disease is contained, a full recovery is unlikely."
– Federal Reserve Chair Jerome Powell, in semiannual testimony before Congress on Tuesday. Powell also said that the pandemic-driven downturn could widen economic inequality. "The burden of the downturn has not fallen equally on all Americans," he said. "Instead, those least able to withstand the downturn have been affected most."
Coronavirus Spending Will Add $2.4 Trillion to Deficit: CBO
The four pieces of legislation Congress passed in March and April to provide relief and stimulus during the coronavirus pandemic will add about $2.4 trillion to the deficit, the Congressional Budget Office said Tuesday.
The CARES Act — which provided $1,200 relief checks for many adults, enhanced unemployment benefits of $600 a week and billions in forgivable loans for small businesses, among other things — accounts for most of the deficit spending, roughly $1.7 trillion. The recent extension of the small business loan program will add another $483 billion, CBO said.
Two earlier bills, which focused on assisting health care providers and funding the medical response and further research, will increase the deficit by about $200 billion.
Paycheck Protection Program Saved 16 Million Jobs: Moody’s
The Paycheck Protection Program of loans to small businesses has safeguarded about 16 million jobs, or about 10% of the pre-pandemic U.S. labor force, according to a new analysis by Moody’s Analytics.
Moody’s Analytics economist Bernard Yaros says the program, which has seen more than $500 billion in forgivable loans approved to more than 4.5 million businesses, likely fueled the surprising gains seen in the government’s May labor market report, potentially contributing between 9.2 million and 10.9 million jobs. And the PPP gains could continue this month.
"A couple of million more jobs could show up in the June employment report thanks to residual PPP-induced rehiring," Yaros said in a statement. "However, as small businesses that were the first to receive their loans in the first half of April exhaust their PPP funds by mid-June, as many as 4.5 million jobs that were rehired thanks to PPP could be at risk of layoffs."
Trump Signs Executive Order on Police Reform, Calls for More Funding
President Trump signed an executive order Tuesday to encourage changes in policing nationwide, including a ban on chokeholds except when an officer’s life is at risk. The order would also create a national database of excessive force complaints, and it seeks to use the allocation of federal grant money to drive police departments to meet certain credentialing standards regarding use-of-force and de-escalation. Trump lauded law enforcement at the signing event and rejected calls to "defund" the police. "In many cases local law enforcement is underfunded, understaffed and undersupported," he said.
Trump’s order "will have little immediate impact," The New York Times reports, "and does not address calls from activists and protesters nationwide for broader action and a new focus on racism."
National Health Spending Plunged 24% in April Compared With 2019
As the coronavirus pandemic spread and much normal activity was halted, national health spending in April fell by 24.3% compared to the previous April, according to an analysis by consulting firm Altarum. Health spending in April was $2.88 trillion (seasonally adjusted annual rate), down from $3.57 trillion in March and $3.8 trillion in April 2019.
"While March 2020 exhibited the only previous occurrence in our historical time series (which goes back to 1989) of a monthly decline from the previous year, the April reading dwarfs the March value," the report says.
Spending on hospitals and doctors fell by more than 40%, reaching the lowest monthly levels in more than a decade. Spending on dental services, meanwhile, fell by more than 60% year over year.
The only health care areas to see increased spending were nursing home care and prescription drugs, which rose 6.3% and 5.1%, respectively. Altarum’s analysts say that, with the economy starting to reopen in May, they expect to see the declines in spending reverse.
HHS Sent $50 Billion to Health Care Companies Accused of Fraud: Report
The Department of Health and Human Services gave more than $50 billion in loans and grants to health care companies accused of bilking taxpayers by inflating Medicare or Medicaid expenses, Bloomberg News reports:
"Companies that settled cases involving overbilling or fraud -- among them Tenet Healthcare Corp., Universal Health Services Inc. and Beaumont Health -- received more than $36 billion in interest-free loans from a U.S. Health and Human Services Department program to help providers handle cash-flow shortages caused by the pandemic, according to data compiled by Bloomberg and Good Jobs First, a watchdog group that has been monitoring federal relief payments.
"That’s more than one-third of the $100 billion distributed through the loan program. In addition, companies accused of wrongdoing got more than $20 billion in grants issued by HHS to stave off coronavirus-related losses. In most of the cases, there was no determination of liability."
Read more at Bloomberg.
The $2,315 Coronavirus Test
In April, an otherwise ordinary medical test facility outside of Dallas, Texas, was charging unusually high prices for coronavirus tests, with some patients receiving bills of $2,315 for a single procedure. Many major labs charge about $100 for the same analysis.
While the lab has since said that the pricing — which was applied to more than 100 tests, with 23 of those being paid in full — was the result of "human error" and dropped its standard fee to a still-high $500, Sarah Kliff of The New York Times says that such shockingly high charges are not unusual in the U.S. due to one simple factor: the lack of government regulation in health care pricing.
That lack of regulation produces two outcomes that crop up again and again in the health care system, Kliff says. The first is that prices tend to be much higher for all kinds of procedures in the U.S. than in other wealthy countries. The second is that there is massive variation in prices between providers. (Kliff cites one study that found prices in California for a basic appendectomy ranging from $1,529 to $182,955.)
Currently, the data show considerable variation in prices for coronavirus tests — though it’s hard to be sure how much is actually being paid, since much of the payment information is private. What is clear is that all of the tests are basically the same, even though some individuals and insurers are paying much more than others. "There is little evidence that higher prices correlate with better care," Kliff says. "What’s different about the more expensive providers is that they’ve set higher prices for their services."
Poll of the Day: Americans Unhappier Than They’ve Been in Decades
Americans are unhappier than they have been in almost 50 years, according to a new report from the National Opinion Research Center (NORC) at the University of Chicago.
Using public opinion data from the General Social Survey, the report finds that only 14% of American adults describe themselves as being very happy, an all-time low for the survey since the question was first asked in 1972. (The number of Americans who say they are "pretty happy," the orange line in the chart below, has taken a sharp turn higher.)
At the same time, an all-time high of 80% report that they are satisfied with their family’s financial situation. Yet optimism for the future also reached a decades-long low, with 43% of Americans believing that the children will grow up to enjoy a better standard of living than they do, down sharply from 57% in 2018.
Interviews for the study were conducted in May. The survey was completed by 2,279 adults and has a margin of error of 2.9 percentage points.
- There Isn’t a Coronavirus ‘Second Wave’ – Mike Pence, Wall Street Journal
- What a Successful Economic Recovery Plan Must Look Like – Jason Furman, Timothy Geithner, Glenn Hubbard and Melissa S. Kearney, Washington Post
- It Didn’t Have to Be Like This – Adam Serwer, Atlantic
- For Once, Give Congress Some Credit – Bloomberg Editorial Board
- What Has the Trump Administration Done With a Half-Trillion Dollars? – Catherine Rampell, Washington Post
- The Tax Rule That Inspired Billionaires and Movie Stars to Back Climate Moonshots – Ben Steverman, Bloomberg
- Don’t Just Save the Postal Service. Reinvent It – Jason Linkins, New Republic
- Why the Pandemic Has Energized Hospital Unions – Stephanie Goldberg, Modern Healthcare
We Must Let Competition Flourish for the Sake of Both Drug Innovation and Affordability – Matthew Lane, Morning Consult