The Pandemic Recession Is Approaching a Dire Turning Point

Utah Food Bank volunteers assemble bags of food to be delivered to waiting cars at the food bank's mobile food pantry Wednesday, Aug. 12, 2020, in Salt Lake City, during the coronavirus pandemic.

Utah Food Bank volunteers assemble bags of food to be delivered to waiting cars at the food bank's mobile food pantry Wednesday, Aug. 12, 2020, in Salt Lake City, during the coronavirus pandemic. AP Photo/Rick Bowmer

 

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Without an extra $600 a week in unemployment assistance, many Americans are on the brink of not being able to pay rent or put food on the table.

Americans are five months deep in a historic economic crisis. From February to April, the country’s unemployment rate shot up from under 4 percent to nearly 15 percent. It has since declined to roughly 10 percent—about what it was at its peak during the Great Recession.

In response to that turmoil, the government spent $2 trillion via legislation called the CARES Act to support American people and businesses. The act provided households with crucial financial help for several months, notably in the form of an extra $600 in unemployment assistance a week. But that help was cut off last month, and without additional support, American families face “a looming hunger crisis and a looming eviction crisis,” Lawrence Katz, an economist at Harvard, told me.

[Read: The second Great Depression]

“No national economic shock or downturn in the U.S. has ever happened as fast as this one,” Katz said. “We had increases in unemployment [over the course of] two months that took two years in the Great Depression.” That was the last time the unemployment rate was higher than 15 percent. (At the height of the Depression, it reached 25 percent.)

What carried many American households through the Depression, Katz told me, was “a lot of direct relief” from the government—“things like the Works Progress Administration and the Civilian Conservation Corps, where we directly used the federal government to hire people.” The Great Depression was also when the government, by passing the Social Security Act in 1935, helped establish the unemployment-insurance safety net that the U.S. still has today. In 2020, Katz said, “a huge advantage we have relative to the Great Depression … [is] the existence of an unemployment-insurance system where we were able to get over 30 million workers quick support.”

The current crisis spurred some important modifications to that system. In addition to dispensing the extra $600 a week, the CARES Act, signed into law in late March, ordered a one-time stimulus of $1,200 to most American households (plus $500 a child) and allowed a larger pool of people, including self-employed and gig workers, to qualify for receiving benefits.

This much-needed support was working. “By and large, the CARES Act, between the [$1,200] economic-impact payments and the unemployment [supplement], in particular at the family level, did a lot of heavy lifting toward keeping material hardship and poverty at bay,” Beth Mattingly, an assistant vice president in regional and community outreach at the Federal Reserve Bank of Boston, says. One man in Pennsylvania told The New York Times, “That extra $600 is what’s been keeping us alive.”

But then the support stopped. The additional $600 of weekly assistance expired in late July, and the one-off stimulus payments are at this point “a relic of history” for many families, Mattingly told me.

The extra $600 a week had been an immense help to Henderson Belle, a 58-year-old in Jamaica, New York, who was furloughed from his job at an airport Starbucks in late April. The CARES Act funds helped him cover expenses—including rent, food, and an auto-loan payment—for himself and his 31-year-old daughter, who is disabled.

But now that the supplemental assistance has been cut off, he’s not sure he’ll be able to make ends meet this month and beyond. “It is very hard and scary,” Belle, a member of Unite Here Local 100, a union representing food-service workers in the New York City area, told me. “I know there’s going to be some things [in my budget] that I’m going to be stuck on.” He’d like to return to his Starbucks job, but he doesn’t know if or when he’ll be able to do that, so he might start looking for other employment soon. The next few months are uncertain for him. “That is why I put God in front, and God will make a way,” he said.

[Read: The pandemic proved that cash payments work]

Many Americans are now, like Belle, bracing for financial shortfalls and potentially huge consequences. “Absent federal policy, we’re going to see more housing instability as well as food insecurity, probably some utility shutoffs,” Mattingly said. “I’m frankly terrified.”

Congress might pass more pandemic-assistance legislation, but likely not before next month, at the earliest. In the meantime, President Donald Trump issued an executive order two weeks ago pledging more assistance, though the logistics of the order are unclear, the pile of money it sets aside is relatively small, and its rollout has been halting. An additional $300 a week of federal money has already been sent out to some residents of Arizona, but most states still haven’t implemented the new program yet (if they ever will). Even if the supplemental $300 of aid does go out to more of the country, Mattingly told me she doesn’t think it will sufficiently help American families.

The comparatively meatier provisions of the CARES Act, helpful though they were, didn’t completely protect American families from the pandemic’s financial harms or eliminate the hardships that predated it. As Mattingly noted in a recent paper co-authored with researchers from the University of Michigan, the share of households reporting that they couldn’t afford food during the pandemic has been more than one in six, and roughly a tenth of adults have said they haven’t been able to pay rent or their mortgage on time. These amount to millions of family-level catastrophes.

“I think people who were not doing well before [the pandemic aren’t] doing much better” now, Mattingly said. She’s particularly concerned about the pandemic recession’s impact on households with kids and Black and Hispanic workers, who as a group have suffered bigger employment hits than white ones.

In time, Mattingly would like to see a relief package that directs a larger share of federal support to people who need it the most, and a smaller share to those higher up on the income scale. But for now, in her opinion, the remedy for Americans’ current precariousness is another “blunt-instrument” policy as sweeping as the CARES Act. “We need something quick and easy,” she said.

Katz agrees that more assistance is in order. “We need huge amounts of federal spending, as we did initially, in March and April, to continue until we get the virus under control, and then we can have [an economic] recovery,” he told me. “There’s no possibility of a robust recovery until the virus is under control.” Though relief packages are extremely costly, Katz said, the country can certainly afford another one. On top of all the devastation the pandemic has already caused, many Americans are now on the brink of not being able to pay rent or put food on the table—and all it’d take to stop that is money.

Joe Pinsker is a staff writer at The Atlantic, where he covers families and relationships.

NEXT STORY: Higher Rents Associated with Increase in Homelessness, Federal Watchdog Finds

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