Just Taxes Blog by ITEP

Returning to the Economic Status Quo After COVID-19 Crisis Should Not Be an Option

April 6, 2020

One danger in this necessary moment of rapid-fire policymaking is a return to business as usual after the COVID-19 public health and economic crises pass.  

Weak worker protections and prioritization of corporate interests have kept financial security out of reach for millions of working people and set the nation up for a longer and deeper crisis than necessary. Lawmakers’ priority, rightly, is preventing economic collapse, but a full recovery will require lasting reforms that can help our economy work for everyone.  

Right now, unemployment claims are meeting the most-dire predictions. Missing one paycheck is sending millions more to the nation’s food banks. Lower-wage earners, particularly service workers, are at greatest risk. They are among the first losing their jobs as businesses shutter, and those who remain employed are risking exposure to the coronavirus by providing what more of us now understand are essential services that keep our economy moving. Disproportionately, they are Black and brown people. 

Some policymakers have recognized the challenges faced by everyday working people and are putting in place policies to address them. California is trying to alleviate food insecurity by making it easier for people to apply for food assistance through the Supplemental Nutrition Assistance Program (SNAP), for example. More states should follow suit. 

A few corporations that had scant or no benefits such as paid sick leave for their lower-wage workers are stepping up and offering them now. This is good, too, but it shouldn’t have taken a pandemic for working people to receive rudimentary protections that allow them to avoid the impossible choice between tending to their health and losing a day’s payor their job altogether. Congress enacted legislation that will address this moment and offer paid leave for some workers, but Trump administration regulations already seek to weaken this protection and permanent reform is lacking 

We collectively understand that shutting down economic activity will enable us to prevent illness and save lives. But let’s also be clear about the underlying problem that sends millions of us to food banks after missing one paycheck: It’s not COVID-19. The pandemic did not create the 40-year trend of widening economic inequality, a hollowed-out middle class and stagnant workers’ wages. The responsibility for this rests squarely on special interests, corporate forces and their political allies who have facilitated explosive growth in CEO compensation and shareholder value while suppressing rank-and-file workers’ wages and benefits 

Lawmakers are focused on getting the nation through the acute phase of this crisis. But it will take immense imagination, unyielding political will and a fundamental reordering of our policy priorities to adequately address the problems of this moment and unrig our economy. 

Debate over CARES Act embodied structural and political challenges 

Political debate around the Coronavirus Aid, Relief and Economic Security (CARES) Act illustrates deep problems with our policymaking and the ideology behind it. Senate Majority Leader Mitch McConnell’s initial bill excluded from cash payments many people and families who were too poor to file income taxes in 2018, even though they likely face more immediate need. The final $2.2 trillion relief package is better, addressing a sliver of family and workers’ immediate needs and providing money to states to address COVID-19-related budgetary expenses. 

But lawmakers took great care to help various industries with half-trillion in bailouts. The airline industry is pegged for up to $48 billion. When the industry, like much of the rest of corporate America, was enjoying good financial times, it spent excess profits on stock buybacks, further lining the pockets of executives and shareholders. The seven largest U.S. airlines paid a paltry average effective tax rate of 2.3 percent over the last two years on billions in profits. Now, the industry is invested in government stepping up to save it. But our lawmakers haven’t demanded that the airline industry and other corporations invest in government by paying their fair share of taxes.

The Trump administration a week ago said it would block oversight of the bailout funds, and a few days later, the president named a White House attorney to be the fund’s inspector general. This has rightly raised alarms.

If nothing changes, lawmakers who championed the corporate bailout will be complicit in restoring the same corporate power structure that has persisted for years, just as they did after the 2008 financial crisis. Back then, lawmakers didn’t ask for much in exchange for bailing out the financial industry, so we returned to an economy in which Wall Street firms came roaring back and the nation’s wealth continued to accumulate at the top while working people struggled to recoup their losses.  

Political and corporate forces revealed their hands before the bill passed. Three senators, for example, briefly held up the relief package because they worried some workers might receive a bit more in Unemployment Insurance (UI) than they earned from their lost jobs. Let that sink in. Dire predictions that the senators were privy to are coming true. More than 6.6 million people filed unemployment claims last week, nearly double the already breathtaking 3.3 million record one week earlier. These numbers don’t include those who have lost nearly all of their income, such as the men and women who drive for Uber or other ride-sharing services or the independent contractors who some employ to paint, clean and repair their homes. Nor does it include those who cannot get through backlogged state UI application systems. With most of the country shut down, the latest unemployment numbers are only a preview. But a few lawmakers felt compelled to grandstand–not over $500 billion in corporate bailouts–because, in their cynical view of the world, a low-wage worker ordered to stay home might get some “free stuff.”  

The rightwing media machine backed up their point of view. The bill passed despite their protests, but their ideology, shared by powerful allies, has already shaped too many of our policies. It is a dangerous and false individualistic narrative that says the rich are deservedly so, and if you are poor, you failed to take advantage of the American Dream. Relatedly, other lawmakers have complained that Democrats have filled legislation with a “socialist wish list.” And Sen. McConnell last Thursday, musing about the deficit, urged House Speaker Nancy Pelosi to, “stand down,” on proposals, “to do things that have nothing to do with the crisis.”  

The list of proposals that Speaker Pelosi has floated in recent weeks would expand access to housing, create good jobs, strengthen collective bargaining rights and raise the minimum wage among other things. These ideas would move us toward an economy in which more workers and families have the financial security long denied to them by political and corporate forces. They would mean fewer of us face severe economic hardship the minute we lose our job. They would make it easier for families to recover from the economic setback set in motion by the time of coronavirus. 

The good news is that work to change the political and economic paradigm has been ongoing. Even now, a growing contingent of grassroots advocates are raising their voices, demanding change, and telling our elected officials that the challenges working families face are deeply ingrained and must be addressed. Lawmakers should listen and act imaginatively and boldly. Recovering from COVID-19 and returning to a status quo of worsening economic inequality should not be an option.  


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