‘We Need Absolutely To Provide Benefits To People’: Professor On Economic Response To Pandemic

Aug 14, 2020

The U.S. economy has been pretty much hobbled by COVID-19. Five months in, millions of people have no paychecks, the temporary boost to unemployment has ended and an unprecedented eviction crisis looms. 

Dan Lindheim is a professor at the Goldman School of Public Policy at UC Berkeley. He was a World Bank economist, senior advisor to former Bay Area Congressman Ron Dellums and City Administrator of Oakland. NSPR's Marc Albert spoke with him about what could happen without an agreement on supplemental unemployment assistance and the need for a statewide eviction moratorium.

Here are highlights from their conversation. You can also listen to the full, extended interview at the top of the page.

Interview Highlights

On the need for supplemental unemployment assistance and President Trump’s recent executive actions

It's a humongous problem. It's only going to get worse as the various federal efforts to provide benefits to people are in limbo at the moment. With the suspension of the $600 and President Trump's executive memo, which is completely unclear whether A, it has any meaning B, whether it's legal, C by putting 25% of the $400 onto the States, and with most states probably not having the means to be able to cover that amount. Unless anything happens at the congressional level and is made retroactive, people are going to be even deeper in difficulty. 

Newsom estimated it'd be about $700 million a week for California. That's not money that sort of just sits there on trees. Everybody's already hurting because of the pandemic. I mean, most budgets both at the local and state level are upside down. So putting additional burden on these budgets just makes things that much more difficult. It's really only at the federal level that this can be addressed, because only the federal government has the ability to create money. And the federal government doesn't have to balance budgets, only the state and local governments have to balance budgets. So to put this additional burden on states is really an almost impossible burden for most states. And many states are already talking about saying, look, we can't even play. 

On whether the $600 additional weekly pandemic unemployment payments were a disincentive to people taking jobs 

For people who let's say we're making minimum wage, if they were getting the additional $600 a month that would be a better deal for them. But most people prefer something stable, that they know is going to be something they can count on, as opposed to a very temporary benefit that's coming from somewhere else. You know, there may be in some cases, some short-term benefit. But most people who have studied this don't seem to think that that's really the case. I mean, I could imagine, you know, students who were working, let's say, and were getting minimum wage, and all of a sudden, if they were eligible, that if they got the $600 additional dollars, that that would be a good deal for them. But it's really only low wage people who for which that would be the case, but I think most lower wage people are already doing whatever they can to make ends meet. And so I think people are not going to sit at home if they have the opportunity to work. 

If this isn't continued, and people don't have any income coming in, or any substantial income coming in, they're not going to be able to make any payments whatsoever. And if there's no moratorium, and if landlords start moving on eviction, then people are going to be out in the street. Anybody who's dealt with homelessness and homeless issues knows that the best way to address homelessness is to keep people in their homes, and to do whatever it takes to avoid people all of a sudden getting out in the street, because then it becomes vastly more expensive, at least from the public sector, to even begin to address any of those issues. So it makes no sense whatsoever to terminate the eviction moratorium.

On mortgage forbearance

Mortgage forbearance is something that makes perfect sense. There's no reason to not have it just add months or whatever period of time to the end of the mortgage. And that really has fairly minimum impacts on the creditor in this particular case. And it allows the person who has the mortgage to pay just for a longer period, so it's not like they're paying less money. They're just extending and over a longer period of time. On the mortgage forbearance, there's the issue that many people pay both their property taxes and their insurance through their mortgages. And the question then is, what are the secondary impacts and the lack of property tax to state and local governments, which property tax is a substantial part, especially for local governments.

And then the question is do people even know whether their insurance payments are being made and whether they themselves are insured? There are details in all of this that particularly concerned me, that people may feel OK, I have mortgage forbearance, but they may not realize that what the impacts are going to be on local governments, A, or B, just to make sure that they themselves are properly insured. And I hope anybody who is involved in any kind of forbearance checks on particularly whether they're insured.

On what a good policy response would be

Well I think there are two levels, at least two levels of responses. One is the appropriate response to dealing with a pandemic. Because the United States has been a massive failure at dealing with that. And it's been a massive failure compared to almost any other country in the world. And so no matter what takes place, the United States has to, at a federal level, get its head around how to address the pandemic. Most countries have been vastly more successful than addressing this. So that's one set of issues. The whole idea that we can't afford to address the pandemic because of the economy is really upside down. Because until we do address the pandemic, it's just going to have worse and worse economic impacts on the domestic economy.

The second issue is there just has to be continued federal support for families who are particularly impacted by the pandemic. It's not something that can be handled by states or local governments. They just don't A, have the funding sources, B, they don't have the ability to spend more than they bring in. And it's only the federal government who has that opportunity. And so to me, there just has to be a massive pandemic assistance bill at the federal level that continues for the duration of the pandemic. Because otherwise, there really is no option other than people being out in the street. 

The whole approach of the current administration has been to claim success when there were minimal kinds of good things happening but basically devolve all responsibility to the states, which forced states A, to compete against each other for a whole series of things and B, the states don't have the resources to address the needs of their people in this kind of situation. 

On how to protect renters and landlords

If you continue the $600 a week payments, you could have some means of earmarking a percentage of that to pay rents. People are already paying a very high percentage of their incomes at the lower income levels for rent. And you could have some requirement that people pay a certain percentage of that. 

From the data that's out there, it's not like most people are stiffing their landlords. There was a census survey, it said something like 75% of the people were making full payments. And obviously a percentage of the remaining 25 are making some kind of partial payments. But the best thing is to keep people having money coming in and then having them pay rent as much as they are able to do so. It's not one thing or the other. 

Until the pandemic is addressed, or even until the amount of disease is suppressed, that an awful lot of employers aren't going to be able to pay their workers. They're not even going to be able to be open. And so the first real requirement is to at least get the levels of disease down to manageable levels. And we had done that with the shelter-in-place but we completely blew the opportunity to manage it once we started to open up. 

My own view about this is we have to go through this again. And whether it takes six weeks or eight weeks, we need absolutely to provide benefits to people during that period of time. And we need to get the levels of disease down so that we can begin to manage it and then open up again with a much more careful opening process. But I don't think until we do that, or until there are vaccines. I don't think there's much hope for getting any of this — either the economy or the disease — under control.

This interview has been edited for brevity and clarity. Click the “play” button to listen to the entire interview.