Rep. Pramila Jayapal (D-WA) thinks the current stimulus programs don’t go far enough when it comes to protecting people’s jobs and salaries.
Under her new proposal, the Paycheck Guarantee Act, the government would fill in gaps that existing programs have left out. If a company is struggling because of the coronavirus pandemic, the federal government would help them cover 100 percent of their base payroll costs for at least three months, up to an annual salary of $100,000 per worker.
It’s an incredibly ambitious plan — similar to what we’ve seen in countries like Denmark — and it’s one that’s intended to support businesses of all sizes and the workers they employ as they grapple with the economic fallout that’s currently taking place because of the coronavirus outbreak. Additionally, it’s a bill that tries to ensure a speedy recovery once the US has been able to combat the pandemic.
“I really believe that mass unemployment is a policy choice,” Jayapal told Vox. “This proposal is directed to preventing mass layoffs and keeping the businesses going so they can quickly and safely restart.”
It’s not just Jayapal, the co-chair of the House Progressive Caucus, who’s proposing creative progressive solutions that would have been non-starters in the US Congress before the coronavirus economic crisis. Sen. Josh Hawley (R-MO), whom my colleague Emily Stewart argued “reflects a post-Trump populism within the Republican Party,” has also supported an effort that would do something similar. His approach would cover a slightly lower proportion of company payrolls.
“Beginning immediately, the federal government should cover 80 percent of wages for workers at any U.S. business, up to the national median wage, until this emergency is over,” Hawley wrote in a Washington Post op-ed on Thursday.
As the thinking behind the two proposals goes, if the government can help businesses stay afloat and cover their payroll, those companies won’t have to lay workers off, and they’ll be ready to more quickly continue operations once the economy is fully functioning again.
Currently, if companies lay people off, there is an expanded unemployment insurance program that workers can apply to, but the decision to let workers go still means plenty of uncertainty for a lot of people as well as major delays for the company when they need to rehire later on.
And recent numbers indicate that the need for such support is severe: In the past three weeks, 16.8 million people have filed for unemployment insurance.
Jayapal’s plan intends to provide more stability for both workers and businesses during this tumultuous time. It’s a proposal that’s a lot like one that’s recently been implemented by Denmark, where the government is now covering 75 percent of workers’ salaries, including at private companies. And it’s one that’s picked up the backing of several labor groups including SEIU, the American Federation of Teachers, and Unite Here.
Jayapal said she’s currently working on building more support for the program, which has been cosponsored by multiple members of the House and endorsed by the Progressive Caucus. Bringing more Republicans onboard would be the next challenge.
As economist Cecilia Rouse, a former Obama administration official, previously told Vox, the biggest need right now is for the US to keep on providing people with liquidity while the economy goes into lockdown mode. “If we can get the liquidity right, so that people feel comfortable and are willing to stay home, it will mean that we can recover from this much faster,” she said.
Jayapal’s proposal would take big steps toward ensuring that workers can endure this pause.
What Jayapal’s plan would do
Jayapal’s proposal enables companies that have been negatively affected by the coronavirus outbreak to apply for grants issued through the Treasury Department.
If a company, regardless of size, is able to demonstrate that it is dealing with challenges tied to the coronavirus, it could be eligible for a lump sum grant that covers three months of base payroll costs including salaries and benefits for workers, up to a $100,000 annual salary per worker. Companies would have to keep all workers on payroll to be eligible for the full grant and those that have furloughed or laid off people would still be able to obtain the entirety of the benefits if they rehire these employees.
These grants would be calculated based on a company’s 2019 quarterly payroll tax return, from either the second or third quarter. They would then be disbursed to companies directly via existing Treasury systems that have already been used to distribute paid family leave tax credits or they’d be sent through a tool that’s built in conjunction with a payroll software firm or the IRS.
If the crisis extends beyond the three-month timeframe, they could be renewed on a monthly basis, based on the proposal.
The delivery mechanism for these funds is intended to reduce the friction that’s already been observed for other stimulus programs. Because government agencies already have the information they need to calculate the amount of these grants, the Paycheck Guarantee program could avoid some of the same issues that small business loan programs have run into, where there’s been a lot of confusion about what each entity can receive and where people can apply.
Denmark is among the countries that’s already implemented something similar
In mid-March, Denmark implemented a program similar to the Paycheck Guarantee Act with the government covering 75 percent of workers’ salaries that companies pay out, up to a certain amount.
It was a massive investment and one that’s intended to reduce unemployment across the country. According to the Local Denmark, the country has seen twice as many people apply for unemployment support on a daily basis since the beginning of coronavirus isolation measures in mid-March. It’s a notable uptick but it’s an increase that’s much lower than what’s been observed in the US.
In the past two weeks, more than 6 million people have applied for unemployment insurance in the US each week. Those figures are way above the pre-coronavirus high of roughly 700,000 claims.
“If nothing changes, the unemployment rate will soon exceed 20 percent,” says UC Berkeley economist Gabriel Zucman, a supporter of Jayapal’s plan, in a statement. “The federal government needs to guard against mass unemployment by guaranteeing paychecks, like many other countries are already doing.”
But the cost of implementing a program like Denmark’s are high, according to the Atlantic’s Derek Thompson. “The plan could require [Denmark’s] government to spend as much as 13 percent of the national economy in three months,” he writes. “That is roughly the equivalent of a $2.5 trillion stimulus in the United States spread out over just 13 weeks.”
Jayapal says there isn’t currently an estimate on exactly how much this program would cost quite yet, but she notes that the costs of not offering such benefits could well be higher in the long term.
“We’re paying it one way or another,” she said.