State and local governments could get $350 billion in pandemic aid
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The $1.9 trillion COVID-19 relief package that the White House and congressional Democrats are now running down the legislative field includes $350 billion in direct aid to state, county, municipal and tribal governments. It’s meant to help them offset losses in tax revenue brought on by pandemic shutdowns, job losses and depressed spending by businesses and households.
Is it too much? Not enough? Just right? And what’s the best way to spend it?
Some state governments, like California’s, are doing pretty well. Meanwhile, states heavily dependent on tourism or energy — think Hawaii, Florida, Texas — are deep in the hole.
Lucy Dadayan at the Urban-Brookings Tax Policy Center estimates state revenues are down 1.8% overall during the pandemic:
“It’s not as bad as it was in the Great Recession. It’s not as bad as it was feared to be. But it’s still terrible,” she said.
In part because 1.3 million state and local workers have been laid off as a result.
Dadayan thinks $350 billion in federal aid is enough to get governments back on their feet and some of those people rehired.
Michael Strain at the American Enterprise Institute thinks less money is needed:
“There is a strong argument for doing more than nothing. I think that $350 billion is too much,” he said.
Strain argues the amount should be based on the revenue governments have lost, which he estimates at $130 billion.
“Under that formula, some states may not get any money. But some of the states that have really been hit by the pandemic — that’s where I think you want the federal government to step in and help,” Strain said.
Federal aid should be narrowly targeted, according to Jared Walczak at the Tax Foundation. For instance, to refill state unemployment trust funds: “Make sure they can keep making those payments without too much further debt. And also keep the taxes on employers lower because in some states, they’re going to skyrocket.”
Walczak said those unemployment taxes could rise sevenfold to tenfold later this year without a federal bailout.
COVID-19 Economy FAQs
So what’s up with “Zoom fatigue”?
It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.
How are Americans spending their money these days?
Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”