“She was a moving force. Without her, Social Security doesn’t exist, and without her, the nationwide unemployment insurance program doesn’t exist,” said Kirstin Downey, who spent a decade studying Perkins’ life and documented it in the book The Woman Behind the New Deal. There’s a whole lot of people whose financial salvation is going to come because Frances Perkins existed.”
In the midst of the coronavirus pandemic, it is the issue of unemployment—and, more specifically, how the federal government under Donald Trump is responding to job losses already numbering in the tens of millions—which brings Perkins’ efforts to mind. Kurtz interviewed Suzi Levine, the chief of Washington state’s Employment Security Department—the people dealing with the huge increase in unemployment claims caused by widespread stay-at-home orders.
“It’s going to take a collective effort the likes of which we have not seen before, and I feel humbled to be a part of the team that will get us there,” Levine said. “When you roll back the clock a hundred years, I suspect Frances Perkins and her colleagues felt similarly as they looked at the devastation, the Depression and the oncoming World War II. I think there’s a lot that we can learn from then and apply now, but with a modern context and with our modern tools.”
As Kurtz points out, unemployment insurance—Perkins’ pet project—is the quickest and most efficient way to get money into the hands of those who have lost their jobs during this pandemic. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in late March, includes an additional $600 per week for each employee in order to supplement the unemployment insurance funds that the states provide eligible workers. I’m confident in predicting that Sec. Perkins would’ve applauded that approach. However, other measures in the CARES Act that aim to help workers stay afloat aren’t working nearly as well.
In addition to her work creating unemployment insurance and Social Security, Perkins, in her capacity as the founding chair of FDR’s Committee on Economic Security, played a key role in establishing the Civilian Conservation Corps and its counterpart for women, the She-She-She Camps. These programs put American workers, who otherwise would have been earning nothing, on the government payroll. Sounds like a pretty smart idea for today as well, but thanks to Donald Trump and his Republican Party, that’s not what the government is doing.
Yes, many workers who are laid off are able to get unemployment insurance, but many other workers remain in desperate straits. The problem lies with the Paycheck Protection Program (PPP), a core element of the CARES Act which was supposed to provide $349 billion to small businesses, in order to keep employees on the payroll and off of the unemployment rolls.
Remember that unemployment insurance only provides a percentage of one’s lost salary, and only goes up to a maximum level determined by each state (for example, Mississippi’s weekly maximum is $235, while in Massachusetts the maximum is $823 per week, plus an additional $25 per dependent child—up to a limit of 50% of one’s base benefits). Plenty of workers are going to have trouble making ends meet even if they get these new, souped-up unemployment benefits. As for the PPP, which is supposed to help businesses keep paying employees their regular salary, Eric Levitz at New York magazine summed up the program’s promise:
Under the policy, any business (or nonprofit, veterans organization, or tribal concern) with 500 or fewer employees is eligible for a government-backed loan equivalent to eight weeks of its prior average payroll, plus an additional 25 percent of that sum (unless that grand total adds up to more than $10 million, which is the cap for any individual firm)…The idea is to keep the small-business sector frozen in place, so that it can rapidly defrost once the coronavirus pandemic has passed.
If companies use the loans to keep paychecks flowing, they will be forgiven and turn into grants. That’s the idea, at least. However, as multiple media outlets—from the The New York Times to the Wall Street Journal to Daily Kos and beyond—have reported, there’s a chasm between the idea and the reality.
Another smaller, similar program is run directly through the Small Business Administration (SBA), which provides Economic Injury Disaster Loans (EIDL). The first $10,000 installment is supposed to be sent to applicants within a couple of days, and that money is a grant that need not be paid back to the government. Any money a business requests beyond that $10,000 comes in the form of a low-interest loan, and applicants have to wait longer for that money. The CARES Act appropriated $10 billion for the EIDL program—which existed before the pandemic—and made it easier to qualify, in theory. But that program is also floundering, apparently because of a lack of sufficient funds.
Regarding the PPP, Levitz detailed a number of the problems. First, there’s simply not enough money in the fund—Daily Kos’ Joan McCarter explored the push in Congress to add another $250 billion. By early Thursday morning, the money was like the proverbial sunshine in that achingly beautiful song by the late, great, Bill Withers: gone. Additionally, large numbers of smaller businesses, including independent contractors, just aren’t able to access the program’s benefits at all.
The Paycheck Protection Program was supposed to, as the name suggests, protect paychecks. One of the main reasons why it isn’t working is because of the way it was designed. Small business owners don’t simply receive the funds needed to make payroll—that would be far too straight-forward; instead, they are forced to search for a bank willing to make such a loan, a harder process than it should be.
At first glance, there’s no reason why banks wouldn’t want to make these loans to as many applicants as possible. Banks know that the government is guaranteeing the program, so they just have to front the money and then can collect the (relatively small) fees and interest associated with each one.
The problem is that, as Levitz explains in depth, “for many banks, the program looks high-risk, low-reward.” They have to double-check all the information submitted by each applicant—normally a time-consuming process—but they face tremendous pressure to process each application quickly and get the money out the door.
Some banks apparently fear giving out money only to find out afterward that they screwed up and approved an applicant who turned out to be ineligible, leaving them to face consequences ranging from being responsible for the loan themselves or worse. At some point there will be more guidance from the government on this, but for now, many banks are either not participating or they are only distributing money to businesses they already know well, i.e., companies whose information they’ve previously verified in a careful manner.
This means that many small businesses and independent contractors/sole proprietors, because they don’t have a preexisting business relationship with a participating bank, have been locked out. This issue must be addressed if and when the program’s next round of funding comes through. Also note that independent contractors, the self-employed, and gig workers were not even able to file applications until April 10, whereas other small businesses could file starting April 3. Given that funds were distributed on a first-come, first-served basis until the pot emptied, that’s a huge disadvantage for the smallest operations.
“Some of the most vulnerable small businesses operate on cash and do not boast any such (banking) relationships. Meanwhile,” Levitz relates, “such enterprises are also unlikely to be as well-prepared and informed about policy changes as larger, more profitable ones, or pseudo–small businesses like chain-restaurant franchises. Taken together, all this means that the companies most in need of aid are the least likely to actually secure it before the well runs dry.” Sure enough, steakhouse chain Ruth’s Chris revealed Friday that it received $20 million with just four days of the PPP application window’s opening.
It is also important to note that, as the The New York Times reports, businesses owned by African Americans and other Americans of color are disproportionately likely to be left out, specifically “because minority-owned businesses often have weaker banking relationships than their white-owned counterparts—one legacy of the practice of redlining, or refusing to lend to people in communities of color. Research shows that African American and Latino business owners are denied loans at higher rates.” If the program’s coffers are indeed refilled, Congress must take concrete steps to remedy this and other disparities. Nancy Pelosi and Chuck Schumer have been pushing hard on this front, but Republicans continue to say no.
I know people who are falling through the cracks. One employee at a healthcare office in Brooklyn was laid off, along with most of the rest of the staff, a few weeks ago. The owner has sought funds through the PPP and EIDL, and has thus far come up empty.
An independent contractor’s Bronx-based business has essentially disappeared because the clients don’t have money coming in. I helped this person apply for funds through both the EIDL and the PPP, each of which are supposed to allow independent contractors to continue to pay themselves when their business income dries up. We went from the website of one bank to another. None of the institutions were even accepting applications without an existing business account. Like many sole proprietors, this independent contractor hadn’t needed a business account: whenever they received a check, they simply deposited it in their personal checking account.
Websites such as Fundera and Lendio have created portals to collect the necessary information and connect business owners and sole proprietors with banks willing to accept their application. The aforementioned Bronx contractor has submitted their information to these sites, as well as directly to a number of lenders, but so far no funds have come through, so they are getting by as best they can. For now, they can only wait and hope additional money for the PPP is appropriated.
The PPP and EIDL programs are supposed to keep people earning so that they can keep spending, and thus keep other businesses going and prevent a full-on collapse of our economy. As these two cases and many more like them demonstrate, these programs are failing.
Meanwhile, Fox News audiences are hearing an entirely different story about the CARES Act.
Appearing on “America’s Newsroom” with host Sandra Smith, Wright explained that the connection with their local bank — Live Oak Bank in Wilmington, North Carolina — and their support was what made the difference.
[…] “Very accessible, very seamless for us and just made bringing our employees back to work so that they could earn their paycheck again possible,” Wright remarked.
Fox News liked this story so much they had Ms. Wright come on a second time a few days later, this time to appear on Fox & Friends—or what I like to call “Trump’s personal safe space.” The hosts made sure to emphasize for Trump and the rest of the audience how well the PPP is working.
Back in the real world, Live Oak Bank, as of April 13, had the following message on its website: “We are busy processing Paycheck Protection Program loans and are unable to accept new applications at this time. We are working as quickly as possible with the hope of helping others but can make no assurances.”
What really would frustrate Sec. Perkins—and does frustrate progressives today—is that it doesn’t have to be like this. There is another, better way to ensure that workers continue to get paid and stay employed during this crisis. European countries, including large economies like France and Germany, and even the one led by the so-called mini-Trump—the United Kingdom’s Boris Johnson—are simply authorizing the government to take over payrolls and pay 80-90% of salaries. As Britain’s Torsten Bell, an advisor to his government’s efforts, noted, doing so “brings challenges. But policymakers’ job right now is to make uncertainty matter a lot less.” Yet on this side of the pond, uncertainty is what far too many Americans face.
The New York Times Editorial Board places the blame for this right where it belongs, and contrasted the American approach with that of much of Europe.
The nation’s political leaders … appear to regard mass unemployment as an unfortunate but unavoidable symptom of the coronavirus. “It’s nobody’s fault, certainly not in this country,” President Trump said [March 26].
[…] Even after it became clear that the Trump administration had failed to prepare for the pandemic, policymakers still could have chosen to prioritize employment by paying companies to keep workers on the job during the period of lockdown.
Unfortunately, the United States chose a different path. My hope is that a proposal from Washington Rep. Pramila Jayapal, a staunch progressive, wins enough support to become part of the next coronavirus package. Her bill, the Paycheck Guarantee Act, would have the government simply pay 100% of the salaries of employees earning up to $100,000 per year for three months at companies that are being hurt by the virus.
“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.” Breaking from the rest of his party, Republican Sen. Josh Hawley of Missouri proposed something similar in terms of structure, albeit with less generous terms.
Frances Perkins and her fellow New Dealers had to overcome severe resistance from conservatives to their proposals. Yet they stuck to their positions because they understood the value of having the federal government directly employ workers, as they did when they created the Civilian Conservation Corps. Unfortunately for American workers and small business owners, that lesson is being ignored today by some in Washington, as The Man Who Lost The Popular Vote, Senate Majority Leader Mitch McConnell, and Republicans in Congress refused to even consider such an approach in drafting the CARES Act.
Of course, they are not the ones suffering the financial consequences of that decision. We must contact our representatives and senators and push them to enact real, urgent, timely solutions that draw on what we already know works. Next, let’s make sure that the Republicans who crafted the deeply flawed plan we’re currently stuck with suffer the political consequences come November.
Ian Reifowitz is the author of The Tribalization of Politics: How Rush Limbaugh’s Race-Baiting Rhetoric on the Obama Presidency Paved the Way for Trump (Foreword by Markos Moulitsas).