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Utah economy

Red state takeover fuels GOP fight against Biden spending plans

Businesses, economists and policymakers are divided over whether the policies of conservative governors on unemployment benefits and Covid-19 restrictions – many of them have chosen not to issue any at all. Stay-at-home orders – are actually helping their savings or so industries in their states simply haven’t fallen as far behind during the pandemic.

Yet the patchy recovery and poor job growth reported in April and May gave Republicans ammunition to repudiate Biden’s costly aid plans. They also stoked Conservative concerns that federal aid, particularly the $ 1.9 trillion American rescue plan which passed without GOP support in March – should have focused more on those most in need.

“Overall, the funds could have been used much better by being more focused,” said Rachel Greszler, economist at the Heritage Foundation. Congress should have tied UI to workers’ incomes or allowed states to use federal aid to distribute their own benefits based on labor market needs “in whatever way they thought best suited them.” , she said.

The seven states that chose not to issue a stay-at-home order last year – Arkansas, Iowa, Nebraska, North Dakota, South Dakota, Wyoming and Utah – were all led by GOP governors.

Republican-led states were also very early to relax trade restrictions in the event of a pandemic and hide mandates: Missouri, Montana, Iowa, and Alaska were among the first states to reduce their trade needs by January and February. Texas, Arizona, Arkansas, New Hampshire and Wyoming followed in March.

Of those states, Montana, New Hampshire, Arkansas, South Dakota, Utah, Missouri and Nebraska returned to pre-pandemic economic activity levels in April and reported lower unemployment. at the national rate of 5.8% in May.

By comparison, states that still have some restrictions on coronaviruses, including California, Connecticut and Hawaii, had the highest unemployment rates in the country in May and were still producing less in April than before the pandemic.

Washington lawmakers sent direct checks to millions of middle- and low-income Americans and supplemented state unemployment benefits with additional weekly payments and coverage for workers traditionally ineligible for unemployment assistance . They also distributed $ 1,000 billion in government guaranteed repayable loans to small businesses under the Paycheck Protection Program, initially on a first come, first served basis.

Other economists wonder if Congress could have maneuvered as precisely as Greszler suggested to save the economy early on, amid a flood of business closures and tens of millions of layoffs caused by health restrictions. pandemic.

“There aren’t a lot of nuances you can use in politics when trying to get the money out as quickly as possible and adapt to local situations for every worker in the state,” said Daniel Zhao. , senior economist. at Glassdoor. “It is very difficult to bring help to all those who need it at the same time, and in a way that is actually targeted at individual situations.

The uneven nature of the recovery partly reflects the diversity of state economies. States like New York, California, Hawaii and Nevada that rely heavily on tourism, as well as food and accommodation, are among the deepest of the economic hole and have the longest way to go, according to the The Federal Reserve’s April State Coincidence Index, which estimates economic conditions based on local employment and wage data corresponding to state GDP trends.

Hawaii’s economic activity in April was 13% lower than it was in January 2020, according to the index. Activity in Nevada and New York is also still down nearly 10% from before the pandemic. Florida, down just 1%, is doing better.

But states like Utah, Idaho, South Dakota, and Nebraska that rely heavily on food processing and manufacturing – industries deemed critical and required to stay open during the pandemic – are falling back to the forefront. normal much faster.

“What we are seeing is the states that were the most down at the start are still the most down, and it’s basically the states that depend the most on travel,” said Michael Ettlinger, founding principal of the Carsey School. of Public Policy at the University of New Hampshire. “There’s just more destruction, if you will, in these states, and it’s just going to take longer to come back. “

The advantage that GOP-led states such as Georgia, Mississippi, Arizona and Missouri enjoy in rebounding from the pandemic has fueled Republican attacks on Biden’s policies.

More than two dozen GOP governors have decided to end federally-funded extra unemployment benefits, citing labor shortages they say are triggered by generosity. In Congress, Republican lawmakers use a similar argument against Biden’s plans to spend $ 4 trillion to shore up the nation’s infrastructure and expand social programs.

“Our goal should be to rebuild the economy as quickly as possible, not to subsidize it,” said Sen. Mike Rounds (RS.D.), who cited the extension of unemployment benefits. as a reason to vote against an aid plan put in place by the Democrats in March.

Some economists say it is not clear whether generous unemployment benefits are a factor preventing jobs from being filled.

A June analysis of the United States Chamber of Commerce itself has found that the ratio of available workers to job openings is what it was before the pandemic. Before Covid, “companies struggled to fill openings because available workers lacked the skills companies needed,” wrote senior economist Curtis Dubay. “This problem persists now.”

And an analysis of May from the hiring website Indeed’s chief economist, Jed Kolko, found that job search activity in states ending federal benefits saw a brief temporary jump on the platform shortly after. time after the governors announced they would.

Economists, as well as the Biden administration, also say issues such as lingering hardships for parents at daycare, lingering fear of contracting the virus, and an economy that appears to have gone from zero to 60 in a matter of weeks have likely the strongest effect.

“We have this kind of race to the bottom, state after state, with Republican governors… ending the benefits and, frankly, misleading people,” said Senate Finance Chairman Ron Wyden (D-Ore .). “They tried to make a big deal by saying we were cutting the extra $ 300. This is simply not true. They cut an extra week, they cut the concert workers, if someone has exhausted state benefits.

With about 4 million Americans – disproportionately workers of color and women – faced “virtually zero income … which makes the need for federal reform much more serious,” he said.

“This crazy quilt of state systems that offer different levels of data, unemployment benefits and approaches to reopening highlights to me the need, the urgency for fundamental reform,” Wyden said.

He campaigns for an overhaul of the unemployment system that would unite all states under a single benefit infrastructure and create automatic triggers that tie benefits to economic conditions, among other things.

Senate Majority Leader Chuck Schumer and Wyden proposed last year to extend the unemployment benefits program until a state’s unemployment rate falls below 6%, but Republicans were hesitant to support a long-term extension of unemployment assistance financed by taxpayers.

Had Congress passed the proposal last July, 27 states would currently have unemployment rates low enough to phase out the extra $ 300 in additional benefits under the program.

“Hopefully this will spark a conversation after the pandemic ends on how to improve our safety net,” Zhao said, “not just in terms of expanding it, but also making sure it actually reaches the people it needs and reaches them quickly when help is needed.

Mary Cashion

The author Mary Cashion