Saez and Zucman explain how we can protect our health and save our economy

March 31, 2020

Topics: Quote of the Day

It’s not too late to start protecting employment or to make medical care for Covid-19 free.

By Emmanuel Saez and Gabriel Zucman
The New York Times, March 30, 2020

The coronavirus pandemic is laying bare structural deficiencies in America’s social programs. The relief package passed by Congress last week provides emergency fixes for some of these issues, but it also leaves critical problems untouched. To avoid a Great Depression, Congress must quickly design a more forceful response to the crisis.

Start with the labor market. In just one week, from March 15 to March 21, 3.3 million workers filed for unemployment insurance. According to some projections, the unemployment rate might rise as high as 30 percent in the second quarter of 2020.

This dramatic spike in jobless claims is an American peculiarity. In almost no other country are jobs being destroyed so fast. Why? Because throughout the world, governments are protecting employment. Workers keep their jobs, even in industries that are shut down. The government covers most of their wage through direct payments to employers. Wages are, in effect, socialized for the duration of the crisis.

Instead of safeguarding employment, America is relying on beefed-up unemployment benefits to shield laid-off workers from economic hardship. To give just one example, in both the United States and Britain, the government is asking restaurant workers to stay home. But in Britain, workers are receiving 80 percent of their pay (up to £2,500 a month, or $3,125) and are guaranteed to get their job back once the shutdown is over. In America, the workers are laid off; they must then file for unemployment insurance and wait for the economy to start up again before they can apply for a new job, and if all goes well, sign a new contract and resume working.

Even if unemployment is generously compensated — as it is in the $2.2 trillion bill Congress passed — there is nothing efficient in letting the unemployment rate rise to double digits. Losing one’s job is anxiety inducing. Applying for unemployment benefits is burdensome. The unemployment system risks being swamped soon by tens of millions of claims. Although some businesses may rehire their workers once the shutdown is over, others will have disappeared. When social distancing ends, millions of employer-employee relationships will have been destroyed, slowing down the recovery. In Europe, people will be able to return to work, as if they had been on a long, government-paid leave.

The battle for the speediest recovery starts today. The next congressional bill needs measures to protect employment for the duration of the shutdown. This does not raise insuperable technical difficulties. The bill passed last week provides support for wages in one industry, airlines. Congress could easily extend this program to other sectors. Some countries — like Germany, with its Kurzarbeit system, a policy aimed at job retention in times of crisis — already had the government infrastructure in place to send workers home while the state replaced most of their lost earnings. But several nations with no experience in that area — like Britain, Ireland and Denmark — were able to introduce brand-new employment guarantee programs on the fly during the epidemic.

This situation for laid-off workers would be bad enough if it were not aggravated by a second American peculiarity. As they are losing their jobs, many workers are also losing their employer-provided health insurance — and now find themselves faced with the Kafkaesque task of obtaining coverage on their own.

One option involves continuing to be covered by one’s former employer, a program known as COBRA. It is prohibitively expensive: Participants have to bear the full cost of insurance, $20,500 per year on average. Another option is to go shopping for a plan on the Affordable Care Act insurance exchange, where one is faced with a bewildering choice between plans like Blue Shield’s Bronze 60 PPO (with a deductible of up to $12,600 per year) and Aetna’s Silver Copay HNOnly (with a $7,000 deductible and up to $14,000 in annual out-of-pocket expenses). The last option is to join the ranks of the uninsured, a catastrophic solution during a pandemic.

The bill passed last week does nothing to reduce co-pays, deductibles or premiums on the insurance exchanges; nor does it reduce the price of COBRA. The next bill should introduce a Covidcare for All program. This federal program would guarantee access to Covid-19 care at no cost to all U.S. residents — no matter their employment status, age or immigration status. Fighting the pandemic starts with eradicating the spread of the virus, which means that everybody must be covered.

The big battles — be they wars or pandemics — are fought and won collectively. In this period of national crisis, hatred of the government is the surest path to self-destruction.

Emmanuel Saez and Gabriel Zucman are economists at the University of California, Berkeley.

https://www.nytimes.com…

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Comment:

By Don McCanne, M.D.

Much has been written about how having an equitable, efficient, comprehensive national health program (i.e., single payer Medicare for All) would have been extremely helpful combating illnesses caused by the coronavirus pandemic. We would still have other problems such as the pending permanent closure of a multitude of businesses that are not able to survive the shutdown that is occurring during this pandemic.

Emmanuel Saez and Gabriel Zucman are experts in income and wealth inequality and the adverse consequences that occur when the one entity that could remedy these problems fails to act, and that entity is the government.

In this article, they provide, as an example, an explanation of how in other nations many of the businesses will survive because of implementation of beneficial government policies. They contrast that with the dire prognosis in the United States which we can expect because of our failure to enact and implement socioeconomic programs that would help protect all of us, even during crises like the current pandemic. A recession would be understandable, but our lack of foresight could result in a prolonged depression.

The authors explain why our current health care financing system is not satisfactory. They propose an emergency financing program, but it would have been far better to have had a single payer Medicare for All system already in place. The crisis is difficult enough without adding the additional task of creating a massive new Covidcare for All program.

We are hardly into our national nightmare and yet the lesson for us is already obvious. We need greater solidarity in working together through our government, and that includes following the Willie Sutton rule (go where the money is) in establishing equitable, progressive taxes.

As Saez and Zucman state, “The big battles — be they wars or pandemics — are fought and won collectively. In this period of national crisis, hatred of the government is the surest path to self-destruction.”

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