On this last episode, we look back on 23 years of joyous, difficult and always informative conversation.
Maryland Governor Larry Hogan proposed a coronavirus relief package that would amount to about $1 billion. Hogan’s proposed package includes help for small businesses, tax cuts, tax credits and individual payments for lower-income residents. While the state’s top lawmakers say that coronavirus relief is the top priority, Maryland’s Democratic leaders may not be as eager to pass the bill, as they didn’t negotiate details with Hogan.
President Biden has also announced a $1.9 trillion emergency stimulus plan to address the impact of the pandemic and lingering economic inequality. Biden’s plan includes funding a national vaccine program, individual stimulus checks and proposals to raise the federal minimum wage.
But what are the details of these plans? Will they pass their respective legislative bodies? And will they be enough to help those struggling weather the pandemic?
Produced by Richard Cunningham
KOJO NNAMDIWelcome back. The coronavirus has upended the nation's economy. Many Americans are out of work as the pandemic has affected nearly every industry. However, Marylanders may see hope on the horizon, as both Governor Hogan and President Biden have each announced proposals for pandemic relief. Both plans include help for small businesses, tax credits and individual and family payments.
KOJO NNAMDIBut what exactly is in these proposals? Will there be enough for those struggling to stay afloat, or will they not? You'll find out during the course of this conversation. Joining us now is Bennett Leckrone. He's a reporter at Maryland Matters, a corps member of Report for America. Bennett, thank you for joining us.
BENNETT LECKRONEThank you for having me.
NNAMDIBennett, last Monday Governor Hogan announced his pandemic relief proposal. What's in this proposal, and how much would the state need to spend?
LECKRONESo, it's a mix of tax cuts and relief funding through the state's rainy day fund and other reserves. In all, it'll total about a billion dollars. The biggest component of it is stimulus checks that are direct, immediate payments to low to moderate income Marylanders. Those checks will go to families and individuals who filed for the earned income tax credit in 2019, I believe.
LECKRONEThe first round of immediate payments will be $500 for families and $300 for individuals. And then there'll be another round that'll give an additional 250 to families and 150 to individuals. So, that equates to $750 payments for families, $450 payments for individuals, and that'll cost the state a total of about 270 million. The governor's office estimates that it'll affect more than 400,000 low-to-moderate income Marylanders. It's important to note that you won't have to apply for those payments.
LECKRONEThere's also tax relief measures in that relief act. It'll repeal state and local income taxes on unemployment benefits. That'll equate to about 180 million. Small businesses will also get tax credits, totaling up to $12,000, or 3,000 per month over a four-month period. That'll affect about 55,000 small businesses to the tune of 300 million in tax relief. That also extends to the governor's previous unemployment tax relief for small businesses, since unemployment surged during the pandemic.
LECKRONEThere was concern that unemployment taxes would increase for businesses that had to lay off workers. That'll equate to about 218 million. And then it'll also protect small businesses from tax increases due to loans or grants that they received as part of the pandemic relief. And that'll provide about 40 million in tax relief. So, all told, around a billion dollars.
NNAMDIHave any state lawmakers voiced any concerns or opposition to this proposal?
LECKRONEThe biggest one that comes to mind is Comptroller Peter Franchot. He's been particularly critical of the proposal. He accused Hogan of, quote, "passing the buck to the legislature," and he said that the governor has the power to authorize immediate payments to Marylanders, instead of going through the legislature.
NNAMDITo your knowledge, have any state Democrats proposed any relief packages?
LECKRONENot that I know of, as far as a large, all-encompassing package like this. There are some smaller efforts sort of targeted toward specific aspects of the pandemic. One that comes to mind is the Housing Justice package, which features bills for both House and Senate Democrats. Senator Will Smith and Delegate Jheanelle Wilkins, for instance, are sponsoring an effort to codify an eviction moratorium and extend some more relief to tenants.
NNAMDIJoining us now is Dr. Melissa Kearney, a professor of economics at the University of Maryland. Dr. Kearney, thank you for joining us.
MELISSA KEARNEYThanks for having me.
NNAMDIThis would not be the first relief check Marylanders would be getting, as has been pointed out. What kind of economic help have people gotten, including from the federal government, and how does that square with the need out there?
KEARNEYYeah, so the federal government has already authorized more than $4 trillion in relief since last March. And those have included individual stimulus checks to individuals and couples and families, extensions of the unemployment insurance, etcetera. So, a lot of households have already been receiving relief.
KEARNEYAs I'm sure you and most callers know, Biden has just called for another $1.9 trillion dollars in additional federal spending. So, in addition to what we just heard about from Governor Hogan's plan, individuals could be looking at another round of $1,400 checks, which would come on top of the $600 checks that were just authorized in December. Those would go to roughly 90 percent of tax filers. So, you know, a lot of money has already been spent in direct relief, as well as extensions of safety net programs.
NNAMDIBigger picture, though, what is the idea behind direct relief payments to people? As an economist, how does it work? What are the benefits and what are the limitations of this kind of help?
KEARNEYYeah, it's a really important question. So, in the first round in March, in the Cares Act, when Congress authorized these stimulus checks to everyone, the idea was, you know, we are in the throes of a deep crisis. Let's just get a lot of money out to as many people as possible. And I think there was a good argument to do that. We wanted -- you know, we didn't want to waste time trying to figure out who really needed the money, and we just sent it out.
KEARNEYI think it's a lot harder, at this point in the pandemic, to really justify, on economic grounds, another round of $1,400 checks. To be clear, these would go to roughly 90 percent of tax-filers. So, I've heard these referred to as, you know, checks to the working class. Ninety percent of tax-filers is a pretty extensive definition of the working class.
KEARNEYSo, the two main reasons you would have checks like this are, one, to help households maintain their spending and consumption, keep up with their rent and housing payments, keep up with their spending on food when they've suffered an income loss. Again, if we're sending checks now to 90 percent of tax-filers, this is not well targeted on people who have lost their jobs or income. Extensions of unemployment insurance do a much better job of that. Extensions of rental insurance -- or rental assistance or, you know, continued SNAP, Supplemental Nutrition Assistance Program benefits, those are much better targeted.
KEARNEYThe second reason why people support stimulus checks like this is to stimulate the economy. And, again, that might've made more sense in March, when we were in, really, the throes of a terrible recession. But right now, given all the money that's already been sent out to households, given that the labor force has been recovering, that GDB gross is positive again, that stimulus argument doesn't really carry much weight, either.
KEARNEYSo, in my mind, you know, there's very little justification for sending another round of $1,400 checks to 90 percent of tax filers. On the other hand, I think there's a lot of reason why we need to do things like continue enhanced UI programs, continue safety net extensions, etcetera, to really help those who are economically struggling.
NNAMDIWell, what are some of the arguments that politicians and economists, particularly macroeconomists, are using against more pandemic relief legislation?
KEARNEYYeah, so macroeconomists are worried that yet another round of stimulus payments going out to households could mean that when the economy -- when the pandemic essentially wanes and economic activity resumes, there's a lot of pent-up demands, there's a lot of cash on hand. We could see an increase in inflation.
KEARNEYI mean, to be clear about this, the personal savings rate is up, which, I think, surprises some people, given the general sentiment that there's a lot of, you know, economic distress. But economic distress is pretty concentrated. There's a lot of households who have maintained their income, but seen their spending fall because they're not going out and doing things like eating at restaurants, booking flights, staying at hotels. And so personal savings rates are way up.
KEARNEYIf we send more money out to households, we could sort of overshoot, is the worry of macroeconomists. When the pandemic wanes and economic activity recovers, we could just have too much money out there now and lead to inflation.
NNAMDIWell, before I go to the phones, there seems to be, Dr. Kearney, a lot in Biden's plan, outside of pandemic relief, like emergency paid leave and expanded child tax credit and a $15 minimum wage. What's the idea in building a package like this, putting all of this into it? Why do you think these were all put into this specific bill?
KEARNEYYeah. I had a similar reaction when I read it. As an economist, my first thought was, wait, this doesn't look like pandemic relief. So, some of this, you know, might be good ideas. I am definitely not a political strategist, but my understanding at this point is the reason the Biden team decided to do that was because, you know, this idea you never waste a good crisis, right. This is an opportunity to get a lot of sort of progressive wish list items into play and into conversation. If I could comment on two of those, though.
KEARNEYThe expansion and full refundability of the child tax credit, again, I wouldn't have thought of it as necessary for immediate pandemic relief. But it's a great idea that sort of, you know, child and poverty scholars have been pushing for for a long time. And the idea of this child tax credit is, you know, families used to get $1,000 per year, per child under 17. In the 2017, actually, Trump tax reform act, that was expanded from 1,000 to $2,000.
KEARNEYWhat the Biden proposal would do, for this year only, is it expand that from 2,000 to 3,000 per child, an additional $600 if your child's under six. But more importantly, in my mind, it would make the maximum amount fully refundable, which means that a tax filing unit that doesn't owe enough taxes to qualify for the maximum benefit would get that money. And what's really nice about that is that that delivers payments like, you know, tax rebates to the lowest-income households. And we should be spending a lot more supporting low-income families and the lowest-income families with children.
KEARNEYSo, you know, I'd love to see that part of permanent tax reform, not just part of a temporary relief. Some of the other measures, as you mentioned, like an increase in $15 minimum wage, there's reasons to think that that actually might stifle pandemic recovery, especially for small businesses. But, certainly, that's something that many Democrats and progressives would like to see happen, and this seems like an opportunity to try to push for that.
NNAMDIHere now is Jonathan in Hyattsville, Maryland. Jonathan, you're on the air. Go ahead, please.
JONATHANGood morning, Kojo. Thank you for taking my call. My question is, what happened to those who have not got assistance yet and who to talk to?
NNAMDICan you answer that, Bennett Leckrone?
LECKRONEWhat's the question? Who hasn't gotten assistance, who to talk to?
LECKRONEYeah, so I think it would be best to contact your local legislators or, alternatively, I know the IRS has an earned income tax credit helper that can sort of give information about the earned income tax credit filing and who qualifies. And, as far as unemployment benefits, people who haven't received those, that's a common problem that I've heard of. I know that Maryland is, according to federal data, among the slowest states getting those unemployment benefits out. That's something that talking to local legislators to address that may be best.
NNAMDIAnd thank you very much for your call and good luck to you, Jonathan. Bennett, how has the pandemic affected people in Maryland, and what have you been hearing from residents about the kind of help they need?
LECKRONESo, unemployment, like I was just saying, is something that is pretty much the most common thing I hear from residents. Unemployment claims have been on the rise, recently. They were down for a little while, and then they started to rise. I know the weekend of January 16th, initial claims rose to 28,923. That's up from the weekend of January 9th, which was 23,084. That's according to the Department of Labor. And residents have been getting slow -- or they've seen delays in getting those unemployment benefits from the state. Rent relief is another thing that I've heard a lot about, tenants who can't pay rent. And that relates right back to the unemployment benefits.
NNAMDIHere now is Celestine in Clinton, Maryland. Celestine, you're on the air. Go ahead, please.
CELESTINEYes. I have a question that has to do with local churches, especially small churches. Do they receive contributions, or do they receive checks from the CARES Act? And is it included in the Biden proposal?
NNAMDIDo you know, Bennett Leckrone?
LECKRONEI'm not exactly sure about the federal CARES Act, if that provided relief for churches.
NNAMDIDr. Melissa Kearney?
KEARNEYI don't know about churches. One thing I can say is that local nonprofits, and in particular, the question made me think about local Catholic charities, a lot of them are involved in dispersing money that's gotten to state and local governments through the CARES Act. So, you know, if the question is about the support of churches themselves, I don't know. But if it's about, you know, church groups that are helping with rental assistance and emergency financial assistance, a lot of those church groups are helping funnel some of the CARES Act money to individuals who need it.
NNAMDITrue, that. Here, now, is Anthony in Mount Pleasant, in D.C. Anthony, you're on the air. Go ahead, please.
ANTHONYHey there, Kojo. I just wanted to chime in about people who haven't received stimulus checks. I'm 22. I graduated December, 2019 from American University. I was an adult dependent in 2018. So, a lot of people my age haven't received any money from all of the CARES Act stuff, although we have been helped out by Department of Education. And so, it's good to see some of the money.
ANTHONYI think adult dependents are back in with Biden's plan, but I think it was really tragic that a lot of my friends who just graduated college, were unemployed and couldn't get a job, didn't receive any of the money. Also, adults with disabilities, I think, also didn't get the money, although I could be wrong on that. So, it's good to see that money back in.
NNAMDIMelissa Kearney, adult dependents in the Biden plan?
KEARNEYYes. My understanding is also that they're included in the Biden plan. You know, it's interesting to hear, you know, a recent college grad's perspective on this. That is the group, demographically, that's most in support of things like universal checks going out to people, which perhaps isn't all that surprising.
NNAMDIWe got an email from Pam, who says: Stimulus money not needed? Give it away. I've been making a donation a day since March. And then there is Marty in Tacoma Park, D.C. Marty, your turn.
MARTYHi, Kojo. I was just listening to the woman speaker, I didn't get her name, but I sort of disagree with what you're saying about the stimulus package and giving away $1,400. I don't think you're seeing, as the caller before said, all the people, taking into account all the people who really are truly affected by this pandemic and are struggling. I also think, you know, the points that you made about where the money should go to and how it should be distributed is good. However, I think that giving away $1,400 is a symbolic act, too, to folks across the country.
MARTYYou know, $600 doesn't do anything. It's a symbolic act. $1,400 begins to do something. Pays for rent, pays for a month of groceries. I think this is going to go on -- the pandemic, so far, is going to go on through until September, October, November. That's a long time. So, I just wanted to make those points. Thank you.
NNAMDICare to respond, Dr. Kearney?
KEARNEYSure. I'm certainly sympathetic to just how widespread the hardship is during this pandemic. And actually -- I mean, that's why, you know, my policy preference is to really focus spending on people who need it, so it's not just a symbolic act. Sending $1,400 checks to roughly 90 percent of tax filers costs $465 billion. I mean, that's a lot more than symbolism. That's a lot of government money that could be -- if you wanted -- you know, for the same amount of money, you could send checks that are twice as large to the people who have lost their jobs or who can't afford rent or who need the money to go out and buy groceries.
KEARNEYI mean, you know, one interesting point that the caller made is $600 doesn't pay the rent, and that's entirely true for people who need that spending. But what we know from the checks that went out in the spring is that a lot of households saved that money. Low-income households spent the money because they needed the money to pay their rent or pay for groceries. But higher-income households that are getting that money that haven't experienced any income loss, they're just putting it in savings.
NNAMDIBennett Leckrone, when it comes to the individual payments, who will be eligible for the Maryland relief checks and how much is expected?
LECKRONESo, it's earned income tax filers, I believe, from 2019. Basically, there's a few requirements for that EITC. People have to show proof of earned income, have an investment income of less than $3,650, a valid Social Security number, claim a certain filing status on their taxes. And, again, it'll be $500 for families and $300 for individuals, initially. Then there will be another round that will give an additional $250 to families and $150 to individuals.
NNAMDIMelissa Kearney, over the last few years, progressives have been calling for a universal basic income, also known as UBI. What's that?
KEARNEYRight. So, a universal basic income -- with the emphasis on universal -- is the idea that you would -- you know, you'd have a guaranteed amount of income. And, in general, these proposals mean for it to be a subsistence amount, a meaningful amount, like $1,000 a month, or 10 or $12,000 a year, and it would go to everybody. And then there's various ways, you know, people get their income taxed away, etcetera, so low-income people would keep more of it.
KEARNEYBut the idea is really that everybody is eligible. There's no categorical testing, meaning you don't have to be elderly, you don't have to be disabled, you don't have to live in a certain neighborhood. And there's no means testing, right, meaning you don't have to have income below $50,000, or something. So, it's interesting to me that there's been such a progressive push for this, because it's really not progressive at all, right. So, it's very different than something like a guaranteed income, that's not universal, that would call for unrestricted cash to people who are low-income. Or the way it's being rolled out in some cities is people who live in very low-income neighborhoods.
KEARNEYYou know, so some of the reason that people call for a UBI is to say, you know, work is really demanding, robots are taking jobs. The UBI would liberate people from either that worry about being displaced or having to take an undesirable job. A guaranteed income is very different. You know, there are people who are not making enough money in the market, and we want to make sure they have a subsistence amount of income.
KEARNEYYou know, it probably won't surprise you or the callers, given the way I've been talking about less-targeted versus more-targeted relief in the pandemic. I think there's a lot of good reason why we should be spending more money helping low-income people. I find the arguments in favor of a universal basic income much less compelling on an economic level, though I can see why, politically, this has great appeal.
NNAMDIHave you seen countries where the UBI is in place, the universal basic income, and how's it been working?
KEARNEYSo, in terms of, like, rich countries, a couple countries tried pilots in the past couple of years, and they had to end them. I mean, it's, as you would imagine, extremely expensive to just send checks to everybody. I think much more intriguing and interesting are some of the small pilots happening in places like Stockton, in California, where people are getting a guaranteed income. Even though sometimes it's confused, and, like, it's written up as a universal basic income, it's not. It's giving unrestricted cash to people in very poor neighborhoods.
KEARNEYAnd so, you know, the data will come out over the next few years to see how people spend the money if it meaningfully and proves outcomes, etcetera. By the way, I'll just add, we have a lot of evidence that giving money to low-income families leads to benefits, especially for the kids in those households. I know of no compelling evidence saying just incremental increases of income to middle- or higher-income households -- you know, clearly, people like it, but the social or economic benefits of that, I haven't seen any compelling evidence suggesting that we'd see anything.
NNAMDIIn the last 30 seconds or so that we have, what more would you like to see local and federal governments do to curb the economic effects of the pandemic?
KEARNEYSo, me, I'm really worried about, you know, one of your callers said, this pandemic is going to go on for a while. Even after the pandemic wanes, there's a lot of people who are many, many months behind on rent and mortgage payments. I really want us to, you know, continue with dedicated help to people who are at risk of hunger and homelessness. That's a really important one.
KEARNEYAnd the second thing that, I think, is going to be really important is to help the long-term unemployed, people who have been unemployed for more than 27 weeks.
NNAMDIAnd I'm afraid that's all the time we have. Dr. Melissa Kearney, Bennett Leckrone, thank you both for joining us. Today's show was part of our Kojo Connect Series. This month, we're looking at economic inequality. It was produced by Kurt Gardinier and Richard Cunningham.
NNAMDIComing up tomorrow on The Politics Hour, we welcome Maryland Congressman John Sarbanes. He'll discuss the historic inauguration of President Joe Biden and Vice-President Kamala Harris. Plus, he'll tell us about a sweeping national bill aimed at reforming voting and campaign finance. Then we hear from Virginia Governor Ralph Northam on his legislative priorities for 2021 and the latest news on the vaccine rollout. That all starts tomorrow, at noon. Until then, thank you for listening, and stay safe. I'm Kojo Nnamdi.
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