Category Archives: Pandemics & Infectious Diseases

Student Loans, COVID-19 and Reform Needs

Source: Martin Wurm, Regional Financial Review, November 2020
(subscription required)

Despite concerns that student loan delinquencies and defaults may spike once deferment under the CARES Act expires at the end of 2020, most student loan debt is owned by high-income households, which are not likely to default and do not need such subsidies. Policy reform should be aimed to benefit lower-income and minority households, which are targeted by low-quality, for-profit schools and are much more likely to default

Economic Challenges for Parents During COVID-19

Source: Ryan Sweet, Regional Financial Review, November 2020
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We explore how living with school-age children has affected decision-making during the pandemic. Households with children experienced sharper job and income losses than those whose children are not living at home, and female parents are more than twice as likely as men to reduce their work hours among couples living together.

U.S. State and Local Shortfall Update: December 2020

Source: Dan White, Emily Mandel, and Colin Seitz, Moody’s, December 17, 2020
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Will the money come from taxpayers over time funding federal debt or more immediately in tax hikes and austerity measures?

  • Without additional federal assistance we project states and local governments will be forced to raise taxes or cut spending by between $171 billion and $301 billion over the next year and a half.
  • Though nearly every state will see significant fiscal stress this year and next, the consequences of these shortfalls will vary even more than usual from one state to another.
  • How federal policymakers choose to react to these shortfalls will have significant implications for the economic outlook.

Fiscal Effects of COVID-19

Source: Alan Auerbach, Bill Gale, Byron Lutz, Louise Sheiner, The Brookings Institution, Brookings Papers on Economic Activity, BPEA Conference Drafts, September 24, 2020

The COVID-19 pandemic and the associated policy responses have had a significant impact on government budgets. Federal spending has skyrocketed. State and local governments, almost all of which face some form of annual balanced budget rule, confront fiscalshocks on both the revenue and spending sides that threaten to make the recession deeper and slow the recovery. This paper examines the impact of COVID on the fiscal status of the federal government and the states.

Section II provides new projections ofthe federal budget outlook, with five main results. First, we document that the pandemic and the policy responses to it rapidly and substantially raised federal deficits, but only on a temporary basis. Spending and revenue are projected to return to pre-COVID baseline values relatively quickly. Second, the long-term fiscal outlook through 2050 has deteriorated somewhat. Under the Congressional Budget Office’s (CBO 2020f) assumptions for GDP growth and interest rates, we project that the debt-to-GDP ratio, currently 98 percent, will rise to 190 percent in 2050 under current law, compared to a pre-COVID baseline projection of 180 percent. CBO (2020f) obtains a similar projection – 195 percent –using a slightly different set of assumptions.

Third, although the economic downturn and COVID-related legislation raise debt permanently, sharply lower projections of interest rates for the next dozen years help moderate future debt accumulation. Nevertheless, even during the period when interest rates are projected to be low, the projected debt-to-GDP ratio rises steadily due to substantial and rising primary deficits, driven largely by rising outlays on health-related programs and Social Security. As the economy grows and debt accumulates, interest rates are projected to rise and to exceed the nominal GDP growth rate by increasing amounts starting in the early 2040s.

Fourth, under a “current policy” projection that allows temporary tax provisions –such as those in the Tax Cut and Jobs Act of 2017 –to be made permanent, the debt-to-GDP ratio would rise to 222 percent by 2050 and would continuing rising thereafter. Fifth, the long-term projections are sensitive to interest rates. If interest rates remain low (that is, at their projected level for 2025), rather than rising as in the CBO projections, the debt-to-GDP ratio would equal157percent in 2050 under current policy.

We discuss several aspects of these results – including how the current episode compares to past debt changes, the role of historically low interest rates, and recent Federal Reserve Board policies. Because of the macro-stabilization effects of fiscal tightening, and because low interest rates create “breathing room” for fiscal policy, we do not see the large, short-run debt accumulation resulting from the current pandemic as necessitating any immediate offsetting response. But the long-term projections show that significant fiscal imbalances remain and will eventually require attention.

Section III discuss the effects on state and local governments. We examine several recent estimates of the effects of the pandemic on state and local budgets — some of which find relatively modest effects and others which find effects that dwarf those experienced during the Great Recession. We note that the very unusual nature of the current recession meansthat relying on the historical relationships between the state of the economy and state and local tax revenues may produce misleading results. We instead attempt to calculate the impact on state and local government using a “bottom-up” approach that accounts for the geographic variation in the distribution of unemployment and consumption declines, the fact that low-wage workers have been particularly hard hit this recession while higher-income workers have been much less affected, and the fact that the stock market has not responded to the economic downturn as it has in the past.

Our findings suggest that this pandemic is indeed having very unusual effects on state and local revenues. We estimate far smaller income tax losses than would have been expected on the basis of historical experience, which we attribute to the fact that employment losses have been unusually concentrated on low-wage workers, the unprecedented increases and expansions of unemployment insurance benefits and business loans, which will shore up taxable income in 2020, and the fact that the stock market has held up so far, unlike most of the prior economic downturns. On the other hand, our estimates of the losses in sales and other taxes and fees are much larger than one would have expected—the decline in use of transportation services alone seems likely to depress revenues by over $45 billion this year. In aggregate, we estimate that state and local own source revenues, excluding fees to public hospitals and institution of higher education — which we view as somewhat distinct —will decline $155 billion in 2020, $167 billion in 2021, and $145 billion in 2022. Including lower fees to hospitals and higher ed would bring these totals to $188 billion, $189 billion, and $167 billion.

We then turn to a discussion of federal aid. We estimate that the legislation enacted last spring provides about $212 billion in aid to state and local governments, excluding aid to public hospitals and higher ed, and $250 billion including that aid. While this appears to be larger than the total revenue declines expected thisyear, that doesn’t mean that the aid has been sufficient to preclude tough budget choices and poor macroeconomic outcomes. First, should the economy remain below its pre-COVID baseline for many years, as the CBO projections suggest, these governments will face significant shortfalls in coming years. Knowing that, they are likely to restrain spending somewhat this year, and make additional cuts in coming years. Second, the pandemic itself has likely increased the demands on state and local governments—for public health spending, virtual schooling, help for the elderly, etc. Simply maintaining pre-COVID levels of spending may not be enough to assure that necessary services aren’t cut. Finally, our analysis shows that smaller states got much more generous aid relative to their losses, and that states like New York and California will likely be facing budget shortfalls in the current year even without consideration of the spending demands brought on by COVID-19.

Section IV provides concluding remarks.

Related:
State and Local Fiscal Conditions and COVID-19: Lessons from the Great Recession and Current Projections
Source: Congressional Research Service, CRS INSIGHT, IN11394, Updated July 8, 2020

Without Another Massive Federal Stimulus, State and Local Governments Will Face Brutal Austerity
Source: Colin Gordon, Jacobin, November 10, 2020

States Grappling With Hit to Tax Collections
Source: Center on Budget and Policy Priorities, November 6, 2020

How the COVID-19 Pandemic is Transforming State Budgets

Source: Urban Institute, December 11, 2020

The COVID-19 pandemic and resulting recession have dramatically reshaped state economies and budgets. But the severity of the pandemic and economic downturn varies significantly across states, creating unique economic and political pressures. We collected health, economic, and fiscal data for all 50 states and the District of Columbia to show how each individual state has changed during this crisis and suggest what might be needed for recovery.

Always Essential: Valuing Direct Care Workers in Long-Term Care

Source: Kezia Scales, Michael J Lepore, Public Policy & Aging Report, Volume 30, Issue 4, 2020
(subscription required)

From the abstract:
In the United States and worldwide, the coronavirus disease 2019 (COVID-19) pandemic has disproportionately impacted the long-term services and supports (LTSS) sector, which serves those individuals who are most at risk of morbidity and mortality from the disease. Although devastating, the crisis also, importantly, heightened the visibility of the direct care workforce—thanks to increased attention on the LTSS sector and extensive news coverage of the responsibilities and risks shouldered by these workers (Almendrala, 2020; Lyons, 2020; Quinton, 2020; Woods, 2020)—and catalyzed action to improve direct care job quality. This new momentum to improve direct care jobs builds on decades of efforts to reinvent the financing mechanisms, laws and policies, and regulatory processes that have historically marginalized this workforce. However, with the largest payer for LTSS in the United States being Medicaid, a means-tested public assistance program, past efforts to improve LTSS and elevate direct care jobs have tended to achieve incremental progress at best, and more often have ended in political gridlock or inertia (Lepore, 2019). Drawing on empirical data and historical and theoretical analyses of direct care work in the United States, this article examines how efforts to improve direct care jobs have historically been stymied by the incongruence between the moral value and material value attributed to this work (Lepore, 2008). We argue that this incongruity of values has not been sufficiently emphasized in past LTSS reform efforts, and recommend an approach for aligning these values in the post–COVID-19 era.

National Snapshot of COVID-19 Impact on United States Museums

Source: American Alliance of Museums and Wilkening Consulting, November 2020

From the summary:
Between October 15-28, AAM and Seattle-based Wilkening Consulting conducted the second iteration of a survey of 850 museum directors to assess the impacts of COVID-19 on the museum field. The survey asked the same questions as the first National Snapshot of COVID-19 Impact on United States Museums conducted in June, and gathered some new data and benchmark metrics for members. Museum directors responded to the AAM survey on behalf of their organizations, representing a broad cross-section of the field geographically, by size, and by discipline.

The sample of 850 museums provides a confidence level of 95 percent with a confidence interval of 3 percent for the population of AAM member museums. The data filters (by museum type, geographic region, and museum operating expenses) have smaller numbers and therefore higher margins of error. The research was conducted by AAM and Seattle-based firm, Wilkening Consulting.

Findings from the new AAM survey show museums are suffering prolonged stress and are anticipating a difficult and slow recovery:

  • Nearly 30% of museums in the United States remain closed due to the pandemic.
  • Nearly one-third of museum directors surveyed confirmed there was a “significant risk” (12%) of closing permanently by next fall, or they “didn’t know” (17%) if they would survive.
  • Over half (52%) of museums have six months or less of operating reserves; 82% have twelve months or less of operating reserves.
  • Over half (53%) of responding museums have had to furlough or lay off staff. Overall, respondents indicate that approximately 30% of staff are currently out of work. Positions most impacted by staffing reductions included frontline (68%), education (40%), security/maintenance (29%), and collections (26%) staff.
  • To prepare for reopening, each museum spent, on average, $27,000, with this figure cited as high as $750,000.
  • On average, each respondent has lost $850k in revenue due to the pandemic so far this year.
  • On average, respondents anticipated losing approximately 35% of the museum’s budgeted operating income in 2020 and are anticipating losing an additional 28% of normal operating income in 2021.
  • While museums are creatively replacing traditional revenue models, digital fundraising event revenues are falling 34% short of these traditionally in-person activities.
  • Museums are operating at, on average, 35% of their capacity–an attendance reduction that is unsustainable long-term.

Related:
Press Release

Health Benefits In 2020: Premiums In Employer-Sponsored Plans Grow 4 Percent; Employers Consider Responses To Pandemic

Source: Gary Claxton, Anthony Damico, Matthew Rae, Gregory Young, Daniel McDermott, and Heidi Whitmore, Health Affairs, Vol. 39 no. 11, 2020
(subscription required)

From the abstract:
The annual Kaiser Family Foundation Employer Health Benefits Survey is the benchmark survey of the cost and coverage of employer-sponsored health benefits in the United States. The 2020 survey was designed and largely fielded before the full extent of the coronavirus disease 2019 (COVID-19) pandemic had been felt by employers. Data collection took place from mid-January through July, with half of the interviews being completed in the first three months of the year. Most of the key metrics that we measure—including premiums and cost sharing—reflect employers’ decisions made before the full impacts of the pandemic were felt. We found that in 2020 the average annual premium for single coverage rose 4 percent, to $7,470, and the average annual premium for family coverage also rose 4 percent, to $21,342. Covered workers, on average, contributed 17 percent of the cost for single coverage and 27 percent of the cost for family coverage. Fifty-six percent of firms offered health benefits to at least some of their workers, and 64 percent of workers were covered at their own firm. Many large employers reported having “very broad” provider networks, but many recognized that their largest plan had a narrower network for mental health providers.

The Risk Of Severe COVID-19 Within Households Of School Employees And School-Age Children

Source: Thomas M. Selden, Terceira A. Berdahl, and Zhengyi Fang, Health Affairs, Vol. 39 no. 11, 2020
(subscription required)

From the abstract:
Across the United States, school districts are grappling with questions of whether and how to reopen and keep open elementary and secondary schools in the 2020–21 academic year. Using household data from before the pandemic (2014–17), we examined how often people who have health conditions placing them at risk for severe coronavirus disease 2019 (COVID-19) were connected to schools, either as employees or by living in the same households as school employees or school-age children. Between 42.0 percent and 51.4 percent of all school employees met the Centers for Disease Control and Prevention’s (CDC’s) definition of having or potentially having increased risk for severe COVID-19. Among all adults with CDC-defined risk factors for severe COVID-19, between 33.9 million and 44.2 million had direct or within-household connections to schools.