Is This What Happens When You Build a Real Social Safety Net, Then Take It Away?
Andrey Kasay
We built a real social safety net in the United States and then abruptly ripped it apart.
by Bryce Covert
It’s a riddle that economists have struggled to decipher. The U.S. economy seems robust on paper, yet Americans are dissatisfied with it. But hardly anyone seems to have paid much attention to the whirlwind experience we just lived through: We built a real social safety net in the United States and then abruptly ripped it apart.
Take unemployment insurance. The CARES Act, passed in March 2020, included the largest increase in benefits and eligibility in American history. It offered people “a sense of relief,” said Francisco Díez, senior policy strategist for economic justice with the Center for Popular Democracy, which organized unemployed people in the pandemic. “A feeling like they could breathe and figure out what they could do.”
LaShondra White was one of them. When she was furloughed from her job at a Kohl’s department store in Detroit in March 2020, she started receiving more than $600 a week. It was “my chance to get out of this situation,” she told me last year, a situation in which her pay was “horrible.” She had always wanted to own her own business, so with the extra money she fixed her credit score, rented out a commercial space and opened an eyelash studio. Her studio is still open and largely booked.
In 2019, unemployment insurance kept 500,000 people out of poverty; in 2020, that figure was 5.5 million. Yes, the program was riddled with problems, particularly technological ones, that made it difficult for many people to get enrolled quickly. But once they were covered, “They saw something close to the actual level of benefits that they deserve,” Mr. Díez said.
It was short-lived. By July 2020, the extra $600 in benefits had lapsed, and it wasn’t until December 2020 that Congress approved $300 payments with new restrictions. By May, some states started opting out, leaving their residents with the paltry benefits they would have gotten prepandemic.
In those states, “There was a real sense of terror and concern and fear and abandonment from the politicians who chose to cut the benefits off early,” Mr. Díez said. “It really harms whatever faith they had in the nature of government as an institution that can actually see their struggle.”
Unemployment has been below 4 percent for more than two years, wage growth is outpacing inflation (which has fallen considerably), and economic output is booming. And yet consumer sentiment has been depressed, and even though it rose recently, it’s still about 20 percent lower than before the pandemic began. It’s at levels typically seen at the end of a recession.
Why are the economic vibes off? There are most likely many answers. Obtaining the basics, like housing or child care, has become more difficult. Falling inflation is great, but prices have remained uncomfortably high. Republican voters may just not like an economy run by a Democratic president. Americans may feel OK about today’s economy but wary of the future.
All of this can be true simultaneously, but let me add another reason Americans may be doing well but feeling financially insecure: In the pandemic, the country created the most robust safety net we had seen in decades, buffering people against eviction, poverty, hunger and other suffering. Americans’ lives were materially and appreciably improved. Then we took it all away.
The message received is that the government could have done these things all along but had chosen not to — and has chosen once again to withdraw that kind of security. Before March 2020, Americans were used to piecing a living together without much government help, but now they’ve seen that it doesn’t have to be that way. They’ve tried to create their own individual safety nets, but they’ve spent down the savings they were able to squirrel away when pandemic-era public programs were in place.
So even if people are more likely to have a job and even have gotten a raise that outpaces increased costs, they can still look down and see that there’s nothing to catch them if they fall. That puts us in a perpetual state of exhausting hustle. One wrong step, one misfortune, one layoff can mean catastrophe without supports to get you back on your feet. No wonder so many Americans don’t feel very confident.