The Daily Signal - The Price of COVID-19 on America's Economy

Episode Date: May 4, 2020

The $2.2 trillion CARES Act stimulus package and historic unemployment during the coronavirus pandemic is placing a strain on our economy and has greatly increased the national debt. Rachel Greszler, research fellow in economics, budget, and entitlements at The Heritage Foundation, joins the podcast to explain the effects of record high unemployment on the economy and how Americans can successfully get back to work after COVID-19. Greszler also shares the intended purpose of the Paycheck Protection Program and what Congress can do to resolve the program's shortcomings. Check out The Heritage Foundation's Blue Print for Balance to find out how balancing the federal budget is possible. Also on today's show, we talk with Neal Harmon, co-founder of the family-friendly streaming service VidAngel, about the platform’s original series “The Chosen.” Enjoy the show! Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Robert Blewey. And I'm Virginia Allen. On today's show, we talk with Rachel Gressler, research fellow in economics, budget, and entitlements at the Heritage Foundation. Rachel breaks down what the high unemployment numbers mean for our economy and how long America can sustain our growing national debt. We also share your letters to the editor in a good news story interview with Neil Harmon, co-founder of the Family Friendly Streaming Service, Vid Angel,

about the original series The Chosen. Before we get started, Rob and I want to tell you about an exciting way to stay engaged with the Heritage Foundation during COVID-19. While we can't host events in person right now, Heritage is having webinars almost every single day on a variety of topics,

ranging from ethics during the COVID-19 pandemic to the CARES Act and the economy. They're really fantastic, Virginia, and they're also free. You can find all of our upcoming upcoming events by visiting heritage.org slash events or by checking out the link in today's show notes. Now, stay tuned for today's show. Coming up next. I am joined by Rachel Gressler, Research Fellow in Economics, Budget, and Entitlements at the Heritage Foundation. Rachel,

thanks so much for being here. My pleasure. Thanks for having me, Virginia. Well, today we're talking about our economy and what are some of those variables that we're seeing right now in the economy and what some of those effects are of COVID-19. And quite frankly, I really wish that this could be a cheerier conversation. But I'm really glad that you can join us today and share a little bit of your expertise on this subject and just give us a glimpse into America's economy now and what it might look like in the future. So let's begin by talking about unemployment. You wrote in a recent article that unemployment rates are close to 20%.

20%. That's unbelievable. Just in the past four weeks, we've seen about 26 million Americans apply for unemployment benefits. Now, the government's response to these high numbers has been to not only provide the normal unemployment benefits to Americans, but also to give all recipients an additional $600 a week. What was the rationale behind not only offering those unemployment benefits, but tacking on that additional $600? Well, in a normal situation, the unemployment program, it doesn't cover everybody. It doesn't cover people like the self-employed or part-time workers or gig economy workers. And it also only provides about 50% of people's previous earnings.

You also have to be fired from a job. You can't quit or choose to leave your job. But under these unusual circumstances, when businesses were forced to shut their doors, and workers lost their job through no fault of their own, tens of millions of workers, Congress wanted to do something to bridge the gap in a better way so that we could give people a higher portion of their earnings so that they could maintain their living standard, pay their bills, and then be able to be ready to come back to work as soon as it's safe to reopen businesses. So the goal there was to try and get people closer

to what they had previously gotten from their paychecks in the form of unemployment insurance check. The problem there was they just said, well, let's do $600 for everybody because for somebody who makes about the average, this would help bring them up to 100%. But the reality is a majority of Americans will be getting more from unemployment insurance than they would from their normal paycheck. And that creates a lot of bad incentives, including ones that go against the grain and are going to defeat the funds and the programs that Congress has set up that do try to keep people employed. So let's talk more about that because you wrote that the extra $600 a week could increase unemployment benefit claims by $13.9 million and reduce the nation's output by up to $1.49 trillion between May and September. Can you just kind of explain this domino effect a little bit more?

Yes. So my colleague, Drew Gondtrowski, and I have a report coming out today. And we use some modeling in the Center for Data Analysis to look at what the impact would be, considering that more people will, file for unemployment insurance benefits because more people are eligible to obtain them. And they will also tend to be on them for longer because they're making a higher portion of their earnings than they otherwise would have. And so we said, we see this as being really problematic and we want policymakers to know what the implications will be. So we ran it through our labor models and found that the total amount of unemployed could peak at about an extra 14 million people in about May. And that is a result of people not working, and say,

at home instead of coming back when they're able to otherwise, that the output will decline by somewhere between $955 billion and $1.5 trillion between May and September. And we used a lot of economic research elasticity to model this, but we're starting to see the real world implications of it from businesses that are reporting that they've had to close their doors, even though they want to be able to stay open and provide things to people like first responders or maybe it's restaurants in some of those states now that are allowed to start reopening and they aren't able to get their workers to come back because some of them might be making 50% more on unemployment than they would if they went back to work. You know, even just for the median

earner, they can make an extra $2,300 over four months of unemployment compared to being employed. And this is particularly true for the lower that you go down the income scale. You know, somebody who's at about the 25th percentile of earnings would get an extra $5,000 over this four-month period that the additional benefits are available. And so clearly it's in their financial incentive to not come back to work once their employer says, we'd like to rehire you. And that's going to create all sorts of problems in terms of not being able to get the economy regoing again once it's safe to do so.

Rachel, you're saying that if, let's say, I work as a receptionist, it may be an auto part shop or something like that. And I go to my employer and I say, I feel unsafe working right now during the pandemic, then I can quit, but I can still, under the CARES Act, receive unemployment, the regular unemployment benefits, plus that $600 and probably be making even more than I would be making from my employer. That's exactly. Under this new eligibility criteria, it really is more in workers' hands to decide whether or not they're going to keep working or to file for unemployment insurance. And say you're that receptionist may be making $600 per week coming into the office, you would be making $900 per week from unemployment. And those additional benefits

are available until July 31st. So there's going to be a big incentive for people to not go back to work until at least July 31st. And we certainly hope that Congress doesn't extend those benefits It's beyond July 31st. But what about the Paycheck Protection Act? Because my understanding of the Paycheck Protection Act was that it was really put in place in order to keep employees attached to their employer so that now employers could keep paying their staff and we wouldn't end up in a situation where so many people were filing for unemployment. Yes, and that was exactly the goal of the Paycheck Protection Program was, it's aimed at smaller businesses,

but it's a resource for them to be able to keep all their workers on their paychecks, even if they're not actually coming into work or maybe they're only doing a few hours from home, to keep those connections so that workers don't lose their health insurance, and that when it's able to get things up and running again, everybody will be in place and able to resume more quickly. But the problem is that these are kind of competing with one another now. And so we've heard cases of a spa owner in Washington State who she went out and got a paycheck, protection program loan and she was announcing it to all of her employees on one of these Zoom calls

and they got angry with her and they thought that she was taking something away from them by wanting them to remain employed and get their usual paychecks because they could have gotten more from unemployment insurance and similarly you know a woodmill in Arkansas they pulled their workers and said would you rather to keep coming into work and keep your paychecks or do you want the unemployment insurance because they had already heard from among the ranks that a lot of people didn't really want to keep working. And they decided that they were going to lay off half of the people at one of those plants because they didn't want to have that animosity in the workplace of people thinking, I'd rather be at home and collecting these benefits.

So what should Congress have done differently? How could the Paycheck Protection Act had been implemented in a way that it actually really was helping small businesses instead of hurting them? It was really an easy fix. And this was something that a group of senators provided an amendment for that just would have said the total amount of unemployment benefits that you get cannot exceed what you were previously getting in your paycheck. It is a very common sense, but there was pushback against that. Some people said it would make it harder to implement, but the reality is the states already have formulas, whether it's 50% or whatever it is, and so to just say that that new formula is going to be capped at 100% would not have been that

much more administratively burdensome to implement. And so it certainly would have helped prevent these situations where workers are being incentivized to quit, employers are being incentivized to lay workers off instead of go through the application process of getting a loan, which were difficult to do, and we know the money did run out there at one point. And so it's an easy fix, and hopefully Congress will still be looking at this and consider putting that fix into place. So let's talk about the long-term economic impacts from COVID-19 and these really generous unemployment benefits. Let's say we get to July or August. and businesses across America are given the green light to reopen.

Are you worried that businesses are going to face challenges of actually getting employees to come back to work and that it's going to be really challenging to actually get Americans off of unemployment? I think it is, especially before July 31st when this additional $600 per week runs out. And unfortunately, it's going to be hardest to get those people back in the industries that have been hardest hurt, like restaurants, hotels, tourism, and travel, because then these tend to be the lower paid workers, and they are the ones who take home the biggest benefit by this additional $600 per week coming through to them. And, you know, in some ways we can't fault them if they're able to collect more money from unemployment and save that up. That makes sense for them individually, but it might not actually make sense

in the long term also because we know that the longer people aren't employed, the lower their opportunities and incomes are in the future. But also just in the short term, terms of getting the economy going again and having us be productive and in particular being able to meet some of the needs. We've already seen supply shortages in certain companies that are not able to deliver things or get made what's needed to be made as quickly as possible to meet the demands from COVID-19. And so that's going to be an increasing fear going forward, especially as this is going to remain an issue into the fall flu season. We want to have the companies be prepared to to be able to respond to COVID-19 in the ways that we need them to.

Yeah. And one of the other issues that we're hearing a lot about in the news right now is state bailouts. There's a great deal of controversy here. Is there a world where the federal government should consider bailing some states out? Not a bailout. There's definitely a role for the federal government to provide help for COVID-19 related expenses. And we've already seen an unprecedented amount of money go towards that. And the federal government is covering almost all of the health care costs.

They provided $150 billion in direct grants to the states, up to $500 billion in new lending that is unprecedented coming from the Federal Reserve. But what the states are asking for now is unrestricted funds to use for whatever purpose they want, essentially, including if their revenues have gone down, which is something that states are supposed to plan for. and that's why they have rainy day funds. And also covering things like pension obligations that they haven't funded for decades. Illinois sent a letter to Congress asking for $40 billion, including $10 billion to cover

their unfunded pension obligations. That has nothing to do with COVID-19. And so there is not a need and there's no real excuse that the federal government would bail out states. That just sets a terrible precedent going forward that you're going to penalize states who have acted in a responsible way fiscally and reward those who have been reckless. Senate Majority Leader Mitch McConnell said that states maybe should consider declaring bankruptcy if they really need to. His exact words were I would certainly be in favor of allowing states

to use the bankruptcy route. Now, McConnell has received a lot of backlash from this statement. Do you think that the bankruptcy route is something that some states might need to consider? Well, I think the important takeaway behind Senator McConnell's statement is that the federal government's not responsible for states' budgets. And so to the extent that there have been states like Illinois or New York coming and saying, we absolutely need you to give us this money or we're not going to be able to operate, that's not true. You don't get into a bankruptcy-like situation unless you have had decades worth of fiscal mismanagement. The issue of bankruptcy itself, the states are actually not allowed. to declare bankruptcy right now. States can allow their cities or the municipalities to declare bankruptcy. But going forward, this is an issue that will remain something for Congress and the

states to consider because the reality is there are some states that prior to COVID-19 were already in a situation where they're pretty rapidly approaching insolvency. And Illinois is the best example of that. You know, I really don't see a way forward for that state to either raise taxes enough or cut services enough that they will be able to pay their debts and to fulfill their pension obligations. And so something will have to be done there and whether or not that's a bankruptcy type situation or if the state sits down and negotiates with its steaders and with its public employees, something will have to be done. But I think that the issue of COVID-19, that in and of itself would not cause a state to become insolvent. And I think that's the point

that was trying to be made here is that we will help you with the expenses related to this health pandemic, but we're not going to cover those things that are your own responsibility to budget for. I see. That makes sense. Well, speaking of debt, America's national debt now is over $24 trillion last time I checked. That is higher than it's ever been before. And frankly, a number that's just, it's really hard to wrap your mind around. Our federal government is spending a lot of money right now on these various kind of stimulus packages. Where is this money coming from? It's coming from you and me in the future, from our children, from, you know, anybody that's working today on out into how many years we don't know because we don't

know when our debt becomes unsustainable. You know, looking back decades ago, we would have said, how could we ever get over $23 trillion in debt and have a single year in which we have $4 trillion in debt? Like, that's not possible. And yet it seems like it's possible now. And the problem is you just don't know when these debt crises hit. Puerto Rico didn't anticipate the timing of when there's day in Greece, other countries. And when you get to the situation where a creditor just decide that they're not going to lend to you anymore at an unreasonable rate, that's when you don't have time to make the more rational decisions to pair back in certain expenses that you otherwise would have been able to

if you acted sooner. We're already at a situation in the U.S. where each household in America owns about a hundred $187,000 worth of America's debt. And that was before COVID-19. And now we've added on about another $27,000 per household. So this is clearly an unsustainable level and a huge burden for future generations. Is it possible to actually pay off that much debt? We will see. It depends how, you know, it's possible. You know, you have to do it over time. It's going to take a level of fiscal restraint that we never seen before. What we don't want to get to is a situation where you have enormous tax rates that lead to a smaller economy, and then it results in a downward spiral, and you are more likely to face a bankruptcy-type situation or having the Fed need to print its way out of debt,

and that's certainly not something that we want it to come to. Yeah. So what does need to happen next? I mean, how can we come out of the coronavirus situation and really ensure that, like you say, that we're leaving our kids and our grandkids a prosperous America that has, you know, the same opportunities that you and I have enjoyed. Well, I think starting with the current crisis is evaluating what's been done to date and how has it worked or not worked. There's just constant urge by Congress to pass more and more stimulus bills to try and have more assistance and aid and relief.

And yet we don't even know some of the money hasn't gone out the door and we don't know what the impact has been. we don't know what it's going to be like as states start reopening their economy. So I would say the first thing is to put a hold, unless it's an absolute immediate need directly related to COVID-19, we shouldn't be considering spending more money yet. We need to kind of wait and see and hope that things will start reopening and rebounding. And then going forward, you know, just as any time when a household would run out of its rainy day funds or have to take on debt, you have to budget in the future to account for that.

you have to eventually pay that back. And unfortunately, the U.S. has not ever been paying things back. It's like we have an interest-only mortgage, and we just keep increasing that mortgage every single year and never paying anything down. So we actually have a proposal at the Heritage Foundation called the Blueprint for Balance that we've put out each year, and we show how you could actually start balancing our annual budget

within 10 years and get to a more sustainable pathway going forward. Wow. Well, we'll be sure to link the blueprint for balance in our show notes, our audience can check that out. But Rachel, we really appreciate your time today and your expertise on this subject. Thanks so much, Virginia. It's our priority at the Daily Signal to keep you informed during the coronavirus pandemic. Here's an important message from the White House Coronavirus Task Force. Taking care of your mental health is critically important as we stay indoors more often. It's important that people get enough sleep because we know sleep promotes mental health.

It's important that you get exercise when you can while still engaging in proper social distancing. And most importantly, seek help if you need it. Telehealth services are available and call a friend if you just need someone to talk to. Now more than ever, we want you to pay attention to your mental health. Thanks for sending us your letters to the editor. Each Monday, we feature our favorites on this show and in our Morning Bell email newsletter. Virginia, who's up first? In response to Rachel Del Judas' recent podcast interview with Jonathan Jakubowski, author of Bell Leather Blues,

A Conservative Awakening of the Millennial Soul, Elizabeth writes, too many schools have indoctrinated kids, but when they are on their own, they realize life is not free. If you want something, you have to work for it. I worked as a kid, mowing lawns to make money to buy what I wanted or thought I needed. It made me respect life a lot more. And in response to Virginia's interview on the Problematic Women podcast last week with Joni Eric Santata, Wes writes to us, Joni Eric Santata is an inspiration to us all,

but particularly to those who have physical challenges and disabilities. Her passion for life and her faith in God are lived out every day, and even though she is limited by significant disabilities, she's an inspiration and an encouragement to us all. Your letter could be featured on next week's show. So send us an email at Letters atdailySignal.com. We have a unique good news story to share with you all today. We're joined by Neil Harmon, one of the founders of the Family Friendly Streaming Service, Vid Angel.

Neil, thanks so much for being here. Thanks for having me on, Virginia. Now, we have reported on Vid Angel in the past of the Daily Signal, but for those who might not be familiar with the platform, can you just give us a little bit of background about what VidAngel is and what makes it unique and different as a streaming service? You bet. So we exist to help you, the viewer, make entertainment good for your own home.

Now, everybody's home's unique, and we do this in a couple of ways. One way is you can connect your Netflix or Amazon Prime account or HBO account to your VIT angel account, and then you can skip over stuff that you don't want in your own home. So you could skip over nudity, rough language, racial slurs, whatever you chose was not appropriate for your family to hear or see. You can just skip over it. And the second thing that we do is we take all that information that people give us about what they skip. And we share that with creators and we create better content, which you mentioned. that you wanted to talk about The Chosen, that's a good example of better content.

Yeah, I'm really excited to talk about The Chosen. First, though, I do just want to mention that you all have gone out of your way to really provide great options for families during COVID-19 through various promotions and just exceptional content. Can you tell me a little bit about some of the promotions that you all have been running? Oh, yeah, you bet. So back in March, we did a mandatory work from home directive at our own company before the rest of the country. And I was on a phone call with one of our team members. And we were both commiserating on how frustrated our kids were. And out of that grew the idea that we should provide VidAngel for free if you agree to practice social distancing and give bigger hugs when this is all over.

So that's, it's available for free. You can, you can download the app and, and use it right now. That's so awesome. Well, and as you mentioned, you all not only stream content, but you now have original shows and movies. And one of those original shows that you all have produced is the TV series, The Chosen. I am completely hooked on this show because it's so, it's so unique in how it depicts the life and the ministry of Jesus. I really have not. seen anything like this before. Can you just tell us a little bit about the decision to create the chosen and why you decided to tell the story of Christ in the way that you have? So the decision started in, I told you the second reason that we exist as a company is to make better content

from the audience's choices. And back in 2016, 2017, we decided to start making our own content. And we start, our first series was called Dry Bar Comedy, which does over a billion views a year now. And this is stand-up comedy that was family-friendly. And we were able to prove through Dry Bar Comedy that there was a huge market if we created better content for people. And so after Dry Bar, we decided,

well, let's try doing a real, dramatic series and what should be our first series? Well, a friend of ours, and Matthew Farachi connected us to Dallas Jenkins, who had made a short film for his church. And it was called the Shepherd. And it was the birth of Christ through the eyes of the shepherds. And that story touched us deeply at VidAngel. And we caught the vision right away of where Dallas wanted to head with these backstories behind the scriptures. And so we got behind the project and helped raise over $10 million from 19,000 people and produce the first season of the chosen, which has been a breakthrough success. We've been so thrilled with the response to it. And the show is,

like you said, it's 100% crowdfunded, which is just incredible. It's actually the largest crowdfunded multimedia project in history. I mean, that takes incredible courage to say, we're going to make this show and we're going to count on, you know, just normal people to support it and, and drive this forward. What gave you kind of that push and that inspiration to say, yeah, we think we can actually do this and it's going to work? So when we started the company and we provided this service that would allow you to skip over content inside of popular Hollywood TV shows and movies. We were sued for it. Disney didn't

like what we were doing. And that lawsuit has been a multi-year, very difficult battle. And when we were sued, we thought that was the end of our company's short life. But We had lots of customers who asked for us to allow them to donate. And then we discovered a law that allowed for the crowd to invest in a company. And we said to our customers, if you want us to survive and you want us to fight for your right to skip over content and to have better content, then you can invest in our company. Who's interested? and in five days we raised over $10 million to fight the battle with Disney.

And right after we raised that money, my brother Daniel called and said, Neil, if you applied this same principle of crowdfunding to content, don't you think that would be really, really compelling? And we just thought that was the best idea because the only way we need, know if entertainment is good for your own home is because you're voting for it, right? The crowd, the people who are going to be the audience are voting for the content. And so this is like the ultimate say on it's not some executive inside of Hollywood saying whether something should be made. It's the people. It's the audience. Yeah. Well, the first season of The Chosen is out. And I know

from looking at your website, it looks like you all have plans for a second season. what is the response that you have been receiving from viewers and how quickly do you think you'll be able to create that second season? So the first four episodes of season two are mostly written. And my understanding is the episodes five through eight of season two are well on their way. And we're hoping, God willing, with this whole coronavirus thing, that we're able to begin production this summer of season two. Wow. And how many seasons do all want to create? So the initial idea was seven seasons to get through the four gospels and the life and resurrection of Jesus. Wow. Wow. So exciting. Well, I'm certainly loving it. And again,

just want to remind all of our listeners, you can find the show either by visiting the VidAngel website or like you said, Neil, there is an app, as well. well, which is how I'm enjoying the show. But Neil, I just really want to thank you so much for your time today and just coming on and sharing with us about what you all are doing at BitAngel and just the awesome content you all are producing. Virginia, thank you for paying it forward and for helping get the word out. All right. Well, we're going to leave it there for today. You can find the Daily Signal podcast on the Rurkishay Audio Network. All our shows can be found at dailysignal.com slash podcasts. You can also subscribe on Apple Podcasts, Google Play, or your favorite podcast app,

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