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I admit I was surprised to hear Mitt Romney and Donald Trump suggest mailing checks to every adult in the US. It’s a sign of just how serious the abrupt recession is. He may not have used the “R” word, but he’s behaving like an incumbent facing re-election in a recession year.
That said, I hope that the unusual political openness created by the emergency lets us do something smarter than just mailing checks to people, as important as that is.
And it is! Yesterday my local paper had a story of a successful local restaurateur who had to lay off over 1,000 employees at his various restaurants. Hospitality is a huge industry here, and social distancing has hit it hard. The governor even went so far as to order every mall and amusement park in the state to close indefinitely. That’s a lot of student jobs. Getting people money quickly can prevent a devastating crash in consumer demand, which is a majority of the economy.
Regular readers won’t be surprised to hear that I favor a universalist approach. Don’t try to get clever or fine-grained with sliding scales and whatnot, just mail out the checks. That will work wonders for speed of implementation and take care of all sorts of needs. If you’re worried about it being regressive, make it taxable, so higher-income people will keep less of it. Conceptually, that’s the easy part.*
My concern is that the “give people checks” solution is so shiny and seductive that we’ll miss the other part of what needs to be done: backstopping losses at the state and local levels, including higher ed.
Over the last few decades, a progressively larger share of college budgets has come from tuition, rather than aid. That means that an abrupt enrollment drop -- caused by a combination of emptying out campuses and students losing the jobs in the service sector that allowed them to stay afloat while in college -- could eviscerate college budgets, leading to horrific layoffs and even closures. Once that capacity goes, it’s prohibitively expensive to get it back. It would be both cheaper and more humane to support it through the crisis.
We can’t count on states and localities to do that. They don’t have the option of Keynesian (or MMT-style) deficit spending, so when their tax revenues drop, their spending has to drop. This has to be federal. If the feds sent money to the states and localities beyond what they normally would have spent, and designated some of it for supporting K-12 and higher ed, we might be able to weather the storm without terrible damage.
Some schools have deep enough reserves, or large enough endowments, to be able to cover everyone through the crisis, issue refunds for dorms and make everyone as close to whole as possible without bankrupting themselves. But most don’t. Most community colleges have endured a solid decade of austerity before this. I wrote just a few months ago that the next recession would hit this sector much harder than the last one, because we’re already coming off a decade of cuts. I had hoped not to be able to test that prediction quite so quickly.
Enrollment projections in the era of quarantine are a bit wonky. Will enrollment fall off a cliff because people are broke? Will community college enrollment pick up some of the folks who otherwise would have “gone away” to college, but now don’t have the option, or don’t see the point of paying $60,000 for improvised online courses? So much depends on the vagaries of quarantine.
In the meantime, “give people money” has gone from the title of a nifty policy book by Annie Lowrey to the theme of Andrew Yang’s campaign to a Republican proposal to stop a quarantine-driven recession, all in a couple of years. Speaking of going viral …
*Robert Kelchen has proposed simply suspending federal student loan collection for a year. It’s a good idea, though in terms of fighting the recession, it’s best understood as a small part of a much larger whole. For all the press that student loans get, a relatively small percentage of the population has them, and the likelihood of default is inversely related to the amount owed. And it would only apply to loans from the feds, as opposed to all of the other sources. Still, it has the virtue of simplicity, and it would make an immediate difference for some vulnerable people. I’m on board.
