The Ongoing Financial Constriction of the Non-Privileged
When I choose a topic for a post, I try to relate it to some direct personal experience. Then I can tell a story, and stories are always more evocative than facts or statistics. This post, however, deals with the unfolding financial stresses brought on by the end of many Covid-era assistance programs along with a confluence of other economic factors.
When viewed comprehensively these stresses will put financial pressure, in many cases extreme, on families and individuals who are “not financially privileged,” a negative definition that is admittedly imprecise. For purposes of this post, I define this “non-privileged group” as people who were direct beneficiaries of one or more of the Covid-era assistance programs.
I believe the removal of these programs will have a magnitude of effect on the economic lives of the non-privileged and on our politics that is under-appreciated.
I have no direct experience receiving the benefits of these programs. And I am not close with many people who have. That said, through one particular initiative I’m involved with, I have an indirect sense of what ending these programs might mean to families with children.
For the past few years we’ve been supporting emergency aid to families with children attending a small (wonderful) public school in NYC. Many of these families are recent arrivals to our country and many of them are undocumented. As such, they did not benefit from many Covid-era programs either through ineligibility or fear (justified or not) of their status being discovered resulting in potential deportation. So they are a proxy for some of the issues that are on the horizon for many Americans.
The most common emergency situation we’ve encountered at the school is a shortfall in rent. Many of the families rent a room on an informal, shadow-sublet basis from the official tenant. Therefore, they lack eviction protection, either through the Covid era eviction moratorium or legal redress. Failure to make rent means eviction and a likely move to a family homeless shelter.
Often the rent emergency will arise when the family’s primary earner loses their job. There have been a few instances where the primary earner is a taxi driver whose taxi is immobilized, pending repair. The driver will not have the money to repair the car so cash flow for the family stops. Rent becomes overdue. A few hundred dollars can repair the car and a few hundreds dollars can prevent eviction for failure to pay rent.
This small school is run by an incredibly caring, talented, group of administrators who the families trust to tell their problems to. So in many cases the administrators can intervene with the funds necessary to prevent a downward spiral. Like having to move to a homeless shelter.
The anecdotes we hear about various needs for emergency aid have educated us, superficially, about some of the stresses these families experience. But of course I’d never claim to know what their lived experiences are.
Our involvement in this emergency aid initiative does not make us unusual among the people we know. Most of our friends and acquaintances give some substantial mix of their time, money, and ideas to support programs and causes that provide crucial and highly impactful aid and assistance to people in need locally, nationally, and globally. Doing so is part of their DNA, and it’s one reason we find ourselves seeking out their company and friendship.
I’m certain, however, that all of us who are able will be called upon to do more as stresses increase. Below are just some of the Covid era programs that are ending.
1) Eviction moratoria and rent assistance programs have largely ended. Evictions have skyrocketed.
2) SNAP (food stamp) benefits were sharply curtailed earlier this year, on average by about one third.
3) After three years of being suspended, recertification of eligibility to receive Medicaid has once again started. During the suspension time, Medicaid enrollment soared. Required recertification will lead to the loss of coverage for well over 10 million people. Many will be eligible for zero-premium “Obamacare” insurance or employer healthcare, but many others will not or will fall through the bureaucratic cracks.
4) After three years of being halted, student loan payments will start again this fall. This is different than Biden’s “debt forgiveness” program, which the Supreme Court will soon rule on. Even if Biden’s program is upheld, 70-75% of the $1.8 trillion of student debt will remain outstanding on which debt service will restart.
5) Federal assistance to early childcare programs will significantly decline. Some programs will raise tuition, some will close.
6) Many state governments will be under great fiscal pressure as temporary federal aid programs to local governments end. Given that states are required to balance their budgets, we cannot expect states to fill the federal gaps.
(I’m not including the aid program I think did the most good, the Child Tax Credit expansion, because that ended in December 2021. At the bottom is my post from last April about the CTC expansion’s sad demise.)
I’d add to this list of stresses the inflation of the past few years, which even if it abates, will leave prices at much higher levels. And of course interest rates which have skyrocketed over the past twelve months.
I think these cumulative headwinds will create a sharp increase in need and therefore dissatisfaction. In terms of politics, one can speculate on which party will be blamed. In terms of the economy, I’d expect to see pressure on consumer spending and an increase in various measures of consumer loan delinquencies (that’s already begun.)
For a moment let me put on the guise of someone reacting against the thrust of this post. It was no secret that these programs were temporary, so the beneficiaries should have saved, not spent, the benefits of the aid they received. I think that argument is flawed.
First, the economic stresses caused by the pandemic were very real, and these programs were not just “extra,” but were enacted to counter widespread economic devastation. Second, we humans are a species that most naturally thinks about time in the short term. Third, while many people did save, the ones who did would tend to be farthest away from the financial edge.
A final thought. If my prognosis is correct, one indirect effect might be a waning of enthusiasm for economic/humanitarian aid to Ukraine among voters and politicians. That would be shortsighted, but as I wrote, we are naturally a shortsighted species.
If you received this as a forwarded email, here’s a link to my substack site:
robertsdavidn.substack.com
The Cruel, Untimely, and Much Too Quiet Death of the Expanded Child Tax Credit
I’m sending my new Sub Stack to people I know in the hope of sparking thought and dialogue. I want my own thinking to be challenged as well! My topics will be ones where my views are either different than the current consensus or where I feel the topic deserves more attention.
In what borders on tragic irony, the very inflation of which you write was in large part brought on by the increased government funding that was triggered by the covid pandemic. From mid-2019 until just a few months ago, Trillions of dollars were pumped into the economy. We could debate whether this was good or bad policy, but the reality is that the large input of cash, including the CTC expansion singled out above, caused people to make economic decisions that could not be sustained if the program was terminated -- or rather, WHEN the program was terminated.
In hindsight, policy decisions that looked necessary and even generous, have proven ultimately to be destructive. The families who will now be forced out of rental property, and thus face enormous hardship, made decisions when money was more available than it soon will be, and when rents had not yet responded to the increased money supply, or were frozen.
I know, "if the government had not overprimed the economy" is a counterfactual statement, but people with even a basic level of economic understanding will recognize that consumers make different decisions when government intervenes by doing things like freezing rents or pumping money into the economy.
It is, as I said at the beginning, a sad irony that government trying to make things better ends up making things worse. But we are seeing that now. Perpetuating programs like CTC only distorts the market and leads consumers to make poor decisions.
I’m sorry David, this one really bothers me. We had a lot of assistance programs before Covid, and if they weren’t working because of lack of money, then that’s another problem. I don’t know if the best way to handle this is at the state or community level, but it sure isn’t the federal government.
I agree with Flier. Way too much money was thrown into the economy. I still see businesses having trouble finding workers. A lot of restaurants have stopped serving lunch, and have even cut back on the evenings they’re open. We are seeing a lot of people standing at street lights with signs, but there are still a lot of places that need employees. Some of these people look mentally ill, possibly, but the majority are young, physically fit, smoke cigarettes, have cellphones, and are dressed quite well. What’s that about?
I don’t know what to say about people who can’t pay their rent, but telling the home and apartment owners that they aren’t going to get paid is not a solution either.
Sorry, my thoughts aren’t all that cohesive, and I don’t have any overall strong arguments one way or the other. However, I know a mess when I see one, and this one is big.