Opinion: Biden’s infrastructure plan must look to the future, not wrap itself in a nostalgic view of past American greatness

CAMBRIDGE, Mass. (Project Syndicate)—President Joe Biden’s $2 trillion infrastructure plan is likely to be a watershed moment for the American economy, clearly signaling that the neoliberal era, with its belief that markets work best and are best left alone, is behind us. But while neoliberalism may be dead, it is less clear what will replace it.

The challenges that the United States and other advanced economies face today are fundamentally different from those they faced in the early decades of the 20th century. Those earlier challenges gave rise to the New Deal and the welfare state. Today’s problems—climate change, the disruption of labor markets due to new technologies, and hyper-globalization—require new solutions.

Capitol Report: Biden says he’s ‘prepared to negotiate’ on infrastructure as he meets bipartisan group of lawmakers

We need a new economic vision, not nostalgia for a mythicized age of widely shared prosperity at home and global supremacy abroad.

On climate change, Biden’s plan falls short of the Green New Deal advocated by progressive Democrats such as Rep. Alexandria Ocasio-Cortez. But it contains significant investments in a green economy, such as supporting markets for electric vehicles and other programs to cut carbon-dioxide emissions, making it the largest federal effort ever to curb greenhouse-gases.

Economics is different from an arms race. A strong U.S. economy should not be a threat to China, just as Chinese economic growth need not threaten America.

On jobs, the plan aims to expand employment offering good pay and benefits, focusing, in addition to infrastructure, on manufacturing and the growing and essential care economy.

Book Watch: Caregiving is a vital part of the nation’s infrastructure like bridges and roads

The role of government

New ways of thinking about the role of government are as important as new priorities. Many commentators have framed Biden’s infrastructure plan as a return to big government. But the package is spread over eight years, will raise public spending by only 1 percentage point of gross domestic product, and is projected to pay for itself eventually.

A boost in public investment in infrastructure, the green transition, and job creation is long overdue. Even if the plan were nothing more than a big public investment push financed by taxes on large corporations, it would do a lot of good for the U.S. economy.

We need a new economic vision, not nostalgia for a mythicized age of widely shared prosperity at home and global supremacy abroad.

But Biden’s plan can be much more. It could fundamentally reshape the government’s role in the economy and how that role is perceived.

Traditional skepticism about government’s economic role is rooted in the belief that private markets, driven by the profit motive, are efficient, while governments are wasteful. But the excesses of private markets in recent decades—the rise of monopolies, the follies of private finance, extreme concentration of income, and rising economic insecurity—have taken the shine off the private sector.

At the same time, it is better understood today that in a complex economy characterized by so much uncertainty, top-down regulation is unlikely to work. Regardless of the specific domain—promoting green technologies, developing new institutional arrangements for home-care workers, deepening domestic supply chains for high-tech manufacturing, or building on successful workforce development programs—government collaboration with nongovernmental actors will be essential.

If it succeeds, the example it sets of markets and governments acting as complements, not substitutes—demonstrating that each works better when the other pulls its weight—could be its most important and enduring legacy.

In all these areas, the government will have to work with markets and private businesses, as well as other stakeholders such as unions and community groups. New models of governance will be required to ensure public objectives are pursued with the full participation of those actors who have the knowledge and capacity to achieve them. The government will have to become a trusted partner; and it will have to trust other social actors in turn.

In the past, each excessive swing in the state-market balance has eventually prompted an excessive swing in the opposite direction. The Biden plan can break this cycle. If it succeeds, the example it sets of markets and governments acting as complements, not substitutes—demonstrating that each works better when the other pulls its weight—could be its most important and enduring legacy.

Biden’s unhelpful framing

In this regard, it is unhelpful to view the Biden plan as a way to restore America’s competitive position in the world, especially vis-à-vis China. Unfortunately, Biden himself is guilty of this framing. The package will “put us in a position to win the global competition with China in the coming years,” he recently argued.

Peter Morici: Biden doesn’t understand how dangerous China is

It may be politically tempting to market the infrastructure plan in this fashion. In an earlier era, the prevailing fear that the U.S. was losing its edge to the Soviet Union in ballistic missiles and in the space race helped catalyze a national technological mobilization.

But there is much less reason for fearmongering today. It is unlikely to buy much Republican support for the plan, given the intensity of partisan polarization. And it diverts attention from the real action: if the plan increases incomes and opportunities for ordinary Americans, as it should, it will have been worth doing, regardless of the effects on America’s geopolitical status.

Moreover, economics is different from an arms race. A strong U.S. economy should not be a threat to China, just as Chinese economic growth need not threaten America. Biden’s framing is damaging insofar as it turns good economics at home into an instrument of aggressive, zero-sum policies abroad. Can we blame China if it tightens restrictions on U.S. corporations as a defensive measure against the Biden plan?

The plan could transform the U.S. and set an important example for other developed countries to follow. But to achieve its potential, it must avoid misleading state-versus-market dichotomies and outdated Cold War tropes. Only by leaving behind the models of the past can it chart a new vision for the future.

This commentary was published with permission of Project SyndicateBiden Must Fix the Future, Not the Past.

Dani Rodrik, professor of international political economy at Harvard University’s John F. Kennedy School of Government, is the author of “Straight Talk on Trade: Ideas for a Sane World Economy.”

More From Project Syndicate

Megan Greene; How the Fed could give a green light to environmentally sustainable investments

James K. Galbraith: Here’s why fears of surging inflation are off-base

Minxin Pei: China sabotages its economic future by escalating tiff with West over forced labor of Uighurs

Source link


States Overpaid Virus Unemployment Claims, and They Want the Money Back

States accidentally overpaid thousands of workers over the spring and summer during a rush to get relief to unemployed and idled Americans. Now they want the money back.

Funds have long since been spent and many of those workers continue to struggle with the coronavirus pandemic’s economic fallout. Partly due to federal rules governing some unemployment aid, multiple states are trying to recoup money or cutting current benefits to make up the difference.

Individuals themselves often have no idea they are being overpaid, in part because formulas for unemployment checks can be hard to decipher. Many also waited weeks to start receiving benefits, and say they believed that large checks were simply the back payments they were owed because of delays.

Autumn Stull owns a maternity and children’s consignment store in Golden, Colo. It temporarily closed in March when the state went into lockdown, so she applied for benefits through the Pandemic Unemployment Assistance program, which allows self-employed individuals to collect aid. She resumed operating in May by appointment, and returned the store to fully open after a gradual process that began in late June.

The weekly checks helped Ms. Stull pay things such as rent and business insurance while her husband paid most of their personal expenses. Her check was cut in early September, from $618 a week to $223, and she discovered a notice on her account saying that she had been overpaid and now owed Colorado $8,972.

The state had added together her 2018 personal income, which was around $12,000, with her business income, and based her benefits on the higher sum, according to documents reviewed by The Wall Street Journal. Colorado later acknowledged the overpayment and sent Ms. Stull an updated benefit statement listing her 2018 income as $0 and cutting the weekly payment.

“Your heart skips a beat. Your stomach sinks. Your eyes get teary,” she says of reading the notice. “The money is gone. I used it. We’ve been through enough.”

Consignment-store owner Autumn Stull applied for benefits through the Pandemic Unemployment Assistance program.

Cher Haavind, deputy executive director of the Colorado Department of Labor and Employment, says many overpayments stemmed from workers incorrectly reporting their earnings. Ms. Haavind didn’t reply to follow-up questions about alleged state errors.

For many people, the repayment obligations hinge on a fine-print detail in the March Cares Act, which authorized the new programs.

States can waive recovery of overpayments for most unemployment insurance when there is no fraud involved, but the Pandemic Unemployment Assistance program follows a different set of rules. It is administered as a form of disaster relief, and the statute that guides it blocks states from forgiving the debts.


Do you think enough is being done to support struggling Americans during the pandemic? Why, or why not? Join the conversation below.

Adding to the complexity, the PUA program gave new categories of workers—including gig workers and the self-employed—access to unemployment checks. But state unemployment systems were designed to calculate benefits based on traditional jobs, employer records, W-2 tax documents and verifying income with pay stubs. Re-engineering the systems to account for far more complicated self-employment income was bound to create problems, experts say.

“It makes sense that there would be mistakes made,” says Eliza Forsythe, a professor of economics and labor relations at the University of Illinois at Urbana-Champaign. But because states cannot waive the PUA overpayments, “that puts a lot of risk on benefit recipients down the line.”

When Meggan Hurley, a self-employed health coach in Guffey, Colo., applied for the pandemic assistance, she submitted all of the income-tax forms the state requested. She spoke to several staffers at the state’s unemployment-insurance office, “just to make sure I was filing correctly, because it was intimidating,” she says.

Her checks began arriving soon after. They were larger than she expected, so she called the Department of Labor and Employment, and eventually got through to a staffer, who told her the amount was correct and “not to worry about it,” she says. In early September, a notice was placed on her account saying that she had been overpaid by $13,969.

The U.S. unemployment rate shot up faster than in any other developed country during the pandemic. WSJ explains how differences in government aid and labor-market structures can help predict how and where jobs might recover. Video/Illustration: Jaden Urbi/WSJ

“It was an error in your system. I submitted my information in good faith that you knew how to do math. You can’t place the burden of your error on me,” says Ms. Hurley. She has started a petition on asking Congress to allow states to waive the PUA overpayments.

She and other affected workers might yet find relief. House Democrats’ latest version of the Heroes Act, introduced in late September, would allow states to waive PUA overpayments in cases where workers couldn’t repay them “without severe hardship.” The provision would apply to past and future overpayments.

The Labor Department measures states’ performance in administering unemployment-insurance benefits, tracking metrics such as overpayment and the time it takes to process applications. So there is an incentive for states to recover money they erroneously paid out, says Michele Evermore, a senior policy analyst at the National Employment Law Project.

Weekly pandemic-relief checks helped Autumn Stull pay things such as rent and business insurance.

But administrators generally don’t want to claw back benefits from struggling workers, she says. Forcing recipients to repay that money because of a glitch in federal legislation would create hostility toward the state unemployment agencies, she adds.

Thousands of Pennsylvania workers were overpaid because of a calculation error in software that vendor Geographic Solutions Inc. supplied for the state’s unemployment-benefits system. Paul Toomey, president of Geographic Solutions, says the company fixed the error immediately. After the state discovered the problem, it began cutting some benefit checks by half to repay the state, says Julia Simon-Mishel, an attorney with Philadelphia Legal Assistance who has been helping workers with unemployment claims.

“We apologize to the claimants who received the extra payment and appreciate their understanding as we return their benefit to the accurate amount,” says Sarah DeSantis, a spokeswoman for Pennsylvania’s Department of Labor and Industry. The state is reducing the repayment rate to one-third of recipients’ PUA benefits, she adds.

In Ohio, thousands of workers have been overpaid through the regular unemployment-benefits system and Pandemic Unemployment Assistance, says Michelle Wrona Fox, a staff attorney at Community Legal Aid Services in Youngstown, Ohio. For some of Ms. Fox’s clients, the state is docking their remaining benefits by half to recoup its money.

“I’m seeing complete panic,” she says. Many of Ms. Fox’s clients waited two to three months to get benefits in the first place, she says, and some are facing eviction. “They’re in dire straits,” she adds.

A spokesman for Ohio’s Department of Job and Family Services says about 20% of PUA claimants, or 108,000 people, had been overpaid as of Aug. 31 because of a combination of errors by the agency and claimants, but adds most of the errors arose from individuals failing to claim income they earned in weeks when they also received benefits.

In a smaller number of cases, errors were made by agency staff, and those overpayments will be waived where possible, says the department’s spokesman, Tom Betti.

“We understand the frustration overpayments cause during what is already a stressful time,” he says. “We are committed to doing everything we can to lessen those hardships within the bounds of state and federal law.”

Autumn Stull at her store. ‘Your eyes get teary,’ she says of reading a notice that told her she owed Colorado nearly $9,000.

Write to Lauren Weber at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source link