Posts Tagged "Congress"

The Cares Act

CARES Act’s Loan Forbearance is Working

As the pandemic was sinking into our collective consciousness a year ago, Congress, fearing economic calamity, allowed Americans to temporarily halt their mortgage and student loan payments.

By the end of October – seven months after President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act – Americans had postponed some $43 billion in debt, including car loans and credit cards, which many lenders deferred voluntarily. Billions more are still being added to the total amount in forbearance.

Fast action in Congress “resulted in substantial financial relief for households,” says a new study by researchers at some of the nation’s top business schools. Their recent analysis found that the assistance went where it was needed – to “financially vulnerable borrowers living in regions that experienced the highest COVID-19 infection rates and the greatest deterioration in their economic conditions.”

When lenders grant forbearance they agree to waive their customers’ debt payments for a specified period of time. For example, Congress said borrowers could request that their payments on federally backed mortgages be deferred by six months to a year.

Although forbearance was less visible than the checks taxpayers also received under the CARES Act, the financial lift was equally potent. Customers who received loan forbearance saved an average of $3,200 just on their mortgages last year – this compares with $3,400 in stimulus checks for a family of four.

Congress also automatically suspended all payments on federal student loans, saving borrowers an average $140 last year, and President Biden has just extended the forbearance until at least Oct. 1. Lenders, in an attempt to prevent massive loan defaults on their books, voluntarily gave consumers a break last year on two types of loans that weren’t part of the CARES Act: automobile loans ($430 saved) and credit cards ($70 saved).

Forbearance is only temporary relief, because the missed payments will eventually have to be made up. But in a telling indication that borrowers didn’t want to fall behind, just a third of the people who asked for debt relief actually used it. In these cases, forbearance “acts as a credit line” borrowers can draw on – if they really need it. …Learn More

Hands fighting over a rope

Top Economists Seek Solutions to Inequality

Something remarkable is happening in the economics profession. Top researchers in the field have begun arguing for policies to alleviate growing U.S. income and wealth inequality.

For decades, inequality wasn’t taken very seriously by economists. But that view “has changed dramatically,” said James K. Galbraith of the University of Texas at Austin, who moderated a Zoom panel at the annual meeting of the Allied Social Science Associations last week.

Inequality, Galbraith said, has “become one of the most important questions economists face.”

And COVID-19, argued Nobel laureate Joseph Stiglitz, a panelist, “has brought out very forcefully the nature of the inequalities in our society” and has “exacerbated those inequalities.”

The pandemic’s effects include larger increases in unemployment for low-wage workers, who are disproportionately Black and Latino and often work for small businesses devastated by efforts to suppress the virus. In addition, front-line workers like home health aides and meat-packing workers are being exposed to the virus but don’t always have paid sick time. There are also growing concerns about the longevity gap and about a widening educational gap between students from poor and high-income neighborhoods resulting from online learning.

The economists, having agreed inequality is a problem, identified the myriad forces driving it. They range from the persistent segregation of Black and white neighborhoods to the ability of the wealthy to invest and accumulate more wealth, while wage workers can barely get by. In a cutthroat global economy, the decline of unions has also stripped workers of their ability to bargain with employers for higher wages, they said.

Another panelist, Teresa Ghilarducci, brought attention to the inequality that exists among retirees. This can be seen in the downward mobility many people experience after they retire and can no longer support the standard of living they had while they were working.

To address these complex problems, the economists said a comprehensive policy agenda is needed that includes beefing up Social Security benefits – the great equalizer – for disadvantaged retirees, more taxation of inheritances, educational equality at the preschool through college levels, sturdier social safety nets, and new labor rules that give workers back some of the power they have lost.

Another panelist, Jason Furman, former chair of President Obama’s Council of Economic Advisers, agrees that an array of policies will be required to combat inequality. But he also argued that the two major relief bills Congress passed last year – a total of $2.9 trillion – probably reduce inequality. …Learn More

Belongings on the lawn

Crisis for Renters Threatens to Get Worse

Many unemployed and underemployed workers have run out of options for paying the rent. The National Low Income Housing Coalition, the Aspen Institute, and other organizations estimate that up to 40 million renters risk being evicted this winter. Congress is currently negotiating a new COVID-19 relief package but it’s not yet known whether it will extend a CDC moratorium on evictions or go beyond the Cares Act last spring and provide rental assistance to help renters and, by extension, their landlords.

Squared Away spoke with Sarah Saadian, vice president of public policy for the National Low Income Housing Coalition, about what she describes as an impending calamity.

Q: How bad is the current situation?

Saadian: It’s really hard to get data on how many people have been evicted because there isn’t a national database – only state data. But we know that nearly one in five renters are behind on their rent, and they’re disproportionately Black and brown renters. When the CDC moratorium on evictions expires Dec. 31, renters are going to owe somewhere between $25 billion and $70 billion. That’s a huge amount of back rent that renters realistically can’t afford to pay off. So what we’re likely to see is a huge increase in evictions and, in the worse cases, homelessness unless Congress extends the moratorium and provides really robust resources for emergency rental assistance.

Q: What do you expect if the moratorium isn’t extended beyond Dec. 31?

It would be a calamity. Because of the loopholes in the CDC moratorium and because of the sheer amount of rent renters owe, if there’s any gap between when the moratorium expires and the Biden administration takes action – if they do – you’re going to see potentially millions of people lose their homes in the dead of winter when we’re dealing with a resurgence of COVID. It’s an emergency on top of an emergency.

Q: A UCLA study said that 44 states had moratoriums but that 27 have lifted them and that the resulting evictions have resulted in more than 10,000 deaths. Make the connection between housing and health.

When low-income people are evicted from their homes, they don’t have a lot of good options. They either are doubling or tripling up with other families, or they go into homeless shelters. In either case, it’s more difficult to social distance, and it’s easier for the virus to spread. If Congress doesn’t take action, it harms all of us. Not only does it mean more of us dying from COVID but it puts more strain on our health care system. 

Q: This is a complicated issue, because small landlords have to pay their mortgages and can’t necessarily afford to cover tenants’ rents. What is your position on that?

The best solution for both renters and landlords is emergency rental assistance because that eliminates the back rent renters owe and makes up the lost income landlords need to operate their property. It is not every day that landlords and renters can agree. A lot of landlords don’t like the moratorium but it’s absolutely essential to have an extension of the CDC moratorium at least until state and local governments can distribute rental money to people in need. Even if Congress provides emergency rental assistance, but doesn’t extend the CDC moratorium, then millions of people will still lose their homes.

Q: You mentioned minorities are particularly affected by evictions. How about particular states or income groups? Rural vs urban renters? Learn More

Lost and Found art

Pension, 401k Registry Bill Resurfaces

When COVID-19 throws people out of work, their chances of retiring comfortably can deteriorate rapidly. What better time to find a new way to help?

A perennial proposal just reintroduced in Congress would do some good: establish an online database of employer retirement plans so workers and retirees can locate old pensions and 401(k) accounts.

Workers are increasingly responsible for making sure they have enough money to retire. But moving from job to job is now the norm – the one-employer career is a distant memory – and pensions get left behind and 401(k)s fall by the wayside. People who try to find old plans often can’t locate employers that have changed names, merged, relocated, or terminated a plan.

The primary way to find retirement plans now is through the lost property records kept by each state. But Anna-Marie Tabor, director of the Pension Action Center in Boston, which recovers lost pensions and 401(k)s for the center’s clients, said billions more in unclaimed funds can’t be located in the state records, because employers are not required to turn over plan information to the states. Also, 401(k)s are hard to find since many employers transfer small accounts to third-party IRAs without the account owner’s awareness.

Tabor argues in the Journal of Aging and Social Policy that the COVID-19 recession brings new urgency to passing the proposed Retirement Savings Lost and Found Act of 2020, especially for low-income workers hit hardest by layoffs and older workers who are running out of time to repair their finances prior to retiring.

“Connecting people with money they’ve already earned is an easy and inexpensive way to support the economic recovery,” she said. …Learn More