In the first two months of the crisis, 14 percent of American workers filed for unemployment benefits, and some estimates place real unemployment rates of the near future in the low 30’s, a figure not seen since the Great Depression. In Georgia, more than 30 percent of workers have already filed for unemployment. With tens of millions of Americans unable to pay emergency bills of as little as $400, bankruptcies will almost certainly follow.
Following the 2009 subprime mortgage crisis, more than 1.5 million Americans filed for personal bankruptcy to discharge personal debts. In 2009, nearly 25,000 companies also filed for bankruptcy. It isn’t yet clear how corporate and personal bankruptcy rates changed because of COVID-19. Likewise, prior research estimated thousands of local government defaults between 2010 and 2015. Considering the importance of consumer spending on the tax bases of local governments, we should understand how the economic shutdown is affecting local government credit obligations, and which municipalities are defaulting.
Together, these three unknown pillars—personal and corporate bankruptcies, and municipal defaults—measure the financial damage to the people of Georgia, allowing a comparison between this crisis and previous ones. Dynamics of demography intersect these unknowns. Are Black Americans more likely to file for bankruptcy because of COVID-19 than white Americans? Are rural municipalities more likely to default on bond obligations than urban municipalities? What industry factors are most associated with bankruptcy in the COVID-19 era?
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