The Restaurant Lockdown Massacre

New York’s Andrew Cuomo on Friday joined the stampede of Democratic governors shutting down restaurants despite scant evidence that they are driving a surge in Covid cases. Their shutdowns are hitting minorities the hardest and increasing economic inequality.

Democratic governors in Michigan, Illinois, Oregon and Washington in recent weeks have closed indoor dining. California Gov. Gavin Newsom has banned outdoor patios in most areas too. Mr. Cuomo said Friday that he’s shutting down indoor dining in New York City as of Monday.

According to state contact tracing data, restaurants and bars account for 1.4% of the virus spread in the state while household gatherings make up nearly 74%. That’s not surprising. In New York City, restaurants were limited to 25% capacity. Who limits capacity in their living rooms during football watch parties or Thanksgiving?

Restaurants and other small businesses have spent heavily to comply with government Covid regulations, including buying personal protective equipment for staff and improved ventilation systems. But now they are being punished because, well, government can’t control the virus and Democratic leaders feel they must appear to be doing something.

Democratic governors probably expect Congress to pass a Covid relief bill with more aid for small businesses. But this won’t cover all their rent, utilities and other overhead. The National Restaurant Association this week said 110,000 restaurants have permanently shuttered in 2020, notwithstanding forgivable government loans.

More relief will help some restaurants survive the winter, but fewer if they are limited to takeout. Many low-earning servers and cooks will be laid off. Unemployment benefit claims increased nationwide this week as restaurants in many states were ordered to shut down. Continuing claims in California rose 139,078 in the week of Nov. 28.

But small business owners that permanently shut down will lose the equity they have built over many years. The result will be more socioeconomic inequality. A Federal Reserve report this fall showed that net worth (assets minus liabilities) between 2016 and 2019 increased significantly more among blacks (32.1%) and Hispanics (63.6%) compared to whites (4%). One reason was huge growth in business equity among blacks (138%) and Hispanics (63%).

The Fed on Thursday reported that U.S. household net worth in the third quarter hit a record high amid the stock and housing boom. Government’s pandemic response, especially low-interest rates, has made the rich richer.

But small businesses and their workers have been crushed. Joe Biden likes to call this the “K-shaped recovery,” but what he doesn’t acknowledge is that the “K” has been the result of government policy decisions. And now Democratic governors are whacking workers again with their shutdown orders.

Illinois House Speaker Michael Madigan this week floated raising the state’s flat income tax rate of 4.95%. Voters last month revolted against his public-union machine by rejecting a progressive tax referendum. Now Mr. Cuomo warns he will have to raise taxes even if Congress gives states more money. “You could see dramatic tax increases that would hurt families and hurt the economy,” he said this week.

Mr. Cuomo knows there aren’t enough wealthy left in New York to fix the state’s budget problems, which preceded the pandemic. Soaking the wealthy will cause more to flee to no-income-tax Florida, where restaurants and even Disney World are still open—and there are even fewer per-capita new Covid cases than in New York.

Appeared in the December 12, 2020, print edition.