The severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) and the novel coronavirus disease (COVID-19) that it causes represent a significant threat to all nations of the world, including the United States. Apart from its immediate effect in terms of healthcare, a global pandemic is also bound to leave a profound impact on the economy. The response to the crisis varies from nation to nation and depends, among other things, on the political constitution of a given country. This last factor is particularly important in the case of the United States, with its federated structure and complex judicial system. The governmental response should be informed by the experiences of the previous economic crises as well as the constantly updated data on the current one. Additionally, the response measures should aim at maintaining existing businesses and employment rather than directly pouring money into the economy in hopes of improving the situation. The federal government should lead the way in countering the pandemic within its prerogative but exercise caution when supporting the economy, and the relief bill passed by Congress would benefit from several improvements.
The federal government should play a central role in responding to the ongoing crisis rather than leaving the situation to the private corporations to handle. First of all, this is a direct obligation under the American, as the Stafford Disaster Relief and Emergency Assistance Act proclaims “the preeminent responsibility of the Federal Government to take action to stem a nationwide pandemic” (Gostin et al., 2020). Apart from that, it is also a direct legal necessity, because only the federal government possesses the power to enact certain measures necessary to counter the spread of the virus. Limiting the spread of the disease to flatten the epidemic curve and reduce the pressure upon the healthcare system requires, among other things, to impose severe restrictions on the border crossing. By the end of March, the President has banned the majority of the non-US citizens from entering the United States from China, Iran, and most of the European countries (Gostin et al., 2020). This measure is an integral and obligatory part of reacting to the pandemic of such a magnitude, and the federal government is the only entity authorized to enact it.
Apart from the international, population movement within the national borders is also an epidemiological threat under the present conditions, and the federal government’s response to it should be more nuanced. At least several legal precedents interpret the freedom of movement as a constitutional right, although not an unlimited one (Gostin et al., 2020). It means that the federal, state or local authorities can technically limit the freedom of movement to counter the spread of a virus. Still, these actions would be subject to much legal scrutiny and require compelling evidence. It would be particularly difficult to impose nationwide travel restrictions, as, under US law, primary public health powers are invested in the states rather than the federal government (Gostin et al., 2020). Additionally, introducing the nationwide ban would simply be impractical, as imposing the equally strict measures in the heavily affected and barely affected localities would not correspond to the epidemiological situation. Therefore, while the introduction of the nationwide travel ban is technically possible, the federal government is right in exercising caution and leaving this particular aspect of managing the situation to the state and county authorities.
Although the central role of the federal government in responding to the pandemic itself can hardly be disputed, it should adopt a much more cautious approach when dealing with the economic effects of the crisis. Evidence from the rt history demonstrates that direct federal spending as the means of countering an economic crisis does not generate new wealth and is unlikely to help the economic recovery. The 2008 recovery bills demonstrated that “in the best case, federal rescue programs had no effect on – and may actually have crowded out – private activity” (Boccia et al., 2020, p. 4). The evidence suggests that the temporary government spending across short periods tends to shift the resources within a given industry rather than promote a sustained increase in the number of firms and/or employees. While it may be tempting to seek ways to spend generously to foster quicker recovery, the last economic crisis serves as a cautionary tale against this approach. The federal government should focus on countering the pandemic so that the private players could return to doing business as normal as soon as possible, thus spearheading the economic recovery.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act generally keeps this notion in mind and essentially aims to mothball the economy and preserve the existing firms and job positions. However, some of its provisions go contrary to the intended goal of ensuring swifter economic recovery led by the private actors, and this contradiction is the most evident in the case of unemployment insurance. The CARES Act ensures an additional $600 per week as a federal unemployment insurance benefit (Boccia et al., 2020). These and other unemployment benefits constitute almost half of more than $560 billion allotted to “individuals” per the CARES Act (Snell, 2020). However, the Act provides no cap for the total sum of the benefit received, which may lead to the situation when the total sum of the unemployment benefits exceeds a person’s current earnings. People may intentionally leave their jobs to apply for the benefits, thus going against the goal to keep people employed so that the economy could spring back to action. To avoid this, the CARES Act should cap the total unemployment benefits at 100 percent of an employee’s pre-crisis wages.
Another way in which the CARES Act may be improved is by expanding the paid sick and family leave assistance to larger businesses. As of now, the Act provides paid sick leave credits for small companies – that is, those that have no more than 500 employees (Burke et al., 2020). It is a reasonable measure to ensure that the people maintain proper social distancing and the companies do not go bankrupt while supporting their workforce. However, these provisions do not apply to larger businesses (Burke et al., 2020). Instead, the CARES Act offers selective bailouts to corporations in some of the most affected industries – for example, the airline industry receives more than one-tenth of the $500 billion allotted to big corporations (Snell, 2020). Expensing the paid sick and family leave credits to larger businesses would ensure more targeted spending that promotes workforce retention so that the economy could rebound after the crisis. Thus, it would allow spending the same $500 billion designated to help big corporations in a much more efficient and targeted way.
Another promising alternative to bailouts for the large corporations in the most affected industries is pre-purchasing services and goods from the private sector. While this measure is not equally suitable for every industry, it is fairly appropriate for predictable goods and services. A targeted pre-purchase program could be a viable way of supporting the struggling sectors of the economy, such as travel and hospitality (Burke et al., 2020). The federal government could make these purchases based on a discount for single-sourcing or competitively, thus “benefiting taxpayers with reduced future expenditures as well as participating businesses with immediate cash flow” (Burke et al., 2020, p. 10). This approach would allow injecting billions of dollars into the economy in a healthy way that would not differ too much from its normal functioning. At the same time, it would provide a much-needed source of income for the struggling companies in the industries that were hit the hardest by the crisis. Considering this, restructuring the $500 billion allotted to large businesses and specific industries to include well-designed and comprehensive pre-purchase programs would be a beneficial change to the CARES Act.
One more thing to keep in mind is that further federal spending is unwarranted at this point. Admittedly, the understanding of the general principles of the economy and the experiences of the preceding crises, and the measures taken to manage them do much to inform the current anti-crisis efforts. Still, no crisis is precisely identical to the preceding ones, and practice is the only ultimate judge of the efficiency of anti-crisis management. It is impossible to assess the efficiency – or lack thereof – of the crisis relief measures initiated by the Act until they are set in motion. It will take weeks for the provisions of the CARES Act to fully “to reach the busiÂnesses and people whom they are targeting for support” so that the government could analyze the results (Burke et al., 2020). Should new federal interventions prove necessary, they should be based on a careful assessment of the CARES Act to correct the faults and miscalculations that are likely to occur in a hastily drawn bill. The government should wait for the current measures to take effect rather than blindly inject more money into the economy.
To summarize, the federal government of the United States should take decisive action within its prerogative to counter the effects of the pandemic on public health but exercise more caution when addressing its economic consequences. The federal government is both authorized and directly obligated to take some of the measures necessary to limit the spread of the virus, such as closing borders. However, universal travel bans within the country would be constitutionally problematic and often unnecessary and should better be left to states and counties. In economic terms, private firms should launch the recovery, and the responsibility of the government is to ensure that these actors will exist and retain their workforce when the epidemiological situation improves. The CARES Act generally corresponds to this goal but would benefit from several improvements. Unemployment benefits should not exceed the employees’ pre-crisis salaries to ensure the businesses retain their labor force. Large businesses should receive credits for paid sick leave and repurchase programs rather than direct bailouts. Finally, the government should avoid new additional spending at this point, as time is necessary to evaluate the measures already taken.
References
- Boccia, R., Burke, L., Burton, D. R., Creszler, R., Michel, A., Michel, N. J., Schwalbach, J., Sheppard, P., & Winfree, P. (2020). Congress should focus on pandemic control and fix the CARES Act for an economic rebound. Backgrounder, 3484, pp. 1-14.
- Burke, L., Burton, D. R., Fishpaw, M., Creszler, R., Michel, A., Michel, N. J., Sheppard, P., & Winfree, P. (2020). The Senate’s coronavirus bill: Bailouts, missed opportunities, and positive reforms. Backgrounder, 3479, pp. 1-13.
- Gostin, L. O., Hodge, J. G., & Lindsay, F. W. (2020). Presidential powers and response to COVID-19. Journal of the American Medical Association, 323(16),1547-1548.
- Snell, K. (2020). What’s inside the Senate’s $2 trillion coronavirus aid package. National Public Radio. Web.