Public Health Requires an Extraordinarily Aggressive Economic Response to Coronavirus Immediately—One That’s Larger Than What Many Imagine
The coronavirus—which causes the disease COVID-19—is now in 49 states, the District of Columbia, and Puerto Rico and is rapidly spreading. Mortality rates for older patients appear high, but emerging numbers suggest that young people have high infection rates and high hospitalization rates as well. Currently, critical medical equipment such as personal protective equipment and hospital respirators are limited, and the stand-up of additional production and staff training will take weeks or longer.
The economy, working families, and small businesses will feel the brunt of the coronavirus outbreak immediately. Aggressive public health measures save lives and dollars, allowing the economy to bounce back more quickly once the pandemic is contained. But households and state and local governments need economic support to take these actions now and maintain them for the necessary duration.
The measures passed to date in Congress are critical down payments on these supports—and the paid leave package itself must actually get through the GOP-controlled Senate—but a far larger set of supports are already needed. Congressional leaders, such as Sen. Charles Schumer (D-NY), Sen. Elizabeth Warren (D-MA), and others, are right to be laying the groundwork for swift relief. The column recommends an immediate package at least the size of the Recovery Act in 2009—around $1 trillion in today’s dollars—which includes at least the following measures:
- Direct state and local government aid
- Direct aid to individuals, including, critically, direct payments and extraordinary actions to boost food and housing security and reduce debt costs
- Expansion of the unemployment insurance program to increase eligibility and increase generosity
- Small business support and liquidity, including a focus on cost freezes
- Emergency federal actions to address national supply chain shortages
As more may way be needed, passing this package swiftly today will also send the critical signal that Congress will do whatever it takes to secure the American people against the rapidly evolving coronavirus pandemic.
Slowing the spread of the virus is critical to saving lives
Health experts indicate that action this week by federal, state, and local authorities is critical. As CAP put it just three days ago, the importance of aggressive social distancing cannot be overstated: “The United States is at a tipping point: If transmission of COVID-19 is not slowed within the next week, the hospital system will be overwhelmed.”
In this piece, CAP called upon governors and mayors to take immediate action to engage in maximum social distancing. CAPs recommendations include a range of bans on gatherings and meetings, closing all bars, gyms and movie theaters, and more. The CDC has also now recommended many of the same bans on gatherings for the next eight weeks, with officials announcing even tighter guidelines for social distancing as we write. Over the past weekend, many states and localities acted quickly and decisively in taking many of these actions, with some taking even more aggressive steps.
Swift action to protect the public health has clear dividends from history. Yet these decisions have major economic consequences. The disruption already occurring has led several forecasters to anticipate that the U.S. economy may fall into recession in the coming weeks and months—although, there will almost certainly be a substantial lag before we see that in jobs and GDP data. To cushion the blow of these choices to working families, small businesses, and cities, counties, and states, Congress and the Trump administration must not wait to enact major, immediate relief at a scale tantamount to that needed around the Great Recession.
On a human level, this relief is necessary for people who will be experiencing an immediate income shock as they lose jobs or sources of income and small businesses that may see a complete loss of revenue for an extended period of time. Indeed, it is critical workers have an assurance that they will receive aid—otherwise, they may practice less social distancing and come to work when they should otherwise stay at home. We know 40 percent of Americans can’t afford an unexpected $400 expense, and this is only exacerbated in Black and Latinx communities due to stark wealth inequality. And as one small business owner in Nebraska put it, “A lot of people say ‘oh you own your own business, you’re rich,’ No. I’ve often said I’m two weeks away from having to close my doors … I have five or six families that count on putting food on the table with what we provide here.”
State and local officials are making the right call to ensure resources are available to the small businesses and communities most likely to be harmed by this pandemic. For example, San Francisco established a million-dollar relief fund to provide small business with grants up to $10,000, while the Seattle Office of Economic Development is offering grants up to $10,000 as well. There is much that state and local governments can do, but their resources are far more limited than the federal government.
While we do not want people to use additional funds now in activities that imperil public health—such as nonessential retail shopping in crowded areas or attending social activities in public spaces—we must ensure people who are affected by public health requirements, including bans on gatherings, can weather the economic storm. Minimizing economic dislocation now will mean a faster recovery after the country has addressed the COVID-19 crisis. At the same time, aggressive stimulus is critical because it makes it possible for states and cities; businesses; and individuals to make the decisions they need to in order to engage in social distancing. States and cities must make the decision to stop economic activity, even though it puts tax revenues at risk. Social distancing requires businesses to make a hard decision to close shop—or workers the tough choice to decline a job.
On a broad political level and in the context of thousands of individual decisions, federal policymakers must demonstrate that significant economic relief is on the way to make these decisions possible, and they must deliver on this relief so that businesses and families can keep their heads above water during these challenging weeks and months to come.
The two bills that have already passed (or, for the testing and paid sick leave legislation, significantly advanced) through Congress are an important first step. Alongside guaranteeing testing for COVID-19 is without costs to consumers, the bills make a down payment on fiscal relief for states; implement emergency paid sick leave; and provide certain enhancements to existing unemployment insurance, food security, and small business credit programs, among other items. These actions help states, businesses, and individuals begin the process of social distancing. But in terms of the scale of relief necessary, far more is needed to see that through swiftly: What we need, as CAP has written, is overwhelming economic force.
Congress and the administration must immediately proceed to a third package of aid that is of a far greater scale, sufficient to make clear that the federal government will do whatever it takes to support households and state and local governments put under stress by this public health emergency. CAP believes that an immediate package at least the size of the Recovery Act—about $1 trillion in today’s dollars—would be more than warranted.
While further action will almost certainly be needed beyond an immediate rescue package in order to build back from the public health and economic fallout of the coming months, the focus of this package must be on aid that can be delivered quickly and directly to those who need it most. In particular, it must include:
- Direct state and local government aid to provide states and cities with greater leeway to enact temporary containment measures. This should go well beyond the necessary Medicaid funding increase passed in the most recent package. It should enable states to not only cover the costs they are incurring in their public health response but also make it possible for states to provide necessary economic relief to the families and small businesses who need it, as well as health care workers and their families who will be heavily impacted by the crisis
- Direct aid to individuals, including direct payments, is crucial to give workers a greater ability to stay home throughout a public health crisis. Key components should include:
- Direct payments. This stands in stark contrast to a payroll tax cut, which does not provide support for those who lose income as a result of the crisis and would provide much more support to higher-income families
- An increase to maximum SNAP benefit and waive work requirements
- An increase to housing supports, designed also to support temporary moratoriums on evictions for nonpayment of rent by tenants impacted by COVID-19
- Moratoriums on mortgage, student loan, and other consumer debt payments and collection to reduce debt-related costs, and post-moratorium repayment plans should be affordable. Significant attention needs to be paid to the ensuring implementation automaticity for consumers related to servicers and other industry participants. Automobile repossessions should also be frozen.
- Broader COVID-19-targeted unemployment insurance provisions. In particular, work rules and waiting weeks must be eliminated for areas closed down by community transmission. It will also be necessary to increase average benefit levels and the duration of benefit receipts
- Small business support and liquidity in order to make it easier for businesses to weather temporary closure. This relief must be in addition to, not instead of, relief that goes directly to workers who may be laid off. A principal focus should be relieving, freezing, or delaying certain costs, including credit card costs and limits, mortgage and rent costs, and quarterly tax payments. Because there are not existing channels that can provide scaled relief to small businesses quickly, creative channels such as support for state and local programs, grants to mission-driven lenders, and more may be need.
- Emergency federal actions under national emergency authorities and Defense Production Act to ramp-up current production of personal protective equipment, hospital respirators (also known as ventilators), and other essential items in short supply.
These measures should be structured to automatically extend if public health and economic conditions remain dire. And they should serve as a bridge to structural changes that address how the economy was not working for people before this immediate crisis—and, indeed, why we were so vulnerable to it—as well as longer-acting forms of stimulus such as investments in infrastructure and clean energy.
Time is of the essence. The more the economic fallout of the crisis remains hazy, the more uncertain it is that we will be able to foster the public health response we need. That will be measured in lives lost. In addition, without decisive measures, we further hamstring a speedy economic recovery. Swift, overwhelming action now will enable working families, small businesses, and local governments to put public health ahead of short-term economic needs. This is not a small sacrifice. The federal government must act quickly to rescue American communities from the abyss.
At the Center for American Progress, Neera Tanden is the president and CEO; Andres Vinelli is vice president for Economic Policy; Andy Green is managing director of Economic Policy; Maura Calsyn is the managing director of Health Policy; Danyelle Solomon is the vice president of Race and Ethnicity Policy; Alexandra Cawthorne Gaines is the vice president of the Poverty to Prosperity Program; Marc Jarsulic is senior fellow and chief economist; and Olugbenga Ajilore is a senior economist.
To find the latest CAP resources on the coronavirus, visit our coronavirus resource page.
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President and CEO of the Center for American Progress
Vice President, Economic Policy
Vice President and Coordinator, Health Policy
Vice President, Race and Ethnicity Policy
Alexandra Cawthorne Gaines
Vice President, Poverty to Prosperity
Senior Fellow; Chief Economist