President Donald “We’ve never closed down the country for the flu” Trump is the worst offender — and not just because of his inability to acknowledge public health realities. He’s threatening to use his favorite tool, the executive order, to break the congressional deadlock and provide a payroll tax cut, student loan forbearance, eviction protections and an extension of the extra unemployment benefits that expired last week.
The latter ideas are reasonable, but arguably the Constitution doesn’t allow them to be imposed by executive order. The first two probably can’t be imposed that way, either, and also shouldn’t be. The federal government already offers generous student loan deferment programs. And payroll tax cuts are a tool for a recession we’re not having, one more like 2001, or 2008, when they were indeed deployed.
Those cuts stimulated demand when workers were afraid to spend. That’s not our main problem right now. No matter how large a tax cut you give them, people won’t buy a new Brooks Brothers suit in order to sit on their sofa, or dawdle over a lavish meal in a cozy, poorly ventilated bistro.
But Trump isn’t the only one who seems unable to comprehend that now is not business as usual. Consider one reason congressional negotiations have bogged down: Democrats are resisting an employer liability shield for reopened businesses. They’d rather beef up enforcement by the Occupational Safety and Health Administration, while preserving workers’ right to sue.
Yet we haven’t had time to establish federal standards as to what constitutes reasonable safety precautions in a time of covid-19; in many cases, the science is still too uncertain, so what rules should OSHA enforce? Especially since some known best practices — slapping an N95 mask on everyone, lots of rapid-result covid-19 tests — are currently impossible because overwhelmed supply chains cannot deliver enough of the necessary equipment.
Employees who have to go to work should, of course, be offered reasonable damages for any health problems they incur, through existing workers’ compensation schemes. The Democratic proposal to offer hazard pay for the most essential occupations also has merit. But there’s no good reason to hold employers liable for a novel hazard no one really knows how to control — except that the trial lawyers are major Democratic donors.
Republicans are at least equally out of touch with current realities. As always, they are obsessed with the moral hazard of generous unemployment benefits. It’s not an unreasonable concern during a normal recession, since there’s some evidence that job search intensity goes down as the generosity of unemployment benefits goes up. Only that right now, we don’t necessarily want the unemployed to find new jobs. In most cases, it would be better if those workers eventually returned to their old jobs, that being the fastest route to a full economic recovery.
It may be expensive and unnecessary to provide benefits so generous that 60 percent of the unemployed are making more now than they did at their (currently shuttered) jobs. But the cost of those extra payments is not high enough to warrant holding up a relief package. Because — apologies for repeating myself yet again — this is not a normal recession.
One way to think about normal recessions is that they happen when everyone realizes they’re not as rich as they thought they were going to be. The resulting uncertainty is heightened because some people will have made risky bets on that brighter future and now can’t pay them off. In the aftermath, it’s normal to focus on disciplining excess risk-taking and other forms of moral hazard either by the market or government regulation, so that the government’s efforts to mitigate the damage don’t end up encouraging future folly.
None of which is relevant in a virus-induced downturn. We’re not trying to hasten our adjustment to a more stable economic equilibrium; the best we can do is spread enough money around for everyone to muddle through until we reach a vaccine, or herd immunity.
The worst we can do, meanwhile, is to leave desperate households so short on cash that they catapult into insolvency, giving us a more ordinary kind of recession on top of the covid-19 contraction. If we want to avoid that worst-case scenario, we all need to face the reality of an opponent that can’t be browbeaten, spun, incentivized or put on hold while we refight the same old battles.