This, too, shall pass.
To be clear from the outset, this is not an ideological argument: I’m not arguing the coronavirus reveals the importance of the Green New Deal and more progressive taxation any more than it demands tax cuts and deregulation. My argument is pragmatic. Remember, half of the $2 trillion stimulus bill that just passed is aid to businesses, in the form of grants and government-backed loans. Like it or not, we’re in this together.
Some might allege the virus is a once-in-a-lifetime occurrence and, thus, doesn’t require dramatic structural change. But not only did pandemic experts clearly foresee this crisis, they also are now warning that even once we contain the coronavirus, it could come “roaring back” next flu season.
It’s not just viral pandemics that require we update the policies at the nexus between government and private markets. There are those “hundred-year” weather events that now come every few years. It’s also the case that a bit over a decade ago, the United States had an economic crash requiring emergency measures to bail out businesses, save markets and offset soaring job losses (numbers that pale compared with what we’re seeing today). It’s just that, back then, the debilitating infection spread through “synthetic credit default swaps” and other toxic “innovations.”
What drives the needs for these changes? One factor is our highly interconnected, globalized economy. Global trade and human flows provide both great opportunities (such as the “supply side” benefits of increased dispersion of goods, services, capital and workers) and great costs (such as job displacements, refugee crises, credit bubbles and xenophobic politics, not to mention fast-spreading diseases). Global production, as currently managed — or rather, unmanaged — is responsible for unsustainable environmental degradation.
Another factor is our country’s unsustainable degree of inequality. History is clear: At some point, the have-nots revolt against the haves. For now, pitchforks have been dulled by the sharing of crumbs from the table and the false promises of fake populism. But this fast, deep recession is exacerbating the long-forming fissures in our economy. The stark differences between the pain and dislocation facing those living paycheck-to-paycheck relative to the rest of us are only beginning to surface. While some of us experience a long, weird, unsettling, working vacation, others face devastating economic insecurity, characterized by zero income, possible eviction and the inability to meet basic needs.
The center cannot hold under such pressures. We need to restructure the role of government in the economy to avoid, at best, being back here again in a few years — and, at worst, the implosion of a capitalist society that large swaths of the public have every right to question.
Pragmatically, what would such a restructuring yield?
For one, government would be positioned to more directly help businesses and their workers. I’m a fan of much of what’s in the $2 trillion stimulus bill that passed late last week, but I’m also worried about the pretzel logic of many of its measures. Because of our government’s long-held aversion to lend directly to businesses, we have policies that backstop the Federal Reserve so that it can backstop private banks so they can, in turn, through a complex process run by the Small Business Administration, get loans to small businesses. Given that over half of small business have only two weeks of cash reserves, that chain has too many links.
Some other advanced economies are following the direct route. In Denmark, for example, the government has proposed covering 75 to 90 percent of all worker salaries over the next three months — as long as the companies don’t lay anyone off. Note the conditionality: The government helps businesses that help their workers. In the United States, we are comparatively averse to this direct path, because our government supposedly doesn’t “pick winners.” But that’s obviously ridiculous in this context. First, when so many different businesses in almost all sectors need help, we’re picking survivors, not winners, which is essential if we want an economy that can bounce back post-containment. Second, our tax code picks winners left and right. (Mostly right.)
Next — and this part is admittedly progressive — a restructuring could deliver a much-needed, comprehensive system of social insurance, from cradle to grave. The Great Depression made the need for such safeguards glaringly clear; somehow, that insight has faded in more recent decades, despite the risks posed by our unequal global economy. Now we’re seeing that the gamble of tying retirement security to the stock market is clearly the wrong bet, especially when we have a much loved, fully portable, guaranteed pension system — Social Security — in need of significant shoring up and expansion. And downturns shouldn’t send us scrambling to bolster our unemployment insurance system: That system should be federalized, with an automatic ability to expand to meet higher needs during downturns — including higher wage replacement rates and reaching part-time, self-employed and gig workers. (The stimulus package includes both.) Finally, we should expand our concept of public goods and services, including a paid leave program and more equal access to health coverage. Fighting inequality requires sharing in the costs of hard times.
I’ll have more to say in this space as I work with folks of all political stripes on an initiative called the Other Side Economy Project. The current crisis is teaching us about what we will need for the future, and as we learn, our goal is to craft a concrete agenda. But the overarching theme of this moment is clear. It’s the tension that has always defined American social policy: the push and pull between “we’re in this together” and “you’re on your own.”
In the words of Elihu Root, quoted by FDR in a 1934 Fireside Chat: We once again face “questions for the solution of which the old reliance upon the free action of individual wills appear quite inadequate. And, in many directions, the intervention of that organized control which we call government seems necessary …”
When this crisis passes, we either answer those questions in a way that is inclusive and just — or we will find ourselves back here again before we know it.