Audrey McAvoy/AP Photo
A Hawaii state Department of Health microbiologist demonstrates the process for testing a sample for coronavirus at the department’s laboratory in Pearl City, Hawaii, March 3, 2020.
We have no clue as to the number of cases in the United States, due to lack of testing, and no sense about expected casualties. The impact on travel and tourism will dwarf 9/11, and what Italy is doing on closing schools and large gatherings may well portend the emergency measures that may come next here. What we know about port traffic—the declines in container volumes by one-quarter in February, and not having even enough containers in circulation to ship finished goods—suggests that the supply shock is already baked in, even if China rebounds and returns to normal production soon. Shortages on store shelves and Amazon orders are inevitable.
Normal stimulus ideas won’t work in this environment. The International Monetary Fund’s opening bid of $50 billion in relief is way too low, and the Federal Reserve’s emergency rate cut is useless. Monetary policy cannot force people to congregate and produce manufacturing goods, or spend money in the physical world. If people stay home, if conventions and other gatherings continue to be canceled, if restaurants have no choice but to let produce rot, being able to borrow at a half-percentage-point-lower interest rate means nothing. Anyway, ten-year Treasury rates are already about as low as they can go.
We are likely to see a cascade effect, with reduced demand creating more short-term unemployment, and reduced manufacturing from broken supply chains doing the same thing (think of the longshoreman with nothing to unload, or the retail clerk in a store with nothing for sale). Plus, the plummeting demand has unknown effects on one potential recession accelerant: corporate debt concentrated in the energy sector, which has been spread throughout the financial system via collateralized loan obligations. We have no idea which banks or partners of banks own it.
But though this crisis doesn’t fit the normal economic measures to prevent suffering, that doesn’t mean nothing can be done. Public-health and targeted economic plans must be implemented as soon as possible. If the Trump administration refuses, voters loom to show their wrath in November. Democrats must take immediate action that will not only aim to arrest the catastrophe, but signify that self-preservation aligns with progressive values and economic ideas.
A deal has been reached in Congress for putting $8 billion toward emergency response, mostly for vaccine development, some public-health funding, and State Department assistance for global response. The Small Business Administration will have the ability to make $7 billion in low-interest loans and guarantees as well. This is all new money, after the Trump administration initially proposed to take some from an Ebola response fund and low-income heating help.
The emergency package is a mini version of what Larry Summers proposed earlier in the week, minus the demand to cut tariffs to spur an already battered trading sector. But it’s not nearly enough, even if it’s not as bad as the Trump administration’s every-problem-is-a-hammer rumblings about tax cuts. (Compared to the banking lobby’s plea that what we really need is lower capital requirements and less-frequent stress tests, the tax cut idea is practically sensible.)
Elizabeth Warren’s plan announced earlier in the week earmarked $400 billion in economic stimulus, designed to prevent a deep recession. This included loans to affected industries to avoid workforce reductions, expanded aid to states, and unemployment benefits. The last two share similarities with the enhanced automatic stabilizer that Calculated Risk’s Bill McBride proposed. That plan included paying parents in areas with school closures to cover child care.
The late-stage sticking point in the emergency supplemental was a measure favored by Democrats to make a coronavirus vaccine affordable. Republicans called this “price controls.” The truth is that any vaccine produced with federal dollars to stop a pandemic, given the extreme public benefit, should be free, as Warren’s plan indicated. The government could, as it did during the anthrax scare, threaten to seize the patent of any vaccine manufacturer if they tried to gouge the government on a fee for the vaccine.
An America with health care for all without high co-pays or barriers to entry, with paid sick leave for all, is an America that’s at least prepared for the current threat.
In addition, Warren’s concept called for the government to make all testing and early-stage treatment for COVID-19, the disease caused by the coronavirus, free, including for the uninsured. This avoids the spectacle of high medical bills for those who responsibly come into hospitals. High prices will simply push people out of receiving treatment and increase the potential for community spread. It’s completely counterproductive to create barriers to access, really ever, but especially during a pandemic. Finally, Warren and others have talked about providing paid sick leave through the duration of the pandemic. Again, forcing sick people into work just spreads the disease.
Republicans know that they are incredibly vulnerable on these public-health spending measures. Our health system is rickety on a normal day; people dying from being poor is usually hidden from view, but the pandemic makes it visible. “You can look at it as socialized medicine, but in the face of an outbreak, a pandemic, what’s your options?” said Ted Yoho, an extreme right-wing Florida congressman, to HuffPost. An America with health care for all without high co-pays or barriers to entry, with paid sick leave for all, is an America that’s at least prepared for the current threat.
Passing these measures in the House would put Mitch McConnell and the Trump administration in a serious bind. More important, they’re the right thing to do. At worst, it sets the stage for November; at best, people get the care they need to deal with COVID-19. There’s no reason the House couldn’t pass a stimulus and public-health emergency package this week.
Obviously, ramping up public-health spending neglects supply-chain issues, both of medical professionals and the equipment they need. That’s why a briefly floated plan from the Trump administration to use a Korean War–era law to expand industrial production in the name of national security would be so critical. This would entail government taking control of the means of production to make face masks, protective gear, and probably pharmaceuticals that Chinese manufacturing snarls have made scarce (setting up those plants is probably more complicated). This would supply medical professionals with what they need to treat patients; it would also increase economic activity. Increasing staff at hospitals, perhaps through a Civilian Conservation Corps–style program, could also pull off this double whammy.
Yes, this would all cost money. It’s more than worth it to save human life, as well as the widespread suffering caused by a pandemic-induced recession. It also makes the case that some problems require a government solution. It makes the case for the simple values of allowing everyone sick to take a day off work, and allowing everyone who needs medical treatment to get it. The coronavirus is going to roil politics in unknown ways. Those who believe in the progressive conception of government need to drive the conversation.
