The initial international economic response to the COVID-19 pandemic involved nationally enforced lock downs, travel bans, quarantines, and similar measures designed to contain the pandemic. By June, where those polices were followed, infection rates had fallen so dramatically that nations were able to reopen their economies and resume normal activity.
The United States is not one of those nations. Our national government assigned the task of containing the virus to state governments. This scatter-shot approach has resulted in our achieving the disgraceful distinction of having the world’s highest death rate due to COVID-19. Even more troubling, we are now experiencing historic new highs in our infection and hospitalization rate while most other nations are achieving new lows. The economic consequences of this reality are bleak.
At the onset of the epidemic, to aid unemployed and laid-off workers through the crisis Congress added $600 a week to state unemployment checks and legislation that offered tax breaks to companies that kept workers on their payroll even if they were not working. Both of those measures expire by the end of July. Congress also passed a rent abatement program that ends mid-September. Absent extensions of these measures, an increase in unemployment and evictions seems inevitable.
Billions in federal aid were legislated to sustain ‘small businesses’ during the pandemic. Due to poor management, most of the funds were garnered by not-so-small corporations with elite legal advisors. The net result is that many genuine small businesses received no aid. Many will not survive the summer.
A similar situation developed regarding family-owned farms. Agribusiness conglomerates rather than family-owned farms got most of the federal aid. Small farmers face a double whammy of having lost business due to closures of hotels, schools, and restaurants while having to deal with lower prices. Especially hard hit have been dairy farmers and farmers dependent on sales of grains and beef.
Millions of Americans work in the service sector which includes enterprises such as hotels, sports arenas, theme parks, cinemas, restaurants, and airlines. Numerous cities are economically dependent on trade shows, state fairs, conventions, and other one-time events. This hard-hit sector continues to suffer from the totally reasonable reluctance of most of the public to risk its health in unregulated venues.
Millions of workers also are employed, directly and indirectly, by public schools and universities. The economic backbone of many college towns are institutions of higher learning. Local merchants are often dependent on students for their survival. The desire to reopen schools is universal, but it is not self-evident how to do so safely.
Remote learning is useful, but quality education from grade school to graduate school requires in-person instruction. Nonetheless, careless handling of self-distancing and other standard health measures could spike the infection rate in the same manner seen in states that opened bars and beaches without effective pre-planning. President Trump worsens the situation by vigorously demanding all public schools reopen this fall whatever the local conditions or planning. Another troubling factor is the irresponsible behavior of some college students.
The crisis also has underscored the inadequacies of our present health care system. Hospitals are underequipped and understaffed. Some patients already are being turned away by beleaguered hospitals in cities where infections are soaring. Currently, the Trump administration is in court trying to wipe out the Affordable Care Act. If successful, this will leave millions of Americans newly uninsured and end the current protection of those with pre-existing conditions from being denied insurance.
Due to the funding needed to fight the pandemic, state budgets have gone into the red. Without federal assistance, state deficits will result in layoffs of state workers, reduced services, and higher taxes. City workers depending on some state funding also will be affected.
The formula for dealing with the virus has been established by the EU and states such as New York. As our medical experts have been saying from the onset of the crisis, containment of the virus involves face masks, social distancing, contact testing, and when needed, regional, local, and even national lock downs. Reopenings are safe only when done gradually in carefully regulated phases.
President Trump personifies what not to do by refusing to wear a mask, ignoring the need for contact tracing, and staging indoor rallies with no social distancing. He is in de facto denial of the crisis when he states the pandemic is ebbing and will somehow eventually just “disappear.”
The reality is that skyrocketing infection rates have led a number of states to reverse reopening measures and even speak of possible new lockdowns. Most other states have suspended further opening of their economies. Perhaps, the accelerating crisis will spark more sensible federal actions and serve as a wakeup call to irresponsible governors. If not, the worst is yet to come.