Fatigue Is Here, but the Economic Fight Is Just Beginning
Precious public support will be squandered if the economic relief effort isn’t handled with full transparency and accountability, a former presidential adviser says.
· Published May 1, 2020 Updated May 2, 2020
As early as we are in the fight against the Covid-19 virus, I fear that many Americans may already be exhausted by it.
A medical crisis created an economic crisis. But a political crisis can make the economic crisis much worse, and that may be where we are heading.
Deteriorating economic conditions plus some dubious decisions by the federal government could erode public support and cripple efforts to limit the long-run damage precipitated by the coronavirus.
You can see the exhaustion brewing: Individuals with “quarantine fatigue” are , some and government officials are pushing to reopen over the objections of health experts, and Congress is dragging its feet on further support because of “.”
We seem to have lost sight of an important lesson: In long economic crises, as in long wars, the government must maintain public support to succeed. But there are two quick ways for this support to collapse.
One is for the government to embark on ambitious acts but fail to produce observable short-term “success” in the economic data. Another is for government to seem to be squandering aid money or sending it to the “undeserving” (which could be banks, speculators, the profligate, self-dealers or people unwilling to work, depending on who is doing the observing).
On these grounds, the United States has substantially raised the risk of premature public exhaustion.
At the very outset of this crisis, in the United States would come with a particularly savage economic impact — worse even than in China. To deal with the damage, Congress initially passed a $2.2 trillion package, but continued deterioration brought legislators back less than a month later for an additional $484 billion.
To put that in perspective, that amount surpasses what the Congressional Research Service (correcting for ) the United States spent over more than 50 years of conflict in Iraq, Afghanistan, Vietnam, Korea and World War I.
These outlays provide critical assistance, but as big as they are, they are not “stimulus” to jump-start the economy. They are more like relief payments. We will almost certainly need more money in short order.
Yet observable conditions will only get worse. more in the next few months than in any full year in history, . The statistics for the growth of gross domestic product in the second quarter will come out at the end of July, and may show the fastest rate of decline ever.
If the federal government doesn’t help the individual states, they will be required by law to balance their budgets — forcing them to raise taxes and lay off workers in the face of the downturn. That would only make the misery worse and add hundreds of thousands to the unemployment roles (as a decade ago).
One problem is that the administration has repeatedly expressed overly optimistic timelines of when the crisis will end and when things can start returning to normal. Doing that will make the disillusionment by the public worse when it doesn’t happen.
And now the question of whether the money is going to the right people has added another blow to public confidence. Relief checks were . Backlogs in various states have prevented millions from receiving unemployment insurance relief payments. In Florida, .
The $350 billion for loans to small business ran out within days and did not go to industries or states in. Banks over those most in need, and and figured out ways to get the money earmarked for small businesses.
These are exactly the kinds of things that can destroy public support. Even if they end up amounting to a small share of total spending, they enrage people.
A similar dynamic played out during the Great Recession while I served in the Obama administration. In President Barack Obama’s first month in office, the United States passed an package and prepared to do more if needed. But as unemployment rose through the fall and the unemployment rate hovered at almost 10 percent for more than a year, even proposals for minor additional stimulus generated heavy opposition.
Many people concluded that the initial stimulus had not worked. Their anger ramped up with every discussion of projects that had not been “shovel ready” or of money that went to homeowners who bought homes they couldn’t afford or of the fact that banks that caused the crisis had received in 2008 (under the previous administration).
Similar frustrations have played out many times in many countries and may be happening in the effort to relieve suffering in the current downturn.
What’s worse, the largest cash infusion of all — $500 billion for large businesses and a corresponding $5 trillion lending facility at the Federal Reserve — is likely to be disbursed without much clarity on who gets the money or how recipients can use it.
The administration has been adamant that it is not required to be fully transparent or accountable in handling these funds. At the signing of the relief bill, President Trump that the special inspector general designated in the legislation could not report to Congress without his approval, and he subsequently assigned to the job. Mr. Trump declared that he would personally provide all the oversight needed.
The president may view the removal of oversight and the control of the allocation of funds as political victories. But they are dangerous victories. They set the stage for greater popular frustration and exhaustion. They undermine the credibility of the crisis response, which the government will desperately need soon enough.
The administration should expand its managerial capacity and commit to total transparency and oversight of the trillions of dollars to come. No doubt that would make life more difficult and embarrassing in the short run. It might well lead to multiple House investigations into various programs. But in the long run, the administration could show the public that it was committed to getting the money out to where it was needed, not to the favored or connected. In the end, accountability is credibility.
Fundamentally, this economic crisis will continue until we control the spread of the virus — either through testing and public health measures or through medical treatments and vaccines. Until then, we will need to keep spending billions to fight the economic devastation. The president had best remember that the money will continue only if he can maintain public support.
Austan Goolsbee, a professor of economics at the University of Chicago’s Booth School of Business, was an adviser to President Barack Obama. Follow him on Twitter: