Policy Prescriptions for COVID

Update 431— Policy Prescriptions for COVID:
After Pain Relief, a Plan to Help Get to Recovery

Twenty-two million Americans have filed for unemployment compensation in the last month — the misery index that is 5 million higher than last week. Meanwhile, the House and Senate do not reconvene until May 4, in a virtual but voteless session until then. The president daily extolls his success and famous CEOs who say only “testing, testing…”

What should Congress do when it gets back? Can workers’ salaries be replaced, making painful layoffs unnecessary? Can business owners retain access to crucial credit and avoid default and bankruptcy? How can the economic recovery be hastened responsibly? 

We look today at some of the best ideas under discussion for a Corona IV package addressing these questions. 




There is no shortage of ideas to mitigate the economic effects of the COVID-19 pandemic. Democrats are advancing an agenda based on the needs of the middle class and those most adversely affected. The $2.2 trillion CARES Act was the largest spending bill in history, but more must be done, quickly.

A comprehensive plan is needed. Yesterday, the Trump administration released “Guidelines for Opening Up America Again,” sparse on details, dates, states, and specifics. Below, we outline ideas to address the crisis in a more comprehensive manner that seeks to avoid endless whack-a-mole responses in favor of systemic, forward-looking approaches. 

  • Continuity 

Nearly all of the job gains since the Great Recession are gone. This week, Treasury announced that the Paycheck Protection Program (PPP) is out of money. Without immediate, direct paycheck support, the cycle of unemployment, lost incomes, reduced demand, and business insolvency will accelerate. Rep. Pramila Jayapal proposed a Paycheck Guarantee Program, which would allow employers to maintain 100 percent of payroll and benefits, regardless of hours worked, over the next three months.

Business owners need continued access to credit to cover operational expenses and avoid defaulting on outstanding debt obligations. Congress ensured that commercial airlines and “businesses critical to national security” received emergency funding to stay solvent but has done less to help the small businesses that employ nearly 50 percent of the private workforce. 

  • Hazard pay

Many workers who are considered essential are also some of the lowest-paid members of the workforce. Per the Bureau of Labor Statistics, the average cashier makes barely more than $23,000 a year, while personal care workers and in-home health aides earn a meager $25,000 per year. Yet we classify them as essential and ask them to risk their health and the health of their families, and show up to work. At the very least, these frontline workers deserve hazard pay.

This week, Sen. Warren and Rep. Khanna proposed an ‘Essential Workers Bill of Rights,’ which includes “robust premium compensation” for essential, frontline employees.

  • Mark-to-Market Accounting 

A tool previously used to help markets weather storms is suspending mark-to-market accounting (MTM) practices. Current MTM rules revalue assets quarterly according to the prices they command on the open market, regardless of what was actually paid for them. When severe economic downturns occur, investors panic, and asset prices could fall far below their true value, with consequences from destroying nest eggs to depleting state coffers. 

In times of crises, a switch from MTM to historical cost accounting, in which assets are valued based on their original cost, would stabilize prices. The switch could be triggered automatically. As a means of freezing the status quo ante on a (not-so arbitrary) date — say a day before the stock market crashed in February — with regard to valuations, suspending MTM is a rapid prophylactic. 

  • Aid to States and Localities 

The $2.2 trillion CARES Act appropriated $200 billion in relief to state and local governments, on top of the $1 billion in phase one and $40 billion in phase two. Phase four must go further. 

States and localities must maintain strict fiscal responsibility or risk credit downgrading and bankruptcy. Forty state constitutions mandate balanced budgets. But currently, states are forced to enact emergency supplemental appropriations to bolster public health facilities and social services like unemployment insurance and Medicaid. At the same time, sales and income tax revenues are way down, and many states are even pushing back tax-filing and revenue collection. 

Without more federal assistance, states and localities will need to either raise taxes or cut services, thus prolonging the economic recession. Congress must increase the federal share of Medicaid spending beyond CARES Act levels. Federal grants can support social services and infrastructure maintenance temporarily, as they did during the last recession. The federal government should also untether its relief from covering only virus-related costs, as this constraint warps budgeting planning. 

The Center for Budget and Policy Priorities continues to ring the alarm on this issue, and their reports are among the most up-to-date and far reaching. 

  • Affirmative Covenants

The Trump Administration cannot be trusted to implement relief and eventual stimulus without oversight. There must be affirmative covenants — positive requirements that administrators adhere to certain terms of use. Democrats were unable to enact meaningful restraints on the affirmative strategic sector goals and benchmarks of success for the CARES Act’s $454 billion in corporate relief measures. 

Americans for Financial Reform is making a clear case for the need for increased oversight and transparency. 

  • Liberty Bonds

The federal government could finance its relief efforts through long-term and low-yield bond issuance. We did so during World Wars I and II when the government financed military build-up and industrialization. The Federal Reserve could continue its activism and buy a large chunk of liberty bonds to provide immediate liquidity, and investors all over the world (hungry for safer, high-quality debt) would follow. The fiscal effects even from a $1 trillion issuance may be close to negligible with interest rates likely to remain at historic lows for the foreseeable future. 

Robert Wolf, founder of the global-consultancy firm 32 Advisors, is proposing such a measure

Getting Back to Work: Immunity Registry

In the short term, we need to open the economy where we can. Shuttered businesses and mass layoffs are causing misery. Republicans like President Trump and U.S. Sen. John Kennedy are openly calling this a tradeoff between health and economics, and have publicly said they will tolerate more COVID deaths if we can restart the economy sooner. Economists widely dispute this. Increased infections would not only endanger public health and overwhelm hospitals but would also lengthen and worsen the economic recession. 

Because we will never be absolutely certain that it is safe for everyone to return to work, an immunity registry would allow workers a reasonable level of safety and would be a tool for monitoring potential outbreaks. Such a system would establish who has developed antibodies and can return to the workforce. It would abide by medical privacy laws and could be piloted among healthcare workers — those we desperately need to get back to work and mitigate the public health crisis. 

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