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Save Lives, Ready Shovels

A six-point plan to end the Covid-19 crisis and prepare for recovery
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More than two months after the first case arrived on U.S. shores, the United States continues to lack a coherent national response to contain the Covid-19 pandemic, sustain the American people in the face of a deep and perhaps unprecedented economic downturn, or lay the groundwork for a robust recovery. The president has pinwheeled from denial to attacks on his opponents to playacting commander-in-chief at daily White House briefings. Congress has descended into partisan bickering over an economic rescue package that is too late, too small, and does nothing to scale up the paltry measures that Congress and the administration have to date taken to address the public health emergency at the heart of the crisis.

The Coronavirus Pandemic
From the Special Series:

The Coronavirus Pandemic

Now, in the face of an obviously inadequate response, President Trump has raised concerns about the tradeoffs between containing the pandemic and rescuing the economy. In reality, though, there is no choosing. The economy won’t be sustained in the face of the enormous public health consequences that are inevitable should we fail to contain the pandemic, and the far-reaching measures necessary to contain the pandemic can’t be sustained if the federal government does not provide extensive relief to households, small businesses, and corporations. Nor will the recovery proceed quickly if the private enterprises and public infrastructure upon which it depends are decimated in the depths of the economic crisis.

If there is a ray of hope at the present moment, it is that, despite the lack of leadership and at times rank incompetence at the federal level, it’s not too late to act decisively to contain the virus, scale up the response, and put in place a plan to get the American economy back on its feet. But as the caseload of the sick and dying mounts and the economy craters, time is running out. Congress and the president need to act now, with both clarity and urgency. There will be plenty of details to work out. But an effective response will require six broad sorts of actions to stop the virus and put in place a plan to return to something approaching normal life.

1. Lock Down Everything

With hospitals overwhelmed and corpses piling up faster in Italy and Spain than Italians and Spaniards can bury them, it is unconscionable that shelter-in-place orders have not yet been issued for about half the U.S. population. Worse, the Trump administration is considering whether quarantine and shelter-in-place restrictions should be lifted within the next few weeks.

The hard truth is that to limit the long-term pain, socially and economically, we need to shut down normal life, and most of the economy, for the next two to three months. That eventuality will be costly and difficult. But it is also manageable. It will allow us to get the virus under control and to put in place the critical public health capabilities that will be necessary to return to some semblance of normal social and economic life thereafter without allowing the virus to once again spiral out of control.

The alternative is both fast approaching and unthinkable. A million or more deaths. Millions more, young and old, hospitalized, often in critical condition, for weeks or months, with many experiencing severely diminished health and life prospects thereafter.

The notion that the economy might recover in the midst of a public health catastrophe of such magnitude is simply folly. There will be no recovery anytime soon if we are not willing to take the shutdown medicine today.

2. Rescue Everyone

Government-mandated shutdowns of work, travel, and recreation won’t work if households and businesses can’t survive economically. Keeping everyone afloat — workers, families, small businesses, and corporations — isn’t charity or a corporate handout, it is a moral obligation and a public health imperative, one that states alone won’t be able to manage without substantial federal support.

Demanding that Americans abandon their livelihoods and routines for months on end comes with obligations. If we want Americans to hold up their end of the bargain and refrain from all those vital activities, government needs to hold up its end of the bargain and make Americans whole. For the next 60 to 90 days, the federal government needs to do everything it can to keep every American and every business afloat, through paid leave, direct payments to households and small businesses, and expanded unemployment assistance.

In the short term, the virus cannot be brought to heel without destroying an enormous amount of consumer demand and industrial production. In the long term, an economic recovery cannot proceed if households are left in penury and businesses in bankruptcy. In order for economic growth and consumer spending to rebound, workers will need jobs to return to, businesses will have to start making things again, and consumers will have to start buying again. A broad economic rescue today is necessary in order to ensure a quick recovery later in the year.

3. Massive Mobilization for Testing and Treatment

Under the best of circumstances, a widely available vaccine is probably at least a year away. But testing and therapeutic treatments can be ready at scale much sooner. It will likely take 6 to 8 weeks of enforced social isolation to slow the virus and reduce caseloads enough to begin to return to normal life. Allowing large numbers of people to get back to work and their usual routines without infections coming back with a vengeance will require ubiquitous testing, so that every American can get tested regularly to track his or her infection status. It will require a massive scale-up to manufacture protective gear to keep health care workers and others most vulnerable to infection safe. It will require effective antiviral and other treatments that can keep sick people out of critical care and off of ventilators. And it will require a big increase in hospitals, beds, ventilators, and skilled health care providers to care for those who still get sick.

All of that will need to be ready in the next 60 to 90 days. Sooner in parts of the country like Washington State and New York City where infections are already beginning to overwhelm the health care system. This will require nothing less than a wartime mobilization of testing capabilities, manufacturing capacity, hospital resources, and supply chains. The Trump administration has finally authorized the Defense Production Act to guarantee federal procurement of testing kits and masks. But it must extend that to ventilators, hospital beds, and other essential equipment from medical suppliers. The federal government should also hire and train recently laid-off workers to staff makeshift hospitals and testing/treatment centers. These centers can be quickly constructed in parking lots, auditoriums, gymnasiums, schools, and elsewhere.

A national shelter-in-place order can keep the virus at bay long enough to scale up the testing and treatment capabilities that we need to quickly get back to a functioning society and a growing economy. But only if we take far-reaching and immediate steps today to mobilize the necessary resources.

4. Buyouts, Not Bailouts

The rescue package before Congress — expected to pass in the Senate later today — includes explicit bailouts to save the airline industry, along with substantial further lending authority authorizing the Department of Treasury to prop up other key industries. Already, many other industries, from ethanol refiners to rideshare companies to the National Association of Manufacturers are lining up for bailouts as well. Democrats and Republicans in Congress had deadlocked over proposals, on the one hand, to give bailed out industries a blank check from the federal government to weather the storm, and on the other hand to condition federal support on a welter of labor, environmental, and corporate-governance requirements.

There is a simpler and better way, one that has strong precedent and strong support across the partisan divide. Federal bailouts for big companies and even entire industries should come in exchange for taxpayer equity in the companies that we are saving. During the 2008 financial crisis, the federal government propped up General Motors, Chrysler, and AIG by purchasing shares of those distressed companies. Those positions took years to unwind, but ultimately brought taxpayers a fair return on their investment while also saving companies that employed tens of thousands of Americans.

The current paralysis of the federal government in the face of clear and imminent crisis is the detritus of decades of growing public disillusionment with politics and government, inflamed for many because the federal government bailed out the banks while leaving ordinary Americans to suffer. Insisting upon a fair return over the long term from industries asking Congress and taxpayers for a bailout is one way to assure that Americans come out of this crisis with perhaps a bit more faith that government can work for all of us and not just the wealthy and powerful.

5. Get Shovel-Ready Now

It may be, as President Trump has argued, that after the pandemic has passed, the American economy will come roaring back. But it is likely, after months of demand destruction and mothballed production, that substantial economic stimulus will be necessary. There is a long list of legislation to authorize critically needed infrastructure with broad bipartisan support, from transmission lines to move renewable energy around the country to transit, rail, and highway projects to flood channels, water projects, and seawalls. But because of our deeply dysfunctional politics, those investments have languished.

Now is the time to fund that infrastructure, and get started with planning, engineering, and permitting so it is ready to go when Americans are ready to go back to work. It is also time to take a hard look at the morass of regulatory, environmental-review, and contracting rules that have hamstrung efforts to renew our aging infrastructure for decades.

Efforts to invest in infrastructure as stimulus for the post-financial-crisis recovery were stymied by a dearth of “shovel-ready” projects. It took years after the last recession for stimulus investments in infrastructure to begin construction, often long after the recovery was in full swing. To avoid repeating that failure, Congress should not only take action now to fund critical infrastructure programs but take steps to expedite contracting, permitting, environmental review, and other constraints on American infrastructure and civic spending. If we take that action now, as the economic crisis is beginning, then we should be able to emerge from this crisis ready to build our way back toward economic prosperity.

6. Reinvest for Recovery and Competitiveness

Deep global economic shocks, like the one that is underway presently, often reset the global economy in a variety of ways — shifting trade flows, remaking supply chains, accelerating the decline of some economic sectors and markets and the rise of others. With many major companies and even industries in some form of public receivership, there will likely be a need to recapitalize much of America’s manufacturing and industrial base. From cars to steel to airlines, the U.S. ought to use the opportunity to permanently mothball older and less efficient capital stock, to retool for the future with cutting-edge materials and technology, and to open up new export markets for U.S. producers.

Assuming that the federal government holds substantial equity interest in targeted industries, the United States could invest in the long-term global competitiveness of key sectors of the U.S. economy at little cost to taxpayers, as the government can expect to see substantial return on that investment as public equity holdings are unwound over the following years in the midst of the post-pandemic economic recovery.

The extraordinary economic boom that lifted the American economy during the decades after World War II was made possible in part by the nation’s world-leading manufacturing capabilities, built up during the war years. The post-pandemic economy won’t be the same as the post-war economy. The pandemic won’t devastate the rest of the world’s physical infrastructure and capital stock in the way that the war did. But the recovery will potentially represent a once-in-a-generation opportunity to remake America’s industrial capacities for a twenty-first-century global economy that is intensely competitive and rapidly evolving structurally and technologically.

How the Covid-19 Crisis Ends

The greatest risk to both public health and the American economy today is not the pandemic itself but the lack of clarity about the response, how long social isolation will last, how households and businesses will survive the cessation of most economic activity, and how and when the economy will come back. What this moment demands from political leaders is not empty platitudes and cheerleading, it is a coherent plan to bring the nation through the crisis, return to something approaching normal life, and get America working again.

Ted Nordhaus, “Save Lives, Ready Shovels,”, March 25, 2020.

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