The COVID-19 pandemic has presented a unique and unprecedented challenge for economies across the globe as world leaders balance safeguarding public health with protecting workers and industries. Here in the United States, as we continue to respond to the ongoing threat posed by the coronavirus, our nation has suffered staggering economic losses. According to the Bureau of Economic Analysis, the U.S. economy shrank at an alarming annual rate of 32.9 percent in the second quarter of 2020 alone, setting a record for the steepest drop in history.
While the coronavirus crisis has had widespread impacts on the entire U.S. economy, it has had an especially destructive impact on workers and jobs. Since COVID-19 first prompted economic shutdowns in March, tens of millions of U.S. workers have sought unemployment aid for the first time. At the beginning of September, the U.S. Labor Department reported that almost 900,000 workers filed initial claims for unemployment benefits in one week alone. On the other hand, though the unemployment rate has recovered somewhat since it hit nearly 15% in April, the Bureau of Labor Statistics’ recent August jobs report signals that millions of workers still find themselves struggling due to the pandemic’s impact.
As a result of this staggering economic carnage, Congress and the federal government have implemented a number of expansionary measures that aim to prop up our damaged economy. Once businesses were forced to close as states shut down in March, Congress worked quickly to deliver aid to struggling Americans. In late March, President Donald Trump signed the Coronavirus Aid, Relief and Economic Security Act into law after Congress passed it with bipartisan support.
The unprecedented CARES Act — which cost the federal government more than $2 trillion in total — served as a multi-pronged approach to help those affected by the pandemic. Soon after this act was signed into law, each American citizen with income less than $75,000 (or $150,000 for those filing jointly) received a generous $1,200 stimulus check along with an additional $500 for each child under 17 years old in the household. Meanwhile, the CARES Act led to the implementation of the Paycheck Protection Program, a beneficial effort that provided small businesses financial support to help them survive this crisis. Finally, in addition to stimulus checks and support for small businesses as part of the CARES Act, the federal government also provided enhanced unemployment benefits of $600 per week, which unemployed American citizens received in addition to state aid.
The CARES Act was truly a remarkable effort that quickly distributed benefits across the nation in a time of distress and severe economic instability. But in retrospect, the Act was far from perfect. Though the CARES Act was successful in many ways, our lawmakers designed this legislation more broadly in order to distribute this crucial economic aid as quickly as possible. The broad targeting of this stimulus plan led to obvious waste and inefficiency. In terms of the stimulus checks, our federal government distributed benefits to all Americans under a certain level of income, even if some of these people never lost their jobs. Meanwhile, it is highly evident that the PPP was misused and taken advantage of by a large number of businesses, with the Wall Street Journal reporting that “the program’s $521 billion in loans … went to well-heeled and politically connected firms across the economy, including law offices, charities, restaurant chains and wealth managers.”
At the time the original CARES Act was passed in March, it seemed hard to imagine that further stimulus efforts might be necessary. Six months later, however, while our government has already spent trillions of dollars and helped millions of Americans, the coronavirus pandemic shows no signs of letting up anytime soon, with our country’s top health experts warning that the COVID-19 crisis is far from over. The ongoing threat posed by the pandemic has therefore reignited debates over further stimulus efforts, though the negotiations in Congress have appeared to stall for the time being.
It’s painfully obvious at this point that the coronavirus will continue to threaten the American economy until an effective therapeutic or vaccine is made available to the public. Until then, it is incumbent on our lawmakers and government officials to implement further stimulus measures that fight the economic impacts of COVID-19. However, while future stimulus bills are necessary, we must learn from the shortcomings of the CARES Act and make new stimulus money more narrowly targeted to those affected most. Unlike in March, we have the tools today to better understand who is most impacted by COVID-19 and the time to actually implement a strategy that is more narrowly targeted.
A more narrow strategy to uplift struggling Americans would not only be a more efficient plan but would be a smarter plan. Instead of wastefully trying to distribute benefits to every American, as was the case with the CARES Act, narrow targeting of stimulus benefits would enable us to focus on those who need help most.
Take the stimulus checks, for instance. These checks were a crucial tool that successfully injected money into the economy to support workers and families and encourage more spending. But they had a major flaw: Our federal government sent checks to every American citizen under a certain level of income, even if a sizable portion of these people never lost their jobs. Moving forward, a much more efficient and intelligent strategy for future stimulus money would be to target stimulus checks for those who actually have lost their jobs. This would allow the government to send checks to unemployed Americans at a much faster pace (delays were an issue with the original CARES Act). Narrowly targeting the checks could even enable Congress to send more than $1,200 to each unemployed worker, and would also save more funds for additional stimulus efforts.
At the same time, the CARES Act led to the implementation of the Paycheck Protection Program. Unfortunately, while the PPP was well-intentioned, the program turned out to be bulky, wasteful and inefficient. Even after more than $520 billion in loans were distributed as of July 31, according to the Small Business Administration, countless small businesses who truly needed the aid never got it. Unfortunately, many of those small businesses that the PPP was designed to support have now closed permanently, in part due to the failures of this initiative. Now, at a time when we know so much more about both the medical and economic consequences of COVID-19, we have time to devise a better plan that will narrowly target the small businesses that are actually in danger of closing up, as opposed to wealthy corporations that never were worried about the coronavirus in the first place. A more narrowly targeted PPP would allow Congress to send aid to only those businesses (especially “Main Street” businesses) that are teetering on the edge of collapse. Just like narrowly targeting stimulus checks, a narrower PPP could also enable Congress to send even more funds to a select group of small businesses that have demonstrated a clear need.
Moving forward, while almost everybody has been adversely affected by COVID-19, it is obvious that we must advocate for smarter stimulus efforts that focus solely on those who need it most. In particular, these are the Americans who have lost their jobs and are struggling to put food on the table, and the businesses most severely impacted. The next round of stimulus checks, for instance, should be intended for unemployed workers who still have been unable to get back up on their feet. The next installment of the PPP should be designed exclusively for small businesses that are laying off workers or closing up entirely. By creating new stimulus efforts with narrow targets, not only will we build a more efficient system that is able to more easily deliver aid, but we will also be able to provide more help for those who have ultimately been hit hardest.
Evan Stern can be reached at erstern@umich.edu.
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