Congress’s Next Rescue Bill Should Start With Public Health

(Bloomberg Opinion) -- No sooner did the $2 trillion “Phase 3” economic recovery package leave the Capitol Hill runway than Congress started planning a full Phase 4 bill to pass later this month or in early May, along with a smaller interim measure the Senate hopes to pass on Thursday. In the rush to give people and the economy additional support, what should the priorities be?.Any sound economic recovery package has to begin with public health. Congress should build an adequate Covid-19 testing regime, capable of testing not only everyone with symptoms, but also random samples of individuals who paint statistically valid pictures of large regions of the country. That will give policymakers and the public a more complete understanding of how the virus has spread. In addition, Congress should ensure that a disease surveillance system is in place that can rapidly isolate people who test positive for coronavirus, as well as identify their close contacts. .One plan along these lines making waves on Capitol Hill was released on Tuesday. Two of its authors are former Food and Drug Administration commissioners: Mark McClellan and my American Enterprise Institute colleague Scott Gottlieb. Gottlieb tells me that he sees the need for up to several million tests per week. For context, only about two million Covid-19 tests have been conducted in the U.S. in total..The speed of the recovery will depend in part on people’s perceptions of the risk of going to restaurants, stores and other staples of normal consumer life. If people think the government has the health situation under better control, they will be more likely to resume normal life, facilitating a more rapid economic recovery..One of the most important things Congress can do is help to keep workers connected to their employers. In the Phase 3 bill, Congress created the Paycheck Protection Program, which offers grants to small businesses to cover the cost of payroll, utilities, rent and mortgage interest for two months, provided they do not lay off their workers. The program also allows businesses to quickly rehire workers they have already laid off without penalty. .But more needs to be done. Congress allocated $349 billion for these grants. Even if Congress provides the additional $250 billion for this program that Treasury Secretary Steven Mnuchin asked for on Tuesday as an interim measure, it will still be underfunded. The economist Glenn Hubbard and I estimate that demand for this program could easily exceed $1 trillion. .The program uses commercial banks to distribute these grants in the form of loans that are later forgiven. When appropriating additional funding, Congress should also strengthen the statute’s provisions to protect banks from any penalties or enforcement actions if borrowers misrepresent themselves in applying for a forgivable loan. The administration’s implementation of the program should reflect this. .Doing so will encourage banks to participate. Hundreds of thousands of workers have been losing their jobs each day, and these measures will help banks automate the process of issuing loans, getting the money to businesses faster. .Reports suggest that House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer want half of the $250 billion increase for the program to be directed to underserved businesses. McConnell wants to pass that funding on Thursday — it would be part of an interim measure, not a full Phase 4 package — and Pelosi and Schumer shouldn’t slow down that process. To the extent divvying up the funding in this way would slow its ability to get into the hands of businesses, it should be avoided. .A complement to this program is “short-time compensation.” This form of unemployment insurance allows for workers to receive pro-rated benefits if their hours are reduced. Short-time compensation allows companies to cut payroll costs while still keeping workers employed. The Phase 3 package had provisions to encourage this, but additional incentives will be needed to encourage its use and to help the states that do not yet have such a program to establish one..By attempting to preserve the ecosystem of small businesses, the Paycheck Protection Program helps to ensure that unemployed workers can find work more quickly once the crisis is over. Along with short-term compensation, it could mitigate both the psychological and financial challenges of being laid off as well as keep workers connected to their employers for the duration of the crisis..Any hope that the economy will snap back rests with the ability of unemployed workers to get back to work quickly. The goal of the Paycheck Protection Program and short-time compensation is to reduce the number of workers who are unemployed in the first place. .Increased aid to state and local governments will need to be a component of either an immediate interim measure, as Pelosi and Schumer have indicated they would like, or a full Phase 4 package. Their budgets will be stretched by the crisis, and the federal aid they have received to date for Medicaid, public-health measures and general support will likely be insufficient to prevent states and localities from slashing spending and reducing hiring if the crisis stretches into the summer. This could increase unemployment and result in the erosion of essential services and public-health measures..Finally, the safety net should be strengthened. Cash payments to households were a prominent part of the last economic package, and do not need to be included in any additional effort. But Congress should consider sending checks to low-income households, strengthening food stamps or similar measures to protect the most economically vulnerable members of society. Pelosi and Schumer would like to pair a 15 percent increase in food assistance benefits with the interim increase in Paycheck Protection Program funding, intended to pass this week. .This is not a comprehensive list, and additional steps will be needed. Many states need help administering their unemployment insurance programs, which are struggling to handle the rapid increase in the number of unemployed workers requesting benefits and to incorporate changes to make benefits more generous. The state unemployment insurance trust funds will also need shoring up..Additional resources are required to ensure an adequate supply of personal protective equipment for physicians and nurses, as well as to support the housing sector, under stress because of the need for mortgage-payment forbearance. .At least, this aid will likely be needed. Innovation could create a solution to the crisis. If a therapy (not a vaccine) to treat Covid-19 becomes available this summer, the downturn would be less severe. If antibody testing, discussed on Tuesday by New York Governor Andrew Cuomo, could be used to identify people who have had the virus and are no longer at risk or contagious, they could be allowed to return to work. .But Congress can’t bank on that. Its willingness to act quickly is laudable and crucial to restoring the nation’s public health and economic strength. .This column does not necessarily reflect the opinion of Bloomberg LP and its owners..Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”.©2020 Bloomberg L.P.

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Congress’s Next Rescue Bill Should Start With Public Health

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