How COVID-19 Overwhelmed The American State

Decades of poor policy choices and neglect of government agencies have left the U.S. ill-equipped to handle this crisis.
Rebecca Zisser/HuffPost; Photo:Getty

Maybe the United States just isn’t capable of handling this.

The last three months have been a real-time test of America’s ability to respond to an unprecedented crisis: a pandemic whose death toll is likely to exceed 100,000, an economic downturn approaching the scale of the Great Depression, and no end in sight.

The economy won’t rebound until the federal government can assure people that it’s safe to resume something approaching normal activity. At the same time, remaining in near-shutdown status depends on the government’s ability to support households and businesses that no longer have their usual incomes.

And from the looks of things, the federal government is coming up short in both endeavors.

On the public health front, COVID-19 caseloads seem finally to be declining. But it’s happening slowly and unevenly, with the incidence of disease rising in places like Texas even as it falls in places like New York. Health care workers still don’t have enough protective gear; nursing homes, prisons and meatpacking plants are still the sites of major outbreaks. The ability to test and contact trace is below the level most experts say is the bare minimum for reopening the country.

On the economic front, federal and state action has spared millions from hardship; expansions of unemployment insurance in particular have had a big impact. But the relief effort still has significant gaps. Small- and medium-sized businesses are turning down loans designed to keep employees on payroll because the rules are so complex. Millions aren’t getting unemployment benefits because their states aren’t delivering the money efficiently.

“We basically denigrated the public sector for a generation.”

- Harold Pollack, University of Chicago

Some of these problems were inevitable, given the scale of the current crisis. But some weren’t. Overall, the U.S. appears to be lagging behind peer nations, especially those in Europe.

And although American struggles have a lot to do with choices President Donald Trump has made in the past few months, they also have a lot to do with choices that the U.S. has been making for decades ― in particular, skimping on its safety net and funding for key government agencies.

National and state officials have been scrambling to make up for that with new initiatives, most recently a relief bill called the Heroes Act, passed by House Democrats on Friday. Like its predecessors, it would provide much-needed help to millions if it became law.

But there’s only so much that even the most determined policymakers can do right now. What the U.S. really needs to do is reimagine what the government does and how it operates ― to build a new state edifice, starting with its foundation, in a way that it has done only a few times in its history. And it’s not clear the political system is capable of that.

The U.S. Public Health Infrastructure Wasn’t Ready For This

The failures of the public health response have gotten plenty of attention already, especially when it comes to testing, which — if deployed adequately early in the pandemic — had the potential to help officials contain outbreaks much more successfully than they have. An inadequate supply of protective gear is the other big failure, because it’s exposed front-line workers to the virus, causing them to get sick and making spread more likely.

Trump has taken a lot of blame for these problems, and rightly so, given his failures to make testing a priority and to seize control of the medical supply chain in January, February or March, when he was receiving official warnings about the coronavirus and the need for urgent preparation.

But underlying factors, predating Trump, have also contributed to the crisis. That’s most obvious in the case of nursing homes, where infection control has been a long-standing problem because of poor staffing levels (thanks to decades of underfunding long-term care) and poor regulation (thanks to decades of underfunding key government agencies).

Decades of underfunding long-term care is one reason COVID-19 has taken such a big toll on nursing homes.
Decades of underfunding long-term care is one reason COVID-19 has taken such a big toll on nursing homes.
Eduardo Munoz Alvarez via Getty Images

“They cut state inspectors ― the folks that check licensed adult foster care facilities, seniors services ― and they just didn’t have the capacity to go in and do the kind of oversight necessary to protect people,” Marianne Udow-Phillips, who was director of health and human services in Michigan from 2004 to 2007, told HuffPost.

At the time, Udow-Phillips noted, Michigan’s public health agencies were reeling from years of cuts under the previous Republican administration, which isn’t surprising and isn’t unique to Michigan.

Inadequate spending on public health agencies has become a chronic problem in the U.S., in part due to a campaign that began in the Reagan era — led by Republicans and frequently supported by more conservative Democrats — to limit or reduce government spending.

“We basically denigrated the public sector for a generation,” said Harold Pollack, a public health and policy expert at the University of Chicago. “Tens of thousands of Americans are now going to die because of our systemic neglect of these basic functions of our government.”

The effects are likely to become even more apparent in the coming months. The key to allowing activity again, once the number of COVID-19 cases gets low enough, is the ability to pounce on any new reports of infection and then, quickly, identify anybody who may have been exposed.

“The way other countries have handled contact tracing, where they have been successful, has been to rely on a employed paid workforce that is highly valued as part of their public health system,” said Udow-Phillips, who is now director of the Center for Health and Research Transformation. “We just don’t have that readily available in the U.S., anywhere.”

The U.S. Safety Net Also Wasn’t Ready For This

Early on in the crisis, policymakers faced a key choice about how to support people while the economy was nearly shut down. European nations by and large decided they would simply have their governments assume private payrolls, in an effort to freeze their workforces in place until the public health crisis had ebbed.

The U.S. opted for a hybrid approach: a program of forgivable loans to smaller businesses that would, in theory, replicate the European strategy for the beneficiaries, coupled with expansions of unemployment for workers who were furloughed or lost jobs altogether.

Relying more on unemployment insurance has its upsides. And when the money actually gets into the hands of people who need it, the U.S. scheme accomplishes many of the same things that the European programs do, as economists like Harvard’s Jason Furman have argued.

But unemployment insurance in the U.S. goes through the states, which have considerable leeway over how to operate their programs. That’s had serious consequences in some parts of the country.

Consider Florida, where unemployment benefits were among the stingiest even before the crisis and where applying for benefits was already the most difficult. The threadbare system was a hand-me-down from former Gov. Rick Scott, a Republican who slashed program funding and introduced newly restrictive eligibility criteria and who justified those changes as necessary because, he argued, otherwise people wouldn’t look for work.

Sweeping cuts to Florida's unemployment system under Rick Scott, the former Republican governor, help explain why the state has done such a poor job of delivering benefits during the pandemic.
Sweeping cuts to Florida's unemployment system under Rick Scott, the former Republican governor, help explain why the state has done such a poor job of delivering benefits during the pandemic.
Mark Wilson via Getty Images

Those changes help explain why, as of Friday, just a little over half of the Floridians who’ve applied for benefits have gotten them. And while pretty much every state’s system has buckled under the pressure of so many people seeking support, Florida’s has been among the slowest to process claims.

“They’re just not set up to deliver benefits to a large portion of the eligible population,” said Chris O’Leary, senior economist at the Upjohn Institute for Employment Research.

Governors determined to make their systems work better have made some headway. A case in point is Gretchen Whitmer, the Democratic governor of Michigan, another state whose system endured cuts under a previous Republican administration.

Whitmer used executive authority to increase benefits and to streamline the application process. A key decision was making sure that people denied benefits upfront automatically became eligible for a special, federally funded extension of unemployment to independent contractors and others who would not normally qualify.

Sure enough, Michigan has been among the fastest in the country at processing claims.

“Taking a benefit system that was designed to reduce benefit payout and shifting everything to presume that unemployed workers ought to get a benefit is much like turning a barge,” Michele Evermore, senior researcher at the National Employment Law Project, said in testimony to the state legislature last week. “It is a huge shift to make and cannot happen immediately, but the speed at which this is occurring is to be commended.”

Even in a state like Michigan, however, people are falling through the cracks. Studies have shown that large numbers of Americans who should be getting unemployment insurance don’t, because the process is too cumbersome or they don’t realize they are eligible.

In addition, losing a job in the U.S. frequently means losing employer-provided health insurance. Just this past week, the Henry J. Kaiser Family Foundation released a study suggesting that roughly 27 million have lost coverage.

Most are eligible for either Medicaid or subsidized private insurance through the Affordable Care Act exchanges. But millions are likely to end up uninsured because even well-educated workers can find the myriad coverage options so confusing.

And that’s to say nothing of the 14 states ― Florida, Georgia, North Carolina and Texas notable among them ― where Republican officials have blocked the expansion of Medicaid, even though federal funding from the Affordable Care Act is available.

European Systems Have Held Up Better

The European approach to relief has been more coherent and, it would appear, more effective. Through Germany’s “Kurzarbeit” program, which many experts consider a model, the government reimburses firms for about two-thirds of wages, with companies or unions sometimes topping that off out of their own reserves.

It works seamlessly for the employees (who keep getting their paychecks) and the employers (who can get reimbursed through online transactions). And that’s not surprising, given that the system has been in place for decades: The German government didn’t have to first debate and then develop it for this crisis.

It’s also a product of long-standing cooperation between German employers and unions, something typical of European economies.

“Owners and workers and the government can sit down at a table ― like, not a metaphor, they really sit down and figure out how to solve the labor questions,” said Mike Konczal, an economic analyst and writer at the Roosevelt Institute. “Here in the U.S., there’s nothing like that where we see that kind of negotiation with the labor movement.”

The U.K. did not have such a program in place beforehand, but it managed to invent its own version in the span of just a few weeks. As for unemployment payments, they were already available there through a broader “universal credit” program that operates electronically and, despite its own problems, doesn’t have the kind of bureaucratic issues plaguing the U.S. system.

“There’s a sense that the safety net is helping most people and the level of squalor or real hardship hasn’t shot up,” said Daniel Tomlinson, economist at the London-based Resolution Foundation.

European countries like Germany, where Chancellor Angela Merkel has gotten high marks for her leadership during the crisis, have a history of supporting government programs. They also have universal safety net programs that have existed for decades.
European countries like Germany, where Chancellor Angela Merkel has gotten high marks for her leadership during the crisis, have a history of supporting government programs. They also have universal safety net programs that have existed for decades.
Pool via Getty Images

The British programs, like their German counterparts, does not reach all workers. When it comes to managing their economies overall, the European governments on the whole have done less to boost demand than the U.S. has, as Evercore ISI economist Ernie Tedeschi has pointed out.

Still, by all accounts, European governments can deliver benefits more effectively because they do a better job of funding agencies, because national governments can administer programs directly rather than going through states, and because they already have generous programs (including national health insurance) permanently in place.

In the U.S., by contrast, lawmakers are scrambling to create new programs and, even when they succeed, those programs have fixed expiration dates. That could slow economic recovery here, because Americans are less likely to spend money if they aren’t sure relief programs will be there in the future.

“The level of uncertainty associated with your future income streams is just always a lot higher in the United States than in Europe,” said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics.

The U.S. Needs Some Pretty Big Changes

Democrats (especially, but not exclusively, progressive ones) have proposed changing that uncertainty by making unemployment benefits and other forms of assistance available until economic indicators improve ― in effect, creating the sort of “automatic stabilizers” that European countries have.

Also on the progressive agenda is more assistance on health insurance, preferably by expanding an existing government program, like Medicare or Medicaid.

Steps like that could help a lot. So could better use of some existing safety net programs, in particular, a “work sharing” initiative under which businesses can reduce workers’ hours — or bring back those they’ve laid off or furloughed on a part-time basis — and unemployment insurance will kick in for the hours not worked. It could be a particularly useful program if, as many experts predict, the recovery is long and gradual.

“The level of uncertainty associated with your future income streams is just always a lot higher in the United States than in Europe.”

- Jacob Kirkegaard, Peterson Institute for International Economics

On paper, the U.S. work sharing program (known formally as “short time compensation”) is a lot like the German system. But it is not available in all states, and the option is so underutilized that unemployment insurance agency workers in states that have it frequently don’t know the details ― as Slate’s Jordan Weissman discovered when he tried to investigate the option for his employer.

“It’s a nice deal if you can get it, and you can get it, maybe, if you try,” he wrote.

As usual, there is the underlying problem hampering other aspects of the COVID-19 relief effort: Programs and agencies that have never gotten the support they need.

“It’s not that we don’t know what to do, or even that we don’t have systems that could do it,” said Heather Boushey, president of the Washington Center for Equitable Growth and a longtime proponent of the work sharing program. “It’s that we’ve been systemically underfunding them and making it impossible for them to work.”

And funding problems could get even worse as states cut spending to deal with plummeting tax revenue. The Heroes Act that House Democrats passed on Friday includes some much-needed relief for states, but key Republican leaders, starting with Senate Majority Leader Mitch McConnell (R-Ky.), have signaled their opposition.

Whatever lawmakers can or can’t get done in the next few months, the long-term question is whether the U.S. can chart a different course, one in which it not only creates a more seamless, universal set of benefit programs but also starts supporting the public sector again; that is, building up government rather than tearing it down.

It’s happened before. The exploitation of labor in the industrial revolution led to the Progressive Era’s rules for the workplace. The deprivation of the Great Depression led to the New Deal’s provision of welfare benefits.

In both instances, the U.S. responded to a crisis by creating new laws, programs and agencies to protect and provide for the American people. But these transformations required more than new ideas. They required a new political consensus about the role of government and, ultimately, new political leadership ― something to keep in mind, especially with an election just a few months away.

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