The Coronavirus Aid, Relief and Economic Security Act rushed through Congress last month and signed into law by President Donald Trump will go some way toward slowing the hemorrhaging of the U.S. economy by providing assistance for small businesses, large corporations and individuals suddenly struggling because of the fight against COVID-19.
But while the $2 trillion effort at rapid intervention will provide a temporary salve for what is quickly becoming a very painful economic wound, its mechanisms for helping struggling families are likely to prove both inadequate and misshaped, especially when compared with the steps taken in Europe, Canada and elsewhere to keep their respective economies functioning and prepared for a rapid recovery.
The CARES Act provides about $260 billion in supplements to state unemployment benefits as well as an estimated $300 billion in one-time payments to U.S. citizens. Huge sums, but they pale in comparison with the $1.5 trillion in aid targeted to businesses and state and local governments.
These staggering figures reflect the urgency Congress and the Trump administration feel is needed to show they are helping. But other nations have chosen a better-targeted way to protect their economies during the crisis: payroll subsidies.
Such programs are expensive in the short term but have significant benefits that go beyond protecting workers who spend most of their income on rent, food and fuel for the car.
Payroll subsidies allow employers to keep trained workers on their books, so health insurance and other benefits remain intact. This basically pauses the economy for a few months while the pandemic plays out — and when it's time to return to work, everyone is ready to roll. Alternatively, the U.S. could face a wholesale reset of the work force when millions of suddenly unemployed people find it safe to work again.
Forgivable loans to U.S. small businesses function similarly to these programs, but they reach only about half of the economy, and the bureaucratic burden may turn off some would-be participants.
Employers large and small have struggled with the tight labor market. They shouldn't have to start from scratch to recruit and train a new work force because of circumstances beyond their control. And they won't — if Congress rethinks its approach before its next intervention.