Commentary: Federal priorities to address the national emergency

COVID-19 has generated an economic crisis that is, thankfully, unique to our lifetimes. If we are to recover efficiently as a country, then the policy response must be similarly unique, addressing multiple needs along different time scales. Many people are looking to the Great Recession for lessons on how to move forward, but there are critical contrasts between the two crises that have important implications for the solutions we should consider.

The pace of the 2008 recession was comparatively glacial to the challenge imposed by COVID-19. In 2008, approximately 10 months passed before more than 3 million jobs were lost[1] from the January peak, a milestone we appear to have seen in last week’s unemployment insurance claims alone (and this week’s unemployment claims have doubled last week’s claims). The Dow Jones industrial average took nearly a year to lose the percentage of its October 2007 high[2] that we have experienced in the last six weeks. The dramatic difference in the pace of these crises has posed new challenges for governmental and nonprofit institutions to respond with preventative or immediate assistance.

The source of the causes of the two crises is also important. The Great Recession was largely brought about through destructive practices by key stakeholders in debt markets. Corporate America is not at fault for the COVID-19 pandemic. The difference in culpability allows for different conversations around bailouts and assistance than the country might be having if industry malfeasance had caused another economic catastrophe.

The greatest difference between the Great Recession and the COVID-19 economic crisis, particularly from a policy solution standpoint, is that a large portion of the country cannot go back to work — or go spend money — and we do not know for how long. Unlike in 2008-2009, we cannot buy our way out of the problem with economic stimulus alone.

In summary, the Great Recession was a slow-moving crisis caused by structural problems and bad actors that could be addressed by providing new opportunities for economic prosperity, while the COVID-19 economic crisis has been wrought with great speed by a medical pandemic that undermines progress on the economy for an unknown period of time.

Considering the nature of the current economic crisis on its own terms, there are three areas of policy activity we should pursue now:

1. Immediate assistance for individuals and businesses. This is the area where most governmental support has been targeted thus far. We must make sure people can continue to live secure, healthy lives. In addition to direct assistance from governments to individuals, this also means providing assistance to businesses to continue employing as many people as possible. Both financial and advisory assistance is important.
   
   Recommendations:
   1. Help more entrepreneurs access emergency technical assistance by providing all of the entities contracted as service providers by SBA with emergency funding. Specifically, the centers that are contracted to work with tech- and innovation-focused businesses — Regional Innovation Clusters, FAST partners, and Growth Accelerators — should receive additional support to reach their clients, adding to the funding already provided for Small Business Development Centers and Women’s Business Centers.
       
   2. Ensure startups with equity investors are able to access SBA emergency loan programs in order to maintain payroll and other operations by creating an emergency exemption from SBA’s affiliation regulations. The National Venture Capital Association, House Speaker Nancy Pelosi and many others have expressed this need.
       
   3. Expand EDA’s emergency funding so that Regional Innovation Strategies participants, and particularly those that are supporting innovators and entrepreneurs working on biosciences development (e.g., vaccines and therapeutics) and the production of medical devices and supplies, can also expand their services and availability during this critical time.
       
   4. Provide state and local governments with additional direct support that can be used to replace revenues lost due to low tax collection, as well as for expenses related to COVID-19. The previous package provided funding for expenses, but limited economic activity means precipitous revenue declines, hampering the capacity of the 49 states with balanced budget requirements to provide traditional, basic services without further aid.
       
   5. Make additional funds available to institutions of higher education to facilitate the implementation of remote education platforms, continue employment (including for graduate researchers), and advance medical research.
       
2. Prepare to jump-start the economy once the health crisis is resolved. While some businesses and sectors will thrive during shelter-in-place orders, a sizable portion of the economy is essentially in low gear, if not shut down, for the foreseeable future. We should be doing everything we can to limit the economic hangover following the resolution of the health part of this crisis. That means making sure businesses will have access to the capital they need to rehire, restock and reopen.
   
   Recommendations:
   1. Authorize a program to fund state and regional initiatives to facilitate capital access for new small businesses, including through equity investment and patient debt, supporting company formation, growth and hiring during an anticipated period of private-sector disinvestment and economic uncertainty. Getting this program in place early will help ensure entrepreneurs, private investors and public funding are all in place and ready to move as soon as possible.
       
   2. Invest in a program that will invest in regional efforts to fully capitalize on the outcomes of federally-funded research and achieve the transformation of those innovations into new products, services and jobs. The benefits of this investment will be felt over a longer time scale, but is critical to improving the nation’s economic resiliency and expanding access to American-made products and services in the future.
       
3. Creating economic value during the health portion of the crisis. Although many individuals are out of work and many businesses are unavailable to customers, there are still ways policy can help drive the creation of new economic value and opportunities during the health portion of the crisis. Businesses can receive guidance and capital to make equipment and facility improvements. Even better, individuals who are out of work should be able to access remote training to improve their skills. Through these types of investments, the nation will be prepared to be more economically competitive once the health crisis subsides.
   
   Recommendations:
   1. Create a new worker training program that will award funds to any nonprofit (including higher education, workforce centers, and Manufacturing Extension Partnership centers) offering free or low-cost, remote training on technical skills to workers.[3] Because the timeline of the health crisis is unknown, training will need to be offered as short modules.
       
   2. Promote initiatives that finance or provide technical assistance to companies investing in renewable energy, energy efficiency, cybersecurity, and advanced manufacturing equipment. Such facility improvements may be particularly timely in areas and sectors that are closed or using fewer employees, thereby limiting the disruption that may normally occur to business during an upgrade.

Congress is likely to consider a new package of emergency assistance when it returns to Washington the week of April 20. Hopefully, members will be prepared to consider both immediate- and long-term needs of the American economy in this legislation.