These crises elicited massive, rapid, and unprecedented interventionist responses. But government responses enacted under exigent circumstances must control costs better and restore private incentives in the longer term, because history shows that, once launched, public programs and interventions seldom end.

The economic and health recoveries also heavily depend on the actions of businesses, citizens, and schools, including whether they adhere to recommended precautions such as social distancing, frequent hand washing, and wearing face masks. It remains to be seen whether firms can survive with restrictions on employees and customers, and whether the accelerated digital transformation will be a net plus. The other danger, of course, is a large second wave of the virus that overwhelms hospitals and scares away employees, students, and customers.

One bright spot has been the rapid pace of adaptive innovation. Most US schools quickly continued teaching online following the shutdown, while telemedicine has boomed, helped by the relaxation of government pay restrictions and rules prohibiting inter-state medical consultations. And medical researchers quickly refocused on COVID-19 testing, therapeutics, and vaccines: human trials have started for several promising vaccines, and new tests may be deployed before winter. For the first time, vaccine production capacity will be ramped up simultaneously with testing, so that any safe and effective vaccine that emerges will become available far more quickly.

But the longer-term problems revealed by the pandemic and the recession will not disappear when these crises end. True, before COVID-19 struck, things finally had started looking up for lower-income workers. Minority unemployment was at an all-time low, and wages were rising most rapidly at the bottom of the pay scale. But while strong economic growth will be needed to ensure that these trends resume, there are pockets of people who have been left behind.

To address this requires reinvigorating policies to broaden school choice, bring private jobs and capital to depressed areas, and ensure better job training (including more apprenticeships and job matching), as well as taking a new approach to overlapping means-tested anti-poverty programs. US welfare recipients face extremely high implicit marginal tax rates in terms of the benefits they lose if they work, with many standing to earn less if they worked than if they remained on the several overlapping programs.

It is extremely difficult to predict the speed and strength of the US economic recovery with any certainty. What is clear, however, is that we must boost incentives to work in normal times when jobs are plentiful, while strengthening the safety net for when they are not and for those who are unable to work.

First « 1 2 » Next