There Is Only One Way Out of the COVID-19 Economic Crisis

It’s time for a new New Deal.

FDR seated on a sofa, looking at the hat he's holding in his right hand and smiling
The only place to look right now. National Archives

With each passing week, America sets a painful new record: the largest number of job losses since the Great Depression. As of last week, more than 30 million claims had been filed. And while communities across the country are suffering, our leaders in Washington seem stuck on discussing the possibility of insufficient “stimulus” measures as metaphor and model.

As it stands, the primary federal response has been to provide unemployment insurance for those out of work, to give incentives to small businesses to retain employees, and to rely ever more on the Federal Reserve as an instrument of social policy. While valuable, these policy moves leave our republic in the very dire state that COVID-19 has mercilessly exposed: publicly unprepared, socially frayed, economically unjust, and structurally withered. As we outline in a new policy paper, there is a better way.

The current recession is steep and severe, and even under optimistic scenarios, millions of the jobs now lost are not coming back. Meanwhile, any successful test-fueled rush to “reopen” the country and get back to the America of January 2020 will only return us to a world in which, despite low official unemployment rates, four in 10 Americans reported that they could not readily meet an emergency $400 expense, millions were reliant upon gig work without benefits, our infrastructure crumbled, and our government was caught flat-footed in the face of a public health crisis. Such a rush will also likely lead to mass death on a scale beyond what we’ve already seen and is most likely simply impossible to succeed in returning us to the old normal. January 2020 is not a status quo to which we can or should try blindly to return.

Instead, like President Franklin Roosevelt did in the 1940s, we call for a federal job guarantee that would create millions of jobs, end involuntary unemployment, and build out necessary and resilient public infrastructure. Unlike the stimulus ideas that have dominated Washington to date, a direct government hiring initiative would address inequality; build robust capacity in public health, conservation, education, and infrastructure; and provide not just stable jobs, but government capacity to meet the current pandemic and economic crisis as well as the next one.

Other countries have not shed jobs as quickly as America has, in part because those countries directly support businesses, but also because their governments directly employ a greater share of workers. If America boosted its public sector employment rate—currently about 15 percent of the labor force—to the level of Great Britain, about 17 percent, we would create 4 million jobs. Augmenting to Canada’s level, 19 percent, would bring another 4 million.

And the benefits would go well beyond jobs. Public sector hiring would create government capacity to help us in times both lean and fat. European governments can funnel money directly to businesses because the administrative capacity has already been established. America has nothing like this because we don’t systematically employ anyone to do it. Meanwhile, calls to unemployment offices go unanswered, there aren’t enough workers to test Americans en masse or monitor Americans’ health, and state and local governments are laying off critical workers.

By building on the model of the New Deal, Washington could target millions of new jobs directly toward the working-class Americans left behind in the uneven growth of the past decades—especially black, brown, and rural Americans.

There are many ways these jobs could be created. Shoring up our unemployment offices and job training centers while extending vocational and professional training into “Grades 13 and 14” would create hundreds of thousands of new positions. Constructing and staffing new health clinics and creating comprehensive testing for COVID-19 and subsequent pandemics would bring another 500,000 or more jobs. Transforming the energy infrastructure of the U.S. through a Green New Deal—employing people in conservation work, refitting urban and suburban buildings, and installing solar panels and white roofs—would provide millions of jobs. And transforming the American postal system by attaching banking and election registration services to each post office would provide a lifeline for a critical American institution in crisis, better connect our urban and rural citizens to one another and the rest of the nation, and create thousands of new jobs already distributed via the approximately 35,000 post offices across the U.S. Finally, direct grants to state and local governments would enable communities to address their public health, economic, and infrastructure needs in the ways they know best.

The current focus on stimulus is deeply flawed, reproducing inequality by cutting taxes for businesses and thereby conveying billions to the already wealthy. As stimulus funds work their way through corporations, contractors, and small-business lenders, workers get an ever-smaller share of the pie. Stimulus programs are also beset by lobbying, in part because the benefits flow disproportionately to those at the top of the income distribution. Communities of color are already being left out of the stimulus or will benefit little from the short-term cash infusion.

Government jobs programs, on the other hand, deliver the benefit directly to workers; are subject to less lobbying than corporate bailouts; and would extend a job guarantee, more stable finances, and meaningful work to millions of Americans. By reinvesting in the strong and energetic government to which Alexander Hamilton aspired, America can fashion a more just and robust society.

For more on the impact of the coronavirus, listen to The Gist.