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To aid recovery, policymakers need to fix their unintended consequences
Four months ago, the United States was a very different place. There was snow on the ground, the NBA was still playing, and the unemployment rate was 3.5 percent. Then the COVID-19 outbreak changed everything.
In public policy, solutions are the coin of the realm. The trouble is that with every intended “heads,” there is an unintended “tails.” Pandemic response, it turns out, is no different.
As states shuttered their economies to reduce the coronavirus spread, businesses were left with declining revenue and limited funds to pay employees. Layoff numbers began to spike. Rushed to act, Congress responded by floating operating capital to businesses, but also accidentally incentivized a number of layoffs with the way those loans were structured. Additionally, a $600 federal pandemic unemployment benefit was grafted onto state unemployment systems. The logic made sense at the time: People were out of work through no fault of their own and needed periodic influxes of cash to pay their bills. Rather than set up an entirely new system, state unemployment agencies would handle the logistics.