Living with Risk Daily Briefing – March 25

Published on March 25, 2020 / Leer en español

Center for a New Economy

Edited by
Sergio M. Marxuach


Four things you should know today

1) U.S. Senate agreement on economic stimulus

Republican and Democrat leaders announced an agreement on a third bill to address the economic crisis caused by the COVID-19 pandemic. After five days of arduous negotiations, Majority Leader Sen. Mitch McConnell announced at 1:30 am that an agreement had been reached with the Democrats, with Minority Leader Sen. Charles Schumer confirming soon after. The stimulus package is approximately $2 trillion, and includes, among other measures, the following: (1) cash grants of between $1,200 and $2,400 for individuals and families; (2) $500,000 million in loans to corporations and businesses; (3) $150 billion in aid to state and local governments; and (4) $130,000 million in aid for hospitals. This stimulus package, which accounts for about 10% of the United States’ GDP, should help lessen the expected impact of the economic contraction caused by the pandemic, but it all depends on how fast the federal government can distribute all the different forms of aid. According to Senator McConnell, the Senate could be passing this measure around noon today and the House soon after, working under special rules.

The CNE team in Washington, D.C. has been advocating for the inclusion of measures in the federal economic stimulus packages that will help Puerto Rico directly. We will soon share more information on how the new stimulus package will impact Puerto Rico. In addition, it appears that Congress will begin to work on a fourth economic stimulus package soon. We will not rest until Puerto Rico benefits from the aid that is being proposed.

2) Public health experts emphasize the importance of social distancing

At a time when President Trump has said that he wants to “open the country again,” public health experts continue to emphasize the importance of maintaining social distancing and shelter-in-place policies. Health experts warn that prematurely canceling these policies can be very dangerous, especially since the World Health Organization estimates that the United States is about to become the epicenter of the pandemic. This New York Times report clearly summarizes how a seemingly harmless birthday party in Westport, CT became a vector for COVID-19 transmission in that region of the United States.

3) The end of austerity?

CNE Research Director Deepak Lamba Nieves, PhD, writes about the complicated relationship between government responses to the pandemic and the effect of austerity policies on state capabilities around the world.

Government responses to control the contagion rate and announcements of unprecedented programs adopted in many countries to alleviate the economic impact of the pandemic, signal an interruption and perhaps the beginning of the end of austerity policies. From Germany to Puerto Rico, where the governor and officers of the Financial Oversight and Management Board announced an investment of more than $700 million to ameliorate the economic impact, the change in strategy and mentality has been drastic and necessary.

But will these recent measures translate into systematic improvements? Will the health, education or public security systems be straightened out in just a few months? Unfortunately, this is highly unlikely. The effects of years of austerity policies can be seen in the reduced response capacity of the healthcare systems of several European countries, which have been devastated by the virus.

This article, published in the prestigious medical journal The Lancet, details lessons that we should learn from Spain, which yesterday had almost 40,000 infected people – 13% of them health workers – and 2,600 deaths. These are some of the lessons:

  • More funding is needed to bridge the disparities between regional healthcare systems.
  • A lack of investment and cutbacks decimated the responsiveness of a robust public health system, which needs more staff and resources.
  • The Spanish have responded well to the “stay at home” mandate, but new efforts will be needed to help people endure confinement for longer periods—perhaps even for months.

In Puerto Rico, the healthcare system’s frailty is evident and due, in part, to decades of privatization and austerity policies. Let’s take note of what has and hasn’t worked in other places and, once we overcome this crisis, let’s do what is already being debated in Spain: bring back the capabilities that austerity has undermined.

4) Diverse populations have different levels of vulnerability

As authorities write proposals and financial aid programs to lessen the economic impact of the pandemic, it is important to take the limitations of different socioeconomic groups into account. We are all affected by the risk of economic contraction, but each person is vulnerable in a different way. This analysis by Politico clearly shows how closing stores, hotels and restaurants, among other businesses, disproportionately affects low-income and low-skilled workers. This is why some public policy experts like Jim O’Neil of Chatham House argue in favor of cash grants for these workers. But in addition to a basic income, these workers also need help from their creditors, as Isabel V. Sawhill, Senior Fellow at the Brookings Institution reminds us, to avoid a massive wave of bankruptcies.

Quote of the Day

“It would be foolish to disguise the gravity of the hour. It would be still more foolish to lose heart and courage.”

—Winston Churchill

From the editor’s desk

The historian John Lukacs, in his book Five Days in London: May 1940 (Yale, 1999), recounts the decisions that Winston Churchill made during the period from Friday the 24th to Tuesday the 28th, May 1940. Churchill was, and still is, a controversial figure in the United Kingdom’s history. Many consider him an incorrigible imperialist and a dishonest, chauvinistic and selfish person who, in the opinion of some, suffered from an excessive fondness for good whiskey.

But the decisions he made during those five days in May redeemed him forever. With no allies, with Germany having invaded France on May 10, many advised him to come to an agreement with Hitler—notably Lord Halifax, Secretary of Foreign Relations. Churchill’s answer was concise, a mere four words: we shall fight on. And with that simple phrase, he changed the course of history.

This is the end of today’s briefing.
Stay safe and well informed!