politics
economics
coronavirus
How Should the U.S. Government Respond to Covid-19?
Economics, Harvard University
Center for Freedom and Prosperity
0
0
Genesis
Response
March 16th, 2020
Jason, Perhaps I should have been more clear in my original column, but one of my goals was to explain that this is not a philosophical or ideological issue.
At the risk of stating the obvious, libertarians believe that the proper role of government is to protect life, liberty, and property. And a pandemic clearly qualifies.
That's why (in addition to debunking Farhad Manjoo's straw-man argument for socialism) I focused on the very practical concern of how government regulation has been hindering the development and deployment of testing.
That's a public-sector version of "First do no harm" and hopefully there's now a greater appreciation of the downside risk of granting too much regulatory power to bureaucracies such as the FDA and CDC.
Regarding potential steps to boost the economy, I agree with Barry Eichengreen that conventional remedies may not be effective in the current environment.
I don't think my preferred policies (lower tax rates, for instance) will have much impact when people and businesses are focused on curtailing the spread of the virus.
And I also don't think Keynesian policies will be effective when people are sequestered at home (for what it's worth, I doubt whether such policies are effective at any point).
That being said, we are facing a black-swan environment. People and businesses are losing income, a recession may already be underway, and there is enormous pressure for Washington to do something.
Jason suggested four policies: 1) Spending on health infrastructure, 2) program expansions (Medicaid, food stamps, paid leave, etc), 3) universal payments of $1K per adult and $500 per kid, and 4) business loans.
I agree that more health infrastructure would be very helpful. Which is why I want the private sector to take the lead. We'll get faster results at lower cost.
I'm very skeptical of program expansions. I've already written about the downsides of paid leave and that analysis applies more broadly to other areas of the federal government. Simply stated, I don't want politicians to exploit a crisis to impose their long-standing policy preferences - especially when taxpayers, consumers, and workers will be burdened with long-run costs.
I'm far more sympathetic to Jason's final two suggestions. To be sure, I don't think universal payments and/or business loans will prevent short-term economic harm. But if the federal government is going to do something, then payments and loans at least address a real problem (temporary loss of income) with a plausible action (temporary provision of cash).
I wouldn't be a good libertarian, however, if I didn't close with a warning that there are downsides to any government actions.
In an ideal world, firms would guard against black-swan events by having business interruption insurance and households would similarly protect themselves by setting aside funds in savings accounts. Those prudent steps will be less likely in a world where people expect government intervention.
Last but not least, anyone who has read Crisis and Leviathan (by Robert Higgs) knows to worry about the slippery slope of bigger government.
This dialogue is only halfway complete!
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