Statement on the economic impacts of COVID-19

In his message to Congress on the Economic Security Program in January of 1935, which formed the basis for the landmark Social Security Act, President Franklin D. Roosevelt said: “No one can guarantee this country against the dangers of future depressions but we can reduce these dangers. We can eliminate many of the factors that cause economic depressions, and we can provide the means of mitigating their results… We pay now for the dreadful consequence of economic insecurity–and dearly.”

In the 85 years since, the United States has seen large reductions in poverty and broad increases in standards of living. Yet, no amount of economic progress can eliminate risk.  Many events that derail the financial security of individuals, families, and businesses are completely outside of their control. From hurricanes, fires, floods, and other climate-induced disasters to speculative stock bubbles and pandemics like the one we are experiencing today, economic security is always at risk of catastrophic or cataclysmic events. These risks introduce economic insecurity in more ways than one; that a random event outside of one’s control might wreck financial security harms the planning and risk-taking activities that are essential for a healthy economy.

So long as there is risk in the economy, the need for sound policy to maintain economic security remains. The response to the Great Depression, as laid out by FDR’s Committee on Economic Security, worked toward this end with great and lasting success. Indeed, Franklin Roosevelt and New Deal legislation have profoundly shaped today’s solutions and created the template for future action. The New Deal’s policies laid the foundation for much of the legislation Congress just passed to tackle the COVID-19 epidemic and revive the economy. Social Security beneficiaries continue to receive benefits. UI provides support to millions of displaced workers, although it currently faces significant limitations in quickly reaching the newly jobless. These and related programs do, however, miss large portions of our nation and are thus in need of expansion. Our economy’s complexity has in places outpaced our policymaking. Now, much of the policy response to economic crises is made in real time by Congress, and in the rush of the moment builds on policies meant to address prior risks. What that response looks like – and who benefits from it – is itself a source of uncertainty.

The current crisis has exposed critical gaps in our economic security programs that will remain after this crisis is over and that, without systemic solutions, will likely cause just as great a scramble to put together stop-gap measures when the next crisis comes. The National Academy of Social Insurance Economic Security Study Panel’s final report, to be issued early next year, will offer a variety of policy packages through which the United States might increase economic security, during both economic booms and severe contractions, such as the one we face now. We cannot predict what will be the next event to trigger vast economic consequences. We cannot say now which parts of the population, or which parts of the country, will be most affected, or which industries will be hardest hit. We cannot say how long it will last, or how much it will cost to recover. But with thoughtful evidence-based policy we can and must address the necessity for assurance and economic security, to individuals, families, and businesses, before the next catastrophe strikes.