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Given the undeniable dysfunction that has marked American politics for the past decade-plus, the coronavirus has accomplished the unimaginable: Congress and the President worked together to pass the CARES act, a $2.2 trillion relief package which includes provisions for small business bridge loans, individual stimulus checks, expanded unemployment benefits, and other targeted forms of aid.
But there’s one unsolved problem: Actually getting all that money to Americans.
The failure of organizations, technologies, and legal frameworks for distributing relief funds is by now obvious at every level of the American system. Small business loans are already lagging, with banks complaining of a lack of clarity and overloaded systems; states are weeks behind on distributing unemployment insurance benefits; and individual relief checks are little more than notions hovering on the far horizon.
These slowdowns may prove just as devastating as the executive branch’s slow and muddled response to the virus itself. In both cases, every second counts. In fact, it may be useful to think of the economy as a sick patient, thrown into a dangerous coma by the stay-at-home orders that have begun to succeed in controlling the virus.
Financial relief measures are intended, essentially, to keep the patient’s heart beating until it’s safe to be up and about again. But every day money doesn’t get where it’s supposed to go, parts of the economy will seize up and fall into decay, like failing organs. Suppliers dependent on delivery payments from shuttered restaurants, flower shops, and factories are stumbling along with their customers. Laid-off workers, waiting for overdue unemployment benefits, may not be able to pay their rent or mortgages, setting in motion a chain of devastating defaults.
It will already be difficult to restart the delicately interrelated moving parts that make up our economy. The longer relief is delayed, the more things will unwind and disconnect, and the more irreparable the damage will be, turning what could be a three-month shock into a potentially years-long depression.
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I have a painful piece of evidence right in front of me: My wife was among the millions laid off in the past three weeks. Since losing her job in mid-March, despite constant effort, she has been unable to penetrate New York’s overloaded, antiquated unemployment insurance system to claim the benefits her former employer paid into. Luckily, we’re fine, and trust that the money will come, eventually.
But for many others, delay is not an option. Millions of Americans are sole breadwinners with little or no savings, putting day-to-day survival itself in question.
There are alternatives to this catastrophe – or, perhaps, were.
Authorities in Berlin, for instance, were able to airdrop emergency funds directly into the bank accounts of 150,000 independent workers within a matter of days. Examples of such swift results from governments seem rare globally, though, and a number of fintechs are working to create faster pipelines for government cash. Chime and TurboTax are working to improve delivery of direct relief. Small-business loan originator Kabbage typifies the promise of the sector, with rich data feeds letting it automate the lending process, including for businesses smaller than many banks want to bother with.
Some of these innovations may go into effect fast enough to keep the economy’s heart pumping. But after three weeks of lockdown, we’ve already missed the window to really get ahead of the situation. Now the question becomes, once we’ve dug our way out of the rubble, what do we want our financial system to look like during the next crisis?
David Z. Morris