A Progressive Analysis of the HEROES Act: Three Key Questions

May 14, 2020

The United States is facing an unprecedented public health and economic crisis: over 82,000 dead20.5 million jobs lost in April, and a 15 percent unemployment rate. The scale and depth of the crisis are drawing parallels to World War II mobilization and the Great Depression. In fact, Senate Minority Leader Chuck Schumer and House Speaker Nancy Pelosi have called for “Franklin Rooseveltian-type action.”

FDR’s New Deal can and should inform how we think about our response to the crisis today: Is our response at a scale, and structured both to meet current needs and prevent dire and long-lasting macroeconomic consequences? Are our policy choices challenging extractive corporate power or exacerbating it? Are we using the full power of the federal government to address the crisis? And are we implementing structural changes that rebalance power in order to build a more equitable, more resilient economy in the future? These key questions must be asked when progressives analyze the recently introduced Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. 

1. Is our response at a scale to meet current needs and prevent dire and long-lasting macroeconomic consequences?

In Four Priorities for Pandemic Relief Efforts, Roosevelt Chief Economist Joseph Stiglitz outlines several macroeconomic threats we are facing at this moment: the multiplier effects of state and local austerity measures, which he estimates could result in an additional 3.7 million jobs lost; the serious consequences of individual bankruptcies and debt spirals, turning what started as an unemployment crisis into a systemic economic crisis; and not enough emphasis on giving the majority of Americans enough economic certainty to keep them economically engaged, failing to prevent long-term contraction. Importantly, Stiglitz and many others have noted that the economic burden of the pandemic disproportionately falls on Black and Latinx Americans, who already faced precarity before the pandemic hit due to structural racism and our skewed economic system.

There are several provisions in the HEROES Act that are at a scale to meet our nation’s challenges. The $1 trillion in aid to state and local governments is critical to preventing the kind of anemic recovery we faced when we turned to austerity following the last recession. The additional $1,200 cash payments, the continuation of expanded unemployment benefits, and changes to the child tax credit are important steps to support families and maintain demand. And the public health proposals must be a priority; as others have said, we cannot end the economic damage until we solve the public health crisis.

Other policy choices made in the House bill are less effective than they could be. The bill fails to make these critical payments—the $1,200 in cash or the expanded unemployment benefits—continue for the duration of the economic crisis. This creates uncertainty for families, who in turn may constrain their spending when our economy needs it most. Similarly, the insufficient employee retention tax credit for businesses means that layoffs will likely continue, creating far greater dislocation between employers and workers than more robust, better-designed grants to businesses conditioned on payroll maintenance would have.

2. Are our policy choices challenging extractive corporate power or exacerbating it?

Right now, we are seeing the ways that outsized corporate power diminishes working people’s ability to get all of what they need, earn, or deserve.

Yet the House bill does not take several necessary steps to prevent the further concentration of corporate power that this crisis and the response so far will produce. The bill does little to strengthen oversight of previously authorized funds, nor does it add any explicit limitations on the $500 billion in CARES Act funding for corporations. Likewise, it fails to address the very real threat that the pharmaceutical industry will profiteer off of future potential treatments and vaccines for COVID-19. The bill also creates two new federal lending facilities—one for landlords and one for mortgage servicers—with minimal strings attached.

Furthermore, the bill fails, in several instances, to create real checks on the power of corporations to use their leverage to take advantage of the crisis. Because small business relief efforts have been insufficient to meet the challenges many workers face, these companies and their workers are now more vulnerable and more likely to be bought up or crowded out by larger, more powerful firms. It’s true that the bill includes a provision to give the Federal Trade Commission (FTC) additional tools to prevent price gouging and offers some measure of hazard pay for essential workers, and it also institutes a new Occupational Safety and Health Administration (OSHA) standard for essential workers. However, it simply does not do enough to inhibit corporations from taking advantage of the crisis to boost profits at the expense of workers.

In some instances, the bill also structures support for families in ways that exacerbate—rather than check—the power of corporations. For example, the bill provides Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidies for private, employer-based health insurance rather than making Medicare or Medicaid available for those who have lost their jobs. Ultimately, this will increase insurance companies’ power over families and our political economy. Similarly, though expanded broadband is critical to addressing inequality, structuring this support as subsidies for private providers rather than as a public good does too little to check the power of these companies. Additionally, the temporary repeal of the $10,000 cap on deductions of state and local taxes overwhelmingly benefits higher-income families and exacerbates wealth disparities.

3. Are we making structural changes that rebalance power and build a more equitable, more resilient economy in the future?

As we address the crisis, it’s important to make structural changes—by building democratic institutions and rebalancing power in ways that bring workers and a diverse range of people to the decision-making table—that can create a more equitable, more resilient economy in the future. Recent polling conducted by GBAO with the Roosevelt Institute and Groundwork Collaborative found that voters overwhelmingly favor both addressing the current crisis and making more structural changes. Sixty-two percent agree that we must “both address the immediate economic needs and work to fix problems in our economy—like inequality and poverty–that made us all more vulnerable” over leaving long-term problems “for another time” (38 percent).

The House bill does offer some important improvements to our democratic structures. It includes $3.6 billion to protect the 2020 elections and makes needed voting reforms that can rebalance power through our political system. It also takes some steps to increase the capacity to deploy public power in the service of public goals: It expands the application of the Defense Production Act (DPA) and provides needed resources to the United States Postal Service and toward building the long-term capacity of the unemployment insurance system.

However, the bill also misses some important opportunities: Though it guarantees hazard pay to essential workers, it does nothing to restructure power in the workplace to give workers a say in their pay, their health and safety, or the conditions for reopening. It does not adopt proposals for public banking, which, among other benefits, would check the extractive power of banks and make us better prepared to distribute money directly to individuals when future emergencies arise. Additionally, it only glancingly addresses the systemic racism that is fueling the vastly unequal effects of this crisis. And it does little to move us toward a green and decarbonized economy, perhaps the most important way that we can build economic resilience over the long term.

Moving forward, the scale of aid to state and local governments provided in the House bill is critical for an effective response and a sustained recovery. But more needs to be done to maintain people’s connection to work by guaranteeing their paychecks and to make fiscal supports for families renew automatically while economic conditions are so poor. Finally, as we make these changes to policy, we must do so in ways that build accountable, democratic, inclusive institutions and that restructure power in ways that will make our economy more equitable and resilient than it was before the global pandemic struck. As FDR once said, “Let us never forget that government is ourselves and not an alien power over us.”