The Founding Fathers gave us the government we need to effectively manage the consequences of COVID-19 and its threat to our economy. It is federal and each level — national, state and local— has an essential role to play. The loud, often contentious debate as to who does what best has got to end. The wisdom of the Founding Fathers has always served us well. Let’s keep in mind their three principles of federal policymaking and assignment of responsibilities.
First, Fund Nationally.
As Alexander Hamilton stressed, it is the job of the national government to raise the funds required to provide national public goods, to ensure the equitable and efficient distribution of essential resources, and when necessary, to protect our citizens against the economic loss of large and unexpected economic disasters. Our citizens are highly mobile, our economy is national and the virus is often asymptomatic and contagious. It is impossible to keep its effects within states, much less local boundaries. Understanding the science of the virus and developing and disseminating a public health strategy for its containment — social distancing and stay-at-home — are national public goods and the responsibilities of the National Institutes of Health (NIH) and the national Centers for Disease Control and Prevention (CDC).
Further, the national government must ensure that important resources for the diagnosis and treatment of the virus are distributed to the areas of greatest need, not to the states with the most money. As during World War II, today, when essential supply chain inputs are in scarce supply — diagnostic tests, protective equipment and ventilators — it is the national government that must allocate these resources, not the marketplace. This is a job for the national Coronavirus Task Force.
Finally, we must provide citizens and state and local governments in distress with the resources they need to survive the economic shocks from the pandemic. Hamilton in Federalist Papers 30 recommends using national debt rather than taxes to smooth costs over time and to minimize the long-run damage for a declining economy of a large tax increase. This buck literally stops at the federal level. As the Founding Fathers had hoped, a bipartisan Congress has, so far, done its job but one last piece is missing, and it’s essential.
State and local governments are facing an unprecedented fall in income and sales tax revenues and fees, rising expenditures for unemployment payments and health care costs. Together they create a budget gap of $500 billion for next year or about 20 percent of state and local spending. Current accumulated surpluses in the states’ rainy-day funds and their unemployment trust funds can contribute $160 billion to close the gap. That still leaves a $340 billion shortfall. Revenue sharing paid to the states related to each state’s level of unemployment and prevalence of diagnosed cases of COVID-19 is appropriate. This is a national burden, created by a national disaster and best shared nationally.
Second, Plan Regionally.
As James Madison stressed in Federalist Papers 10, state officials can best manage national priorities and allocate national resources to meet unique state circumstances. Setting state regulations for citizen interactions — both socially and economically — is best done by those who understand state circumstances. More stringent regulations for social distancing are appropriate for states with concentrated and mobile populations; less so for more rural or isolated states. So too should the states decide the allocation of national relief funding, both to individuals as unemployment compensation and to local governments to meet recognized fiscal needs.
When state policies have spillovers across state lines, however, governors must cooperate and share best practices for managing the virus. Asymptomatic residents move across state lines. Effective cooperation is happening and must be encouraged. Govs. Andrew Cuomo (D-N.Y.), Phil Murphy (D- N.J.), and Ned Lamont (D-Conn.) have coordinated their strategies for emergency care. Washington Gov. Jay Inslee (D), whose state is seeing a declining rate of new cases, has made the state’s excess supply of masks and ventilators available to New York. Most recently, the governors of California, Oregon and Washington and those of Delaware, Pennsylvania, New York, Connecticut, Rhode Island and Massachusetts have agreed to form regional compacts for the coordinated opening of their state economies.
Third, Deliver Locally.
Enforcement of state regulations for social distancing, treatment for patients and voluntary support for those in need — food banks — along with ensuring the continued provision of safety, education and a clean environment are the jobs of local governments. Be flexible — mayors understand their local economies and their citizens’ health needs best. Community leaders have the most accurate knowledge as to which hospitals need additional ICU space, respirators and personal protective equipment. So too will they best understand which families and what neighborhoods are in greatest need of screening and economic support. When delivering services think zip codes, not states.
Born from the necessity of a failed confederation and afraid of the pettiness or incompetence of an imperial presidency, the Founding Fathers invented federal governance with multiple centers of expertise and appropriately assigned, but constrained, powers. Their vision has served us well through previous national emergencies. It is important that we allow it to do so again.
Robert P. Inman is the Richard K. Mellon professor, Emeritus and professor of finance and economics at the Wharton School of the University of Pennsylvania. Daniel L. Rubinfeld is the Robert L. Bridges professor of law and professor of economics, Emeritus at the University of California, Berkeley and professor of law at NYU.