The disastrous shortcomings in America’s response to COVID-19 are legion.
Despite spending 50% more, both per capita and as a percentage of GDP, on medical care than any other country in the world, the US is unable to implement the mass testing for COVID-19 that has allowed East Asian countries, Germany, and others to stem the virus. Hospitals lack enough ventilators, not to mention masks and gowns for their staff.
Mass quarantines, a necessary measure to stop or at least slow the spread of the virus, have left many millions unemployed by the end of April. The $2 trillion relief measure, the so-called CARES Act, has proven unable to quickly send money to the unemployed or to their employers. This is largely because of the convoluted and decentralized system the US uses to pay out social benefits (with the notable exception of Social Security), and the preference for tax credits tilted toward the rich over any sort of direct payments.
Meanwhile, corporations and well-connected crooks already are profiting from government relief funds and exploiting the misery of ordinary Americans. Drug and medical supply corporations and providers of less essential goods are jacking up prices. Well-connected businesses receive tax cuts and special subsidies through the relief bills. The Federal government paid FedEx more than twice as much as it would have cost to use Defense Department transport planes to ship health supplies. The Federal Reserve is providing trillions of dollars to large corporations that will use more of the money to pay off debts incurred from stock buybacks and mergers than to keep workers on their payrolls.
It is easy to see the failure to respond to the health and economic emergencies as the result of Donald Trump’s unprecedented ignorance, corruption and cupidity. However, that way of thinking is highly incomplete and can lead to the mistaken view that if we elect Joe Biden to the White House and he restores the Obama era all will be well again.
In reality, the US government is handling the current crisis in the same way that it deals with most problems. For decades, elites have been able to insert property claims, tax breaks, and monopoly rights into government policies and procedures. As a result, government programs are organized to reward elites’ property interests over everyone else’s need for secure employment and healthcare. Elites use crises as opportunities to leverage their control over elected officials to gain new privileges for themselves. In this article I will spell out how that operates in the areas that matter for the government’s response to the pandemic and to the economic crisis. But it need not be that way. There is a socialist alternative, and I will present it in the conclusion.
How the US Is Failing to Treat COVID-19
It will take at least a year, and probably closer to two years, before a vaccine against COVID-19 is developed and can be made widely enough available to create “herd immunity.” In the meantime, doctors only can treat symptoms while hoping that patients recover on their own. Facing such a dismal outlook, the best and only way to minimize deaths is to engage in contact tracing, enforce quarantines, and then use antibody testing to identify those who have recovered from the disease and can safely interact with others, while providing protective equipment for everyone else. These are the measures that are being used in Germany, South Korea, Taiwan, China, Vietnam, and a few other places that have been able to keep deaths low and now are beginning to allow normal life and work to resume.
The US has not been able to achieve any of these goals because the American healthcare system is organized to allow private entities to maximize their profits. As a result, there is no central coordination and the most effective but least profitable public health measures do not receive enough funds. Contact tracing requires training and paying a large staff of public health workers. That is not profitable and the few skilled people doing that task are employed by state and local public health departments or the Centers of Disease Control, all of which have smaller budgets today than they had ten years ago. Obamacare included funds for public health, but they were partly diverted in 2014 and then even further in 2016 to allow those who profit the most from healthcare to enrich themselves even more. The 2014 diversion went to increase physicians’ payments from Medicare, and the one in 2016 to subsidize pharmaceutical firms’ research on new drugs that they then can sell at whatever price, and with any profit margin, they desire.
Manufacturing personal protective equipment (PPE), tests for coronavirus and its antibodies, and the swabs and reagents required for those tests, are not smart investments in the eyes of for-profit firms. Such items are not needed on a day-to-day basis and so can’t justify the costs of building factories that would sit unused or underused most of the time. Similarly, there is no profit in public health measures.
Fortunately, there is a way the federal government can compel corporations to manufacture what is needed during a crisis or allow the government to temporarily nationalize factories. The Defense Production Act (DPA) was enacted during the Korean War and has been used by each administration since then, and by the Trump Administration hundreds of thousands of times, to ensure needed supplies are delivered to the military.
Why hasn’t Trump used this law to force corporations to convert factories to produce masks or swabs, and to prepare to mass produce vaccines? The answer lies in the very different ways that the weapons and medical industries relate to the government. Military contracts are usually set on a “cost plus” basis. Firms, ever since World War II, have been able to spend whatever they want to produce items and then get to tack on a set percentage for profit. These corporations gain, not lose, when the DPA is used to force them to manufacture for the military since weapons are produced constantly and the military is willing to stockpile what it doesn’t use. In contrast, pharmaceutical and medical equipment manufacturers make money by monopolizing a particular product, allowing them to reap profit margins far greater than military contractors ever could. Medical companies adamantly opposed government control which would force them to accept lower profits. They have the influence, thanks to campaign contributions and lobbying, to convince the Trump administration and most Republicans and more than a few Democrats in Congress to allow them to continue with business as usual even during a pandemic.
In any case, it takes time to ramp up production of needed equipment. Take ventilators, which are essential for keeping the sickest COVID-19 patients alive until their bodies can fight off the virus, for example. In 2007, under George W. Bush, the US government commissioned a small company, Newport Medical Instruments, to build a simplified, inexpensive ventilator. When the new ventilator was close to mass production that firm was bought out in 2012 by Covidien, a large corporation, which is based in Ireland to avoid taxes. The merger was approved by the Obama Administration. When Covidien bought Newport it shut down the project, eliminating production of a cheaper competitor to Covidien’s expensive ventilator. Now there is a shortage of ventilators, forcing physicians and nurses in areas with large numbers of case to decide who will get a ventilator and have a chance to live and who will die.
The Obama administration could have blocked the Covidien-Newport merger, or imposed production of the cheaper ventilator as a condition of approval. Unfortunately, Obama’s shortsighted and boneheaded decision was not an outlier. His administration actively encouraged mergers of healthcare companies, hospitals, and doctor’s practices in the false belief it would lead to efficiencies and price reductions. More broadly, the US government has approved virtually all proposed mergers since the 1970s, reflecting capitalists’ power over key federal agencies like the Federal Trade Commission and over Congress.
The wave of medical mergers over the past decade gave new behemoths greater market power. We see the results now: the sharp reduction in hospital beds in recent decades means that COVID-19 patients are turned away or people with other conditions are told to wait for treatment of their cancers, heart attacks, or needed surgeries, leading to increased deaths. Doctors and nurses now are employees of hospital corporations that dominate geographic regions. As a result, medical workers have no leverage to demand the equipment and facilities they need to do their jobs, or even the face masks they need to keep themselves alive.
Why the Unemployed Are Not Getting Enough Help
Mass quarantines are necessary to stem the spread of the coronavirus. But that has thrown many millions of workers out of their jobs. The $2 trillion CARES Act did increase benefits for the unemployed and made gig workers eligible for the first time to collect those benefits. However, unemployment payments are funneled through state level agencies which impose widely varying requirements to apply for and collect benefits. The systems in most states are designed to make it difficult for the unemployed to qualify for benefits, and those confusing rules have not been changed. In any case, the state agencies have too few employees to process the millions of new claims. The $1200 payments to individuals went out quickly to those who filed their income tax returns online and provided bank account numbers. Those on the other side of the digital divide and the unbanked will have to wait weeks or even months before they get their checks. Donald Trump’s desire that his name appear on those checks got most of the media attention but is only a small part of the delay.
Most of the $2 trillion is directed at employers, not employees. This reflects most US politicians’ pro-capitalist bias, which assumes that tax breaks and outright subsidies to corporations or small businesses will produce jobs, and therefore there is no need to directly help workers. Thus, businesses are receiving loans that will be forgiven, and the supposed requirement that they use the money to hire back or keep on their employees is only loosely enforced. In any case, the money appropriated for these loans quickly ran out leaving most small businesses, which unlike big corporations have no capital reserves and also lack access to bank lines of credit, no choice but to lay off their workers.
The CARES Act exempted companies with more than 500 employees, and then the Labor Department exempted businesses with fewer than 50 workers from the requirement that they provide paid leave for employees kept away for work by illness or quarantine orders. As a result, 75% of workers will not be covered by the CARES Act and will depend on the usually non-existent good will of their employers to gain access to those benefits. This reflects politicians’ commitment to capitalists’ “freedom” to run their businesses as they want, including firing workers at will, over the security and well-being of those workers and their families.
Of course, most Americans get health insurance through their jobs. This means that the newly unemployed and their families suddenly are without access to health care. In theory, they have the right to pay for their existing insurance with their own money, and in some but not all states they can apply for Obamacare coverage. However, that option takes time, is confusing, and comes with high deductibles. Americans caught without insurance or in Obamacare limbo will avoid seeking treatment for Covid-19 until they are at death’s door, increasing the spread of the disease and the mortality rate.
Meanwhile there is no assistance to help the unemployed pay their rent or mortgages. We can expect a wave of evictions and foreclosures unless a new relief plan is enacted. State and local governments are experiencing drastic reductions in the taxes they collect as companies go out of business, sales tax revenue declines, and the unemployed can’t afford to pay real estate taxes on their homes. This in turn will lead to massive layoffs of government employees. So far, the four relief packages contain only piddling amounts to cover those revenue losses.
How Elites Are Benefiting from the Crisis
If the relief plans are so inadequate where are all those trillions going?
$170 billion, almost 10% of the CARES Act total, went for tax breaks for the rich. Indeed, 82% of that will go to people making over $1 million a year, and because of the way the law was written the super-rich beneficiaries will be mainly real estate and hedge fund investors. The 43,000 people who will gain from these provisions, which are structured to give rebates over several years, will get an average of $1.7 million each. Compare that to the one-time, $1200 maximum payments the rest of us received.
The CARES Act, as I noted above, provides loans to small businesses that will be forgiven if they spend the money to keep employees on the payroll. Democrats rightly insisted on this provision so that workers would not be left in hardship. However, hedge fund managers lobbied to ensure that the numerous small companies they own would be eligible for these loans that never have to be repaid even though their small business in reality now are part of gigantic firms.
The federal government does not decide which “small businesses” get the forgivable loans. Instead, banks will give the loans and get reimbursed by the government, the same procedure that is used for federally-guaranteed student loans and mortgages. Not surprisingly, banks are giving priority to their best customers, leaving the smallest businesses and those owned by minorities and women at a severe disadvantage. For example, Citibank had its bankers fill out and quickly submit applications for customers who had accounts of at least $25 million at the bank, leaving all other applicants to wait in line for the opportunity to access an online portal.
A Socialist Alternative
President Trump sees a trade-off between continuing the quarantine to reduce COVID-19 deaths and restarting the economy. In reality, his administration is accomplishing neither. In fact, it is a false choice, a dilemma created by the government’s inability to create a health care system that provides for all and its continued directing of money to the rich at the expense of everyone else. It is this same calculation that is leading mainly but not only Republican governors and mayors to reduce stay-at-home orders, even though that will lead to rebounds in cases and deaths.
The idea that we should create herd immunity rapidly by letting COVID-19 run through the US and the world, even if it will kill 2% of the population (that would be over 3 million in the US and 70 million in the world), is appealing to capitalists who want to get back as fast as they can to operating the economy for their profit. Another advantage from capitalists’ perspective is that the virus will kill the elderly primarily, people who no longer can work and thus be exploited by capital.
There are ample resources in the US both to produce health care for all, including testing and treatment for Covid-19, and to protect ordinary peoples’ income for as long as the crisis continues. This emergency already has led Trump and Congress to ignore deficits. We saw in 2008-09 and are seeing again now that the Federal Reserve can buy unlimited amounts of debt, in essence creating trillions of new dollars. The Fed then owns the debt, but under law it is required to turn over to the Treasury all its income, including the interest it gets on the bonds it holds. So the US in fact is paying zero interest on however much it borrows as long as the Fed buys up the debt. This procedure “monetizes” debt. Fortunately for the US, since people and governments around the world want to hold dollars, there is no limit on the amount of debt the US can issue, and the Fed can buy. No other country in the world can issue debt without limit. This should make it easier for the US than other countries to protect its citizens’ health and economic well-being in a crisis.
So far, the Fed’s debt purchases have served mainly to allow new surges of speculation. The Fed’s quantitative easing after 2008 led to waves of mergers and stock buybacks. The stock market recovered and rose to new heights while most Americans never fully recovered from the Great Recession. We can expect much of the same this time unless there is immediate and widespread knowledge of how the money is being allocated, awareness that can lead to mass mobilization.
The current approach is to give money to corporations under the mistaken belief that if they remain solvent, they will then rehire workers and revive the economy. But capitalist businesses do not exist to create jobs or expand the economy. Their one and only goal is to turn a profit. If they can make more by hoarding money, or buying back their stock, or investing abroad, they will do that. We need to remember that capitalists are able to get away with serving themselves because they have power over the government and because too many of us believe their claims about their motives and about how the economy works.
We can best challenge capitalists’ assertions by presenting a clear plan for how a socialist alternative would produce better and fairer results. A government not under the control of elites could use the trillions in new money to guarantee everyone’s salary while they are in quarantine and to cover state and local governments’ and nonprofits’ lost revenues so that they won’t have to lay off workers or reduce their services either now or once the country is able to open back up. If people’s incomes are maintained then we can avoid the wave of bankruptcies that will come if laid-off workers are unable to pay rent, mortgages, and taxes.
Inevitably, the government’s inept and pro-capitalist actions will leave many businesses in bankruptcy and millions facing long-term unemployment. We can expect the government to continue its current strategy of dangling loans and tax breaks in an effort to convince capitalists to invest in real businesses again, a process that as we saw after 2008 can take years to restore the previous levels of employment. The socialist alternative is to spend the money the Fed can generate for needed infrastructure, above all on a Green New Deal. Such investments will create permanent good jobs that are invulnerable to the waves of capitalist speculation and recession. We need to emphasize that the disruptions and deaths from Covid-19 give us a taste of the far greater chaos and death tolls that will come if we don’t reverse global warming.
Collective control over resources also would provide the basis for a publicly-owned and directed health care system that actually delivers good health and minimizes deaths from this pandemic. Medicare for All would ensure that everyone has access to medical care, but a centrally planned system would be able to allocate resources to where they are most needed to deliver the sort of care that prevents deaths and lengthens life.
Pharmaceutical companies’ ability to claim patents on all new vaccines and medications is slowing the development and production of COVID-19 tests and will limit the distribution of a vaccine when it becomes available. As I discussed above, these vital medical tests and treatments are far less profitable than monopoly control over drugs that can be sold for chronic conditions year after year. Drug companies today are in the business of price gouging to maximize profit, not to invent new drugs or vaccines to save lives.
Most of the effort to develop a vaccine for Covid-19 is being carried out in government and university labs, institutions that are financed with public money, and staffed with doctors and scientists who trained at universities supported with government funds. If the usual pattern is followed, the Covid-19 vaccine will be turned over to a for-profit pharmaceutical company to run the final trials for safety and efficacy. In return, the drug companies then will get a patent and change whatever they want for the vaccine since they will have a government-granted monopoly. Thus, the public will pay twice: first absorbing most of the costs for developing the vaccine and then paying again, through Medicare, Medicare, Obamacare and insurance premiums, for the vaccine itself.
We need to point out this reality. The costs of developing vaccines and new drugs already is socialized. Only the profit is privatized. Indeed, drug companies spend more on stock buybacks and dividends than they do on research and development. The socialist alternative is to carry out all steps of vaccine and drug research and development in the public and university sectors, and then make the treatments available without patent to anyone in the world.
Once a vaccine is ready, it will need to be produced in massive amounts and rapidly. Our lives and restoration of a world in which we can meet and work with each other in public depends on that. This is a matter of coordination and of devoting our nation’s and the world’s resources to work that will save lives and restore health, not to maximizing capitalists’ profits. Therefore, we must push for the nationalization of key factories to allow for the mass production of personal protective equipment for everyone who needs it from doctors and nurses to the workers who stock and deliver food and other vital supplies.
This crisis can result in a fundamental change in how the US government operates and who it helps. However, we need to properly diagnose the problem if we want to present a coherent and compelling socialist solution.