The Covid-19 Bailout: Another Failed Opportunity at Structural Change

Photograph Source: Kevin Dooley – CC BY 2.0

The Covid-19 bailout is yet another opportunity at a structural transformation of the American state, economy, and society that will be lost. Instead, it will be another short-term patch that will fail to alter the trajectory of Neo-liberal capitalism in America, if not across the globe.

There are two basic types of reform–ordinary and structural.  Ordinary reforms operate within a current paradigm or set of assumptions about politics, the economy, or society.  Ordinary reforms are simply changing the times for voting or adjusting political contribution limits, increasing the minimum wage, or passing laws that criminalize or not some offenses such as the use of marijuana.  These reforms are nice but not necessarily significant.

Structural reform is deeper, changing the rules of the game.  Constitutional law scholars such as Bruce Ackerman talk of constitutional moments, when events change the very fabric of the legal order.  The Reconstruction Amendments (13th, 14th, and 15th) changed the relationship between the national and state governments in favor of the former.  The New Deal further changed federalism, giving the national government greater responsibility over the economy and states.  The New Deal also redefined checks and balances and separation of powers in that it constitutionalized the regulatory or administrative state.

Political science scholars such as Walter Dean Burnham describe how once every 30 or 40 years significant political or economic crises lead to a breakdown in current political party alliances and structures.  These crises, along with technological and generational shifts, produce critical elections and realignments of the electorate that forge new coalitions, platforms, and majorities.  Finally, presidential leadership scholars such as James MacGregor Burns distinguish transactional from transformative presidents.  The former simply view presidencies as managing the status quo, the latter, such as Abraham Lincoln, Franklin Roosevelt, and even Ronald Reagan, used their office to change the pattern of American political institutions and public policy in ways that would have lasting effects for a generation if not more.  Reagan’s legacy in America, along with Margaret Thatcher in Great Britain, was to move their respective states away for the Keynesian welfare states heavily dependent upon government regulation, social welfare transfer payments, and union autonomy to more market fundamentalist Neo-Liberal states.

The New Deal under FDR was the closest America has been to a real structural change.  America did move away from free market fundamentalism and adopted more social welfare policies.  It enhanced government regulation and it nationalized many political choices previously left to states.  It even passed federal legislation recognizing the rights of labor to collectively bargain.  But all of these were choices to restore capitalism.  FDR rejected efforts then to nationalize the banks in 1933 when he could have.  He could have also moved further to the left in protecting worker rights and controlling corporations by forcing the latter to grant labor the right to sit on corporate boards.

When the crash of 2008 occurred President Obama had another structural opportunity.  He could have conditioned federal bailouts of the banks and major industries on more public or worker ownership.  He could have demanded even tougher financial regulatory rules than were imposed by Dodd-Frank.  National health insurance could have had to tougher mandates.  He could have required bank bailouts come with consumer or homeowner debt forgiveness.  He could have pushed for the Employee Free Choice Act which would have updated the Wagner Act for the twenty-first century.  He did none of that, in part setting us up for many of the problems the US is confronting now as the realities of the Covid-19 crisis is looming.

The bailout that is likely to occur too will be transactional, temporary, or emergency-focused, and not transformational.  In the March 15, debate between Joe Biden and Bernie Sanders.  When Sanders declared that the crisis pointed to the fundamental weaknesses of our health care and social welfare system and more systematic change was needed, Biden rebuffed him by saying: “That has nothing to do when you’re in a national crisis. The national crisis says we’re responding. It’s all free. You don’t have to pay for a thing. That has nothing to do with whether or not you have an insurance policy. This is a crisis. We’re at war with the virus. We’re at war with the virus. It has nothing to do with copays or anything. We just pass a law saying that you do not have to pay for any of this, period.”

For Biden, the bailout will be temporary.  When the crisis ends it is a return to the status quo, yet to await the next crisis in a decade or less.

The current bailout bill will provide bailouts to businesses without many if any strings attached.  One-time checks will go to families, and short terms money for childcare, health care, or unemployment insurance will be allocated.  More money will go to states for emergency hospitals.  All this is good, but band aids on larger problems.  None of these effects the structural reforms that could occur, none of these takes advantage of a crisis to make more transformative changes.  What might these changes be?

Consider again a permanent forgiveness of all student loan or mortgage debt along with thinking about ways to reduce costs for education going forward by making available more money to reduce tuition costs to something affordable.  Support a permanent national basic income. Enact a real health care insurance program that covers everyone but even more, go beyond insurance coverage and build a real public health care delivery system.  Institute permanently paid family leave and unemployment insurance laws similar to what many of what other advanced democracies enjoy.  Tie corporate bailouts to respect for workers’ rights and limits on their political activities.

These and other ideas could affect a more permanent realignment of the state, economy, and society.  They would represent a serious challenge to Neo-Liberalism which against like after 2008 proved that it was bankrupt.

However, while this crisis offers a transformative opportunity, it too will probably pass, leaving the scope of reform far less than what is necessary.  The current crisis reveals the underlying problems with the Neo-Liberal state, the proposed fixes do little to address.

David Schultz is a professor of political science at Hamline University. He is the author of Presidential Swing States:  Why Only Ten Matter.