Federal Money Saved Economy as Pandemic Exposed Weak Safety Net

In March 2020, more than 2,500 cars and trucks wrapped around the Honda Center sports arena in Anaheim, California, as people struggling during the COVID-19 pandemic lined up for free rations of rice, beans, oatmeal, noodles and canned goods. Anaheim is home to Disneyland, and a hub of low wage tourism jobs. As theme parks, hotels, restaurants and retail stores closed or drastically cut back their operations, their idled workers joined others trying to survive being suddenly without paychecks.

Over the next few months, the line of cars would grow to 6,000. “We had not seen anything like that before,” said Claudia Bonilla Keller, CEO of Second Harvest Food Bank, which organized the massive food distribution operation. There was, she said, a “whole new layer of people” queueing up for food, people with “nice cars and mortgages.”

At the same time in rural Maine, Roxy Kai-Petrovich, who suffers from an autoimmune disorder, had already left her part-time job as a line cook at a breakfast diner in Mechanic Falls out of fear for her health.

And in Boca Raton, Florida, Linda Orlick, who lacked the savings to retire, lost a job she loved selling jewelry at Neiman Marcus. “I was completely lost. I didn’t go out of my house,” she said. “It was a very, very, very sad time.”

Federal emergency spending helped make the COVID-19 recession — which caused the loss of 20 million jobs in March 2020 alone — the shortest on record.

Seeing the threat of that kind of dislocation and misery, federal lawmakers would approve massive levels of economic relief over the next two years. They pumped $5.2 trillion into the economy through several bills to keep families afloat while also responding to the health crisis caused by the deadly virus. The most significant pieces of legislation were the $1.8 trillion Coronavirus Aid, Relief and Economic Security Act (CARES Act), enacted in March 2020, and the $1.8 trillion American Rescue Plan, which was enacted in March 2021 as the country was rolling out its vaccination program.

The federal government’s aggressive response helped restore the country to economic health, according to a broad consensus among economists. Two studies released on Feb. 24 — one by the Center on Budget and Policy Priorities (CBPP), a D.C.-based think tank, and the other by Moody’s Analytics — underscore the benefits of the economic aid provided by six bills enacted by Congress between March 2020 and March 2021.

The federal emergency spending helped make the COVID-19 recession — which caused the loss of 20 million jobs in March 2020 alone — the shortest on record, according to both reports. The U.S. economy’s rapid recovery was due not just to the scale of the fiscal support, according to the Moody’s report, but also to how quickly lawmakers responded to the pandemic. The unemployment rate fell from a height of 14.8% in April down to its current 4.0% rate. It “reduced poverty, helped people access health coverage, and reduced hardships like inability to afford food or meet other basic needs,” according to the CBPP study. Indeed, the expanded child tax credit would briefly cut child poverty nationwide by more than a quarter before it was phased out in December.

Even so, the economic and personal lives of American workers have been full of stress over the past two years, as they confronted illness and loss, unsafe work environments and the challenges of balancing work with remote schooling for their kids. The economic distress has been hardest on women and on Black and Latino workers — those with the least economic security and those concentrated in professions that suffered the greatest job loss or offer the least assurances of safety.

“It’s not like everything is totally rosy,” noted Heidi Shierholz, president of the D.C.-based Economic Policy Institute, who also gives the federal relief effort high marks. “We still have a long way to go. So I don’t want to make it seem like I’m trying to convince people who are living in what is a difficult time that everything is great. But our recovery is much faster than what it would be if Congress hadn’t acted.”

The government’s response, however aggressive, was hampered at every turn by the weakness of its social welfare system.