The new loan initiative could overwhelm the Small Business Administration’s staff and is likely to be a high-risk area for implementation bottlenecks and confusion.
Congress has just passed the largest economic rescue package in history. Now comes the hard part: a multitude of federal agencies, private businesses, nonprofits, and state and local governments must help implement a complex piece of emergency legislation in record time. It’s a huge challenge, but we’ve been here before. What lessons can be drawn from the last substantial stimulus package—the 2009 American Recovery and Reinvestment Act—that can help speed the effective implementation of the Coronavirus Aid, Relief, and Economic Security Act?
The parallels between the two pieces of legislation are not perfect. The CARES Act is in some ways akin to a combination of the two big stimulus programs of the Great Recession: the Recovery Act and the Troubled Asset Relief Program, known as TARP, that focused on loans and bailouts to banks and large companies. And the Recovery Act, in contrast with the CARES Act, sought to combine immediate fiscal stimulus with initiatives designed to build a lasting legacy of infrastructure improvements and green energy initiatives. But there are enough parallels as to make insights drawn from the Recovery Act experience a worthwhile venture.
One lesson involves the use of established programs and implementation networks to provide rapid assistance rather than standing up new organizations or procedures. In policy implementation, simplicity and familiarity are often critical to fast action. Some of the most successful elements of the Recovery Act expanded upon existing programs and funding streams to the states. This included an $87 billion increase in federal Medicaid matching funds, a $36 billion increase in federal aid to highways and transit, and over $75 billion for education, most of which could be plugged directly into existing state aid formulas for local schools.
These initiatives succeeded in getting federal money out the door rapidly and spent relatively quickly and effectively by the states. Thus, we should expect that elements of the CARES Act that mirror this approach of utilizing existing program structures and networks—such as expanded funding of Unemployment Insurance, additional education spending, additional funding for the Centers for Disease Control and Prevention, increases in federal payments to health care providers through Medicare and Medicaid, and one-time payments to taxpayers based on their previous income tax reporting—have high potential to be implemented relatively smoothly and quickly.
On the other hand, the Recovery Act experience suggests that the $366 billion expansion of the Small Business Administration small business loan program may prove more challenging to implement quickly and accurately. Like the greatly expanded weatherization grant program in the Recovery Act, the new SBA loan initiative builds on an established program, but it provides so much additional funding to meet the needs of hundreds of thousands of small businesses that it is likely to overwhelm the SBA’s staff and established implementation procedures. This is likely to be a high-risk area for implementation bottlenecks and confusion, which is almost inevitable when ramping up an agency whose total budget in FY 2020 was less than $1.2 billion.
Finally, accountability challenges are almost certain to arise during implementation of the CARES Act. Implementation of the Recovery Act was hampered by conflicts between two parallel networks with competing goals: a set of programmatic networks focused on job creation and rapid program implementation, and a parallel accountability network of oversight entities and Inspectors General focused on preventing waste, fraud, and abuse. The dramatically expanded presence of the latter was helpful in preventing fraud and wasteful spending; there was far less of either than was originally anticipated by Congress and the Administration.
But the expanded network of auditors and overseers unquestionably slowed implementation as risk-averse program officials and funding recipients waited for new rules, clear guidance, and risk-reduction strategies. The more quickly such accountability rules and procedures can be issued and the simpler they are, the greater the likelihood that accountability requirements can be successfully implemented.
Based on this history and experience, what recommendations and suggestions can be made? First is that the federal government will need to adopt strategies for speedy and effective implementation of stimulus programs. One strategy that proved helpful during the Recovery Act was President Obama’s appointment of Vice President Biden to serve as a focal point for governmentwide problem solving and coordination. Relying on a small staff headed up by Ed DeSeve, this strategy proved very helpful. Creating a similar high-level focal point for overseeing and implementing the CARES Act will be important.
Second, federal agencies should rely on their established partners, procedures and implementation networks to the maximum extent feasible. Well-established implementation partners—in state and local governments, private industry, and the health care sector—will understand pressure points and how to solve them. They will have contacts in the federal government with whom they can consult and identify problems before they grow larger. And they will know colleagues in other states or organizations with whom they can share best practices and effective strategies.
Finally, administration officials need to rely on the expertise and commitment of experienced civil servants. This is no time for suspicions about the “deep state.” Experienced federal civil servants were the unsung heroes of the Recovery Act, working overtime and often going beyond the call of duty in order to get stimulus programs moving quickly and efficiently. It is time once again to let them do their jobs.
Priscilla Regan and Tim Conlan are professors at the Schar School of Policy and Government at George Mason University, Fellows of the National Academy of Public Administration, and co-editors with the late Paul Posner of “Governing Under Stress: The Implementation of Obama’s Economic Stimulus Program,” published by Georgetown University Press.