“The post–World War II liberal international order should be strengthened, not weakened. It has been a foundation for transatlantic prosperity. Maintaining the rule of law is crucial for many reasons, including maintaining investor confidence in the United States; securing our nation's place as a global destination for business and talented, hardworking immigrants; and encouraging the risk-taking that fuels entrepreneurship, dynamism, and productivity growth.”

—Michael R. Strain
“Strengthen the Post-Pandemic Economy,”
Governing Priorities

 

Unprecedented and growing attacks on free-market capitalism are mounting every day, amplified by the COVID-19 pandemic and the ensuing economic downturn. AEI scholars' work aims to defend the free-market system and bolster American competitiveness.

Economic Responses to COVID-19

AEI scholars provided timely commentary and analysis to help guide the country's economic policy response to the COVID-19 pandemic.

SMALL BUSINESS CONTINUITY

Michael R. Strain and R. Glenn Hubbard worked with key Senate offices to help design aid for small businesses in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Before Congress' passage of the legislation, Strain and Hubbard published the AEI paper “A Business Fiscal Response to a COVID-19 Recession.” Shortly after the introduction of the Paycheck Protection Program (PPP) under the CARES Act, Strain authored an AEI report, “The Paycheck Protection Program: An Introduction,” highlighting the program's key provisions and suggesting ways to improve it. Finally, Strain and Hubbard followed with an April report suggesting additional reforms to the program.


In early June, Strain testified before the Senate Committee on Small Business and Entrepreneurship on COVID-19’s deep, sudden, and lingering impact on small business, and in September, Strain and Hubbard published a working paper presenting evidence that the PPP substantially increased the employment, financial health, and survival of small businesses. The same month, Strain led an online discussion with Sen. Todd Young (R-IN), Sen. Michael Bennet (D-CO), and former Starbucks CEO Howard Schultz on the RESTART Act, introduced by Sens. Young and Bennet to support the small and midsize businesses most affected by the pandemic. Throughout the pandemic, Paul H. Kupiec’s commentary highlighted the potential unintended consequences of the government’s economic policies.

TAX POLICY

▮ In the early stages of the recession, Michael R. Strain, Stan Veuger, and Alan D. Viard all cautioned against employing a payroll tax cut to provide relief to households and workers, while James C. Capretta supported a temporary payroll tax cut. After the CARES Act was signed into law, Kyle Pomerleau offered an analysis of the bill's tax rebate provision, and shortly thereafter, Veuger coauthored an AEI working paper examining the COVID-19 pandemic's impact on state government tax revenues, updating his analysis in a September report. Alex Brill proposed a fiscally responsible tax incentive rather than a costly spending program to boost employment, and he testified before the House Committee on Ways and Means Subcommittee on Select Revenue Measures on the “Consequences of Inaction on COVID Tax Legislation.”

Health Care and COVID-19

Policymakers looked to AEI scholars for policy-driven solutions to abate the coronavirus pandemic. Scholars also addressed other aspects of the pandemic, such as insurance coverage and the burgeoning federal debt.

▮ Scott Gottlieb and other leading policy and infectious disease experts published one of the nation's first reopening proposals. The report gained significant traction; President Donald Trump referenced the report directly at a press briefing, during which he confirmed the administration was acting on several of its proposals. Scott Gottlieb followed with a coauthored detailed guide for state and local governments to ease coronavirus restrictions safely and restore economic activity, and he advised several governors in an official capacity.

▮ AEI launched a COVID-19 Action Tracker, updated daily, to track state-level mitigation strategies. Beginning in March, Scott Gottlieb tracked a variety of COVID-19 data. US Secretary of Health and Human Services Alex Azar and Food and Drug Administration Commissioner Stephen Hahn both cited his data.

▮ Scott Ganz developed a better test for evaluating recent trends in COVID-19 data that informed the White House. His work received coverage in the Washington Post and was circulated among the White House COVID-19 team.

▮ Alex Brilland Benedic N. Ippolito reviewed national data to understand the extent of the COVID-19 pandemic in nursing homes. In a series of AEIdeas blog posts, they examined trends over time, explored differences across states and communities, and matched facility-level COVID-19 death data to metrics of nursing-home quality.

▮ Joseph Antos and James C. Capretta published two pieces about COVID-19's impact on the trust funds, and Capretta published a report on US fiscal policy and the major entitlements in the wake of COVID-19.

▮ James C. Capretta offered ways to make it easier to see a doctor now and in the future. Joseph Antos and James C. Capretta also addressed employer-based coverage during the pandemic in an article for the JAMA Network, Thomas P. Miller took on regulation and concentration in the individual health insurance market on AEIdeas, and Robert J. Barro offered data on non-pharmaceutical interventions and mortality in US cities during the influenza pandemic of 1918–19.

Research and Impact

▮ In July, Michael R. Strain explored whether employment responds differently to minimum wage increases in the presence of inflation indexing, finding it does. In April, Strain published a working paper for the National Bureau of Economic Research on understanding the subject of “wage theft” and the unintended consequences of labor market regulation.

R. Glenn Hubbard's National Affairs essay “The Wall and the Bridge” and AEI Economic Perspectives report “Should the Modern Corporation Maximize Shareholder Value?” addressed how our free enterprise system has thrived because of—and not in spite of—corporations' focus on shareholders.

Andrew G. Biggs warned that the economic decline associated with the COVID-19 recession, combined with a quirk in the Social Security benefit formula, could permanently reduce the Social Security benefits of Americans age 60 in 2020 by about 9 percent. Biggs published the idea as a working paper and a related op-ed and discussed potential fixes with several congressmen.

Amitabh Chandra joined AEI as the John H. Makin Visiting Scholar (2020–21) in August. His work focuses on a wide range of health care issues, including innovation and pricing in the biopharmaceutical industry, medical malpractice, and racial disparities. Chandra concurrently serves as the Henry and Allison McCance Professor of Business Administration at Harvard Business School and the Ethel Zimmerman Wiener Professor of Public Policy and director of health policy research at the Harvard Kennedy School.
Steven B. Kamin joined AEI as a resident scholar in September, after serving for 32 years at the Federal Reserve Board. He most recently served as the director of international finance and principal adviser of international economic and financial policy matters to the Federal Reserve chair. At AEI, he focuses on international macroeconomics and finance.


Andrew G. Biggs coauthored a report and a related Wall Street Journal op-ed offering ways to improve fiscal stability for states and increase government accountability and transparency. Following the report's publication, Biggs held a conference call with Capitol Hill staff and the National League of Cities to discuss these issues.

Alex Brill and Scott Ganz published a National Affairs article to counter misleading claims from policymakers and the media regarding recent trends in data on tax progressivity. They reviewed the data on tax progressivity and the extent of redistribution through the tax code, emphasizing facts on which left- and right-leaning analysts can agree.

Alan D. Viard and Kyle Pomerleau each published pieces in Tax Notes Federal. Viard set forth a clear framework for how to compare wealth taxes to income taxes, and Pomerleau discussed a wealth tax's macroeconomic and revenue implications.

▮ The Financial Services Forum recommended to their members Paul H. Kupiec's work showing the impossibility of accurately forecasting how individual banks will perform during an economic recession of epic scale.

▮ In a coauthored report published by the Bipartisan Policy Center in February, endorsed by nine coauthors, James C. Capretta et al. offered a multifaceted policy prescription for reforming America's health care system.

▮ In Michael R. Strain's latest book, The American Dream Is Not Dead: (But Populism Could Kill It) (Templeton Press, February 2020), he presented considerable data showing that our economy is still characterized by upward mobility and opportunity for most citizens. Strain and AEI promoted the book widely, with op-eds in major newspapers and appearances on MSNBC and several podcasts.

Stan Veuger and Dalibor Rohac invited the Deputy Foreign Minister of the Kingdom of Spain Manuel Muñiz to discuss how COVID-19 stressed various levels of global governance, from the EU to the World Trade Organization. Veuger also interviewed Maarten Verwey, the director-general for economic and financial affairs at the European Commission, about the European Union's economic response to COVID-19.

Steven B. Kamin coauthored an AEI working paper that argued for greater assistance in the form of outright grants for emerging-market and developing economies. He also coauthored a Federal Reserve paper titled “The Impact of COVID-19 on Emerging Markets Economies' Financial Conditions.”

Desmond Lachman's writings correctly predicting the US and global economic fallout from COVID-19. He also hosted events with the IMF's first deputy managing director, the European Union and Irish ambassadors to the United States, and leading world economic experts from Harvard, Princeton, MIT, and Chicago University.

Benedic N. Ippolito coauthored a Wall Street Journal article explaining how Biden's Medicare for More plan will not fix Medicare's flaws or assist the families that need help the most. Kirsten Axelsen offered similar sentiments about the need for health insurance rather than Medicare for All in an article for the Morning Consult.

James Pethokoukis' regular commentary provided a pro-market, pro-progress, pro–liberal democratic perspective and argument that is lacking in today's political conversation and debate. Policymakers, journalists, and other influencers continued to turn to Pethokoukis for his analysis, and his podcast, Political Economy, offered deep dives into important subjects.

Michael R. Strain addressed a host of economic issues through his Bloomberg column and other popular outlets. Topics included Congress' and the Fed's response to COVID-19, the state of the labor market, and Joe Biden's misguided tax plan. He also conducted a number of media interviews in major outlets, including Squawk Box, Morning Joe, CBS Evening News, Marketplace, and NPR.

▮ AEI scholars warned of the negative effects of Joe Biden’s proposed tax policy plan. Andrew G. Biggs, Timothy P. Carney, James Pethokoukis, Kyle Pomerleau, Michael R. Strain, and Alan D. Viard commented and published widely in the popular press on Biden’s misguided tax plan for individuals and corporations. They explained the “smothering” macroeconomic effects: Increasing taxes for top earners would create a headwind in a weak economy, and increasing the corporate rate would reduce US competitiveness, productivity, and wages over the longer term.

“I always like coming to the American Enterprise Institute because I find the discourse here to be in a certain way open-minded, highly principled but not completely predictable across a wide range of issues. The welcome is always warm for the labor movement. That just isn't how Washington works more generally.”

—Damon Silvers, policy director and special counsel of the American Federation of Labor and Congress of Industrial Organizations at
an AEI event