The Pandemic Welfare State

The Pandemic Welfare State

From 2020 to 2022, Americans saw the state mobilize immense resources to boost their standard of living—and then witnessed the hard political constraints hemming in this capacity.

Over the summer and fall of 2024, public opinion polls showed that despite low unemployment, falling inflation, and robust GDP growth, a majority of Americans reported that they were worse off than they had been four years prior, during the height of the COVID-19 pandemic. Then in November, despite the fact that the Biden administration succeeded in putting together fiscal and monetary policies that led to the U.S. economy growing faster than any of its peers in the wake of the COVID-19 crash, Trump won a large majority of the 68 percent of voters who rated the economy as not good or poor, and an even larger majority of the 47 percent who said they were better off in November 2020.

Some commentators have insisted that consumers just really hate inflation, which accounts for low ratings of the health of the economy and Trump’s renewed appeal. But consumers stubbornly refused to improve their appraisal of the economy as inflation came down in 2023. Moreover, wage growth did in fact outpace inflation for most Americans, especially lower-income Americans. And hatred of inflation had never in the past so skewed evaluations of the economy.

In the debate over this unprecedented uncoupling of consumer sentiment and statistical economic performance, COVID-19-era social provisions are often overlooked. The government put in place a slew of temporary welfare measures beginning in 2020. When those programs were allowed to lapse in 2022 and 2023, many Americans suffered an effective loss of income. Nostalgia for the economy of four years prior isn’t just real; it’s also rational.

Something exceptional happened in the United States from 2020 to 2022: not just the pandemic, but also an unprecedented experiment in welfare policy that dramatically altered the structure of American political economy to protect citizens from economic risk for the sake of their health. Americans were shown that their state can mobilize immense resources to boost their standard of living—and then witnessed the hard political constraints hemming in this capacity. The ensuing dissatisfaction with an economy that economists insist is good reflects just how popular the exceptional welfare state policies of the pandemic period were.

COVID-19 quickly proved to be highly contagious and difficult to track. Without a vaccine or effective treatment options, the disease threatened to overwhelm the American healthcare system. In response, the government coordinated a withdrawal from possible transmission sites, including workplaces. Unlike other recessions, the COVID-19 recession was chosen. The economy didn’t crash because of a panic or a slump in aggregate demand or some other endogenous economic cause, but because Americans decided to shut it down to slow the spread of a deadly disease.

The tent pole holding up this withdrawal from the economy at the federal level was ...