What Happened

On April 16, U.S. President Donald Trump’s COVID-19 crisis team unveiled its three-phase approach for states to begin lifting the U.S. economy from lockdown. The plan recommends that states and cities have mass testing, contact tracing and stabilized health care systems in place before moving into the first, still heavily disruptive phase of loosening restrictions. This initial stage allows some non-essential businesses to re-open, such as restaurants, movie theaters, sports venues and gyms, but still requires social distancing and thorough health screenings for patrons of these services. 

After documenting two weeks of declining COVID-19 cases, states can then move into the second phase, which would see schools reopen and non-essential businesses begin to bring workers back to their offices, with vulnerable and immunocompromised populations still sheltering in place. Only in the third and final phase would the traditional economy begin to function without COVID-19 restrictions. But an area may revert back to a previous phase, should healthcare data indicate another spike in cases. 

Why It Matters

The White House’s plan is not a mandate and does not include set deadlines, meaning governors and mayors will still have the ability to decide their own specific lockdown strategies. But much of the guideline echoes the ideas already being floated by governors from West Coast, Midwestern and East Coast states, who are trying to coordinate their own efforts to lift restrictions on gatherings and business operations. Even if the Trump administration's phased system, health care mandates and widespread testing requirements aren't followed to the letter, they're thus likely to be generally replicated in regional and individual state plans. 

However, it will take weeks or even months for some areas to carry out the plan, which is predicated on officials being able to continuously reevaluate their COVID-19 outbreaks. The United States is still far away from having a widespread national testing regime, meaning that reaching even the first phase may still be a distant hope for much of the country. This is particularly true for states with major economic centers, such as New York and California, as creating the monitoring infrastructure needed to continuously test their massive populations will require significant investments. 

Moreover, as phases roll out, businesses will have to adapt to the new era of social distancing, and the potential for reversions to more strict measures should viral outbreaks return. Their employees with children at home, meanwhile, will be adjusting to a new normal of interrupted schools and daycares. Business models will, in some cases, need to significantly change in reaction to these mandates. Restaurants, for example, may be among the first to reopen under the plan. But they will still likely need to spread out customers and check their temperatures, as well as provide staff with some version of personal protective equipment (PPE). Fears of catching the virus by going out, along with social distancing measures that allow a few people to enter at a time, will also suppress customer demand. Some small businesses may not be able to weather such changes, while others may go under while awaiting more robust support from the federal government. 

What’s Next

As states and cities gradually work their way to some resemblance of the final phase outlined in the White House’s plan, unemployment levels will remain high, leaving Washington D.C. in the position of needing to add more stimulus to the economy. The federal government may opt to extend or add to the stimulus measures already passed in the $2.2. trillion Coronavirus Aid, Relief, and Economic Security Act (commonly known as the CARES Act), such as the direct payment system that saw taxpayers get $1,200 per person and $500 per child. Congress may also extend unemployment benefits beyond the current mandate in the CARES Act, which ends on July 31. To incentivize businesses to avoid additional layoffs, some legislators have proposed topping up the Small Business Administration’s $349 billion emergency Paycheck Protection Program, which ran out on April 16 after immense demand drained the fund. 

The Federal Reserve, for its part, will continue its role of injecting liquidity into the financial system and buying up municipal bonds to alleviate the added economic stress on local communities. States, cities and the federal government may also increasingly involve themselves in the rental and mortgage markets to stabilize the living situations for the 22 million Americans who have filed for unemployment in the past four weeks. Using local budgets, states will take their own measures to prop up incomes and stabilize small businesses as well.