Will the COVID-19 pandemic instigate real changes in U.S. foreign policy? If so, what kind of changes? Determining the impact of this unprecedented emergency is difficult in the midst of it all, so reliable predictions on this front will be elusive for some time.

At War on the Rocks, however, Lt. Gen. David W. Barno (ret.) and Dr. Nora Bensahel take a whack at peering into the future at how COVID-19 will change the U.S. military. The pandemic, they write, “has now suddenly and vividly demonstrated that a large, forward deployed military cannot effectively protect Americans from nontraditional threats to their personal security and the American way of life. In a deeply interconnected world, geography matters far less, and the security afforded by America’s far-flung military forces has been entirely irrelevant in this disastrous crisis.” Therefore, policymakers may develop alternative conceptions of national security that emphasize the cyber domain over the the more traditional land, sea, and air. The Pentagon’s budget will be squeezed by other priorities, meaning expensive weapons programs long targeted by budget hawks may be cut.

Barno and Bensahel also predict a possible change in force posture. Maintaining big expensive U.S. military bases and forward-deployed forces overseas, they argue, may get a second look.

Reliance on Forward Defense Will Diminish

Forward defense has long been the cornerstone of U.S. defense strategy, but it will become less important as the focus grows on countering catastrophic threats against the homeland. In a post-pandemic world characterized by huge deficits, massive debt, and economic recession, the United States will continue to defend its most vital interests overseas: keeping NATO alive, protecting Eastern Europe from Russia, supporting Israel, and deterring conflict in Asia. But U.S. forces across the Middle East, Afghanistan, Africa, and even in some parts of the Pacific are likely to be drawn down if not withdrawn completely.

The economic crisis may also require changes to U.S. force posture in the places where military forces remain, since the sprawling network of overseas bases remains expensive. The United States spends about $10 billion a year to operate these bases, a figure that would be far higher without the very substantial amount of host nation support (which includes cash payments as well as various forms of in-kind support). Yet the global recession and rising debt levels spawned by the pandemic may make it harder for allies and partners hosting U.S. troops to continue providing such high levels of support. And here at home, the economic crisis will make members of Congress even more likely to support shuttering overseas bases in order to forestall any discussion of domestic base closures, since preserving jobs in their districts becomes even more critical at a time of such staggering unemployment levels.

There is very little that is “defensive” about our forward-deployed posture, but leaving that semantic quibble aside, this should be a welcome prospect. My Cato Policy Analysis from 2017 addresses the cost and strategic value (or lack thereof) of forward basing and recommends large-scale withdrawal. The “$10 billion a year” figure that Barno and Bensahel cite is a scandalous underestimate, though, as I explain in the paper, it very much depends on how one counts (the range I cite is about $60 billion to $120 billion annually). More importantly, overseas bases often do not achieve the geopolitical objectives they are intended to achieve, they tend to prime policymakers for interventions that should not happen, and they frequently backfire by creating new enemies or exacerbating regional rivalries.

Overseas bases are intended to be an insurance policy on stability abroad and to enable rapid U.S. deployment in a given situation. They do not protect the homeland, per se. They are supposed to protect other nations and deter adversaries that do not pose a direct military threat to the United States. As many of my colleagues and other commentators have explained, the ongoing pandemic crystallizes Washington’s failure to properly assess threats and allocate resources accordingly. Many Americans would surely be flummoxed by the enormous investments we have made in an empire of overseas bases to protect against minor (or even implausible) threats in the traditional military realm while non-traditional threats that actually harm Americans go under-funded. The legislative response so far suggests that Congress is inclined to borrow its way out of the crisis, but revenue is finite. Instead of keeping the federal budget the way it is and simply adding new funds for pandemic responses, at some point trade-offs have to be made.

Remember the Common Core, the national curriculum standards that sparked a conflagration over who should control what every public school child in America would learn? If nothing else, you might recall a little Core comedy, though in many places the Core is still with us in various forms. What you might not recall is how the Core became a sudden national issue: the federal Race to the Top, a competition held by the U.S. Department of Education in which states battled for a slice of $4.35 billion in “stimulus” funds.

It looks like we’re about to have “Race to the Top: COVID-19.”

According to the Department of Education, 1 percent of the Coronavirus Aid, Relief, and Economic Security (CARES) Act funding for the $30.75 billion Education Stabilization Fund is slated for “two separate grant competitions” aimed at states “most affected by coronavirus.” The two programs are Education Stabilization Fund-Rethink K12 Education Models Grants and Education Stabilization Fund-Reimagining Workforce Preparation Grants.

According to reporting in Chalkbeat, about $180 million will go to states that pursue one or all of the following administration-favored policies:

1. “Microgrants” that families can use to pay for tutoring, summer programs, tuition to a private school, and more
2. A statewide virtual school or other avenue for students to access classes their schools do not offer
3. Some other program “for providing remote education not yet imagined, to ensure that every child is learning and preparing for successful careers and lives.”

What “microgrants” are is pretty clear. Chalkbeat reporter Matt Barnum says some people would call them “vouchers,” though they look more like education savings accounts in that they can be applied to multiple uses beyond private school tuition. Regardless, they are a school-choice delivery mechanism, which is ordinarily a good thing. Except…

As I have argued before, while school choice is good, a broad federal program would be bad, presenting a real threat of not just new regulation of private schools, but regulation on a national basis. As families started using federal aid it would bring in tentacles all from one creature: the federal government. No having to go state-by-state if you want to control private schools – just lobby Washington.

But that’s not all! A grant competition is even worse than a federal program created by a normal legislative process that includes public debates, voting, a potential veto, and more that subjects the policy to open public scrutiny. This is rule by bureaucracy—by secretary—which is an even bigger threat to freedom because it allows a single person or unaccountable bureaucracy to pick winning and losing polices.

The Common Core imbroglio illustrated the danger of such policymaking, foisting a policy of highly dubious efficacy on everyone, and eventually launching a debate likely made more wrenching than normal because it did not come until after people discovered their kids would be subject to the Core and they demanded to know, “how dare you inflict this on us without even so much as a vote?”

The good news is that this new competition is for much lower stakes than Race to the Top—$4.35 billion versus $180 million—but relative dollars often do not matter that much. Whether a headline says a state will lose out on $500 million or $5 million by not dancing to Washington’s tune, it looks like a lot of money to most people.

I am, of course, far more favorable to school choice than to national curriculum standards; generally speaking, the former moves towards freedom, the latter farther away. But whether you like the goal or not, bureaucratic contests are an unacceptable way to make policy.

A pandemic is no time for bad governance. As the COVID-19 crisis intensified, bureaucrats and elected officials slumbered. Government regulations prevented many in the private sector from helping with response efforts. The result was a sudden surge of evasive entrepreneurialism and technological civil disobedience. With institutions and policies collapsing around them, many people took advantage of cutting-edge technological capabilities to evade public policies that were preventing practical solutions from emerging.

Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments

This book makes the case for embracing “evasive entrepreneurs” and the freedom to be innovative because of the many benefits that individuals, society, and even governments derive from acts of technological creativity.

Purchase Book

Examples were everywhere. Distilleries started producing hand sanitizers to address shortages while average folks began sharing do-it-yourself sanitizer recipes online. The Food and Drug Administration (FDA) looked to modify hand sanitizer guidelines quickly to allow for it, but few really cared because those rules weren’t going to stop them. Gray markets in face masks, medical face shields, and respirators developed. Some people and organizations worked together to make medical devices using off-the-shelf hardware and open source software. More simply, others just fired up sewing machines to make masks—and then, faced with an emerging public health consensus, the guidance from the federal government shifted dramatically: where formerly ordinary people were instructed not to buy or use masks, within a matter of days, the policy reversed, and all were encouraged to make and use cloth protective masks.

Meanwhile, doctors and nurses started “writing the playbook for treating coronavirus patients on the fly” by improvising treatments and then sharing them on social media. A few doctors even converted breathing machines to ventilators themselves using 3‑D printed parts to address shortages for their patients even though the FDA had not yet authorized it.

Social media sites were also suddenly filled with discussions about how average people might come together to build tools or share information to assist with virus testing or treatments. A 17-year-old used his coding skills to build one of the most popular coronavirus-tracking websites in the world (ncov2019.live) after noticing how hard it was to use government sites. And two high school science teachers in Tennessee set up testing operations in their school lab to help reduce testing time in their area.

Meanwhile, journalists and columnists like the Wall Street Journal’s Andy Kessler cheered on such activity, encouraging the public to “innovate from your couch.” Modern digital technologies and platforms that had been pariahs and the target of a regulatory-minded “techlash” just a few months earlier suddenly became essential public services that were showered with praise for helping people cope with social distancing and the solitude associated with shelter-in-place requirements. Headlines in major media outlets explained how “Facebook Is More Trustworthy than the President” and “Twitter Is Making the Coronavirus World a Better Place.”

Philanthropists like Bill Gates were also funding their own solutions. The former Microsoft founder and CEO pointed out that, in an effort to find testing solutions and vaccines, private groups like his Gates Foundation could likely mobilize faster than governments. Gates likely had grown frustrated with government responses after a Seattle-based lab that the Gates Foundation funded figured out an effective way to test for coronavirus, only to be blocked from expanding it by over-cautious federal bureaucrats. Frustrated by federal intransigence, that Seattle lab started testing for COVID-19 anyway to prove they indeed had an effective test. Commenting on the case study, the New York Times expressed exasperation about “how existing regulations and red tape—sometimes designed to protect privacy and health—have impeded the rapid rollout of testing nationally.”

Wait, Isn’t All This Illegal?

What is interesting about all these examples of bottom-up innovation and evasive entrepreneurialism is that they are remarkably inspiring, but also mostly illegal. Almost all these activities butted up against longstanding regulations governing medical devices, practices, or therapies. Some of those rules are enforced by large and powerful federal bureaucracies like the FDA and Centers for Disease Control and Prevention (CDC).

Others take the form of state-based occupational licensing limitations or certificate-of-need laws, which require healthcare providers to first obtain permission before they open or expand their facilities or services. This crazy quilt of medical laws and regulations accumulated steadily over time, creating what constitutional scholar Timothy Sandefur calls a “permission society,” which values proceduralism and conformity over practicality and common sense.

Eventually, however, the mountains of red tape that the permission society is built upon start to collapse under their own weight. Laws and agencies that previously commanded obedience are now viewed as an opaque, ossified, and confusing morass of one-size-fits-all mandates, prohibitions, and penalties that actually undermine the very health goals they were put in place to achieve. Suddenly, headlines in every major newspaper screamed of how, as it pertained to virus testing procedures, “The Government Failed” (Wall Street Journal) because of “Flawed Tests, Red Tape and Resistance” (Washington Post) and this resulted in “The Lost Month” (New York Times) in the United States.

Eventually, people take notice of how regulators and their rules encumber entrepreneurial activities, and they act to evade them when public welfare is undermined. Working around the system becomes inevitable when the permission society becomes so completely dysfunctional and counterproductive.

Technological Empowerment vs. the Status Quo

What’s going on here, and what lessons can we derive from it?

In a new Cato Institute book, Evasive Entrepreneurs and the Future of Governance, I document how the sort of behavior we have recently witnessed was growing rapidly even before the COVID-19 crisis. In many different contexts, evasive entrepreneurs—innovators who don’t always conform to social or legal norms—are using new technological capabilities to circumvent traditional regulatory systems. They at least want to put pressure on public policymakers to reform or selectively enforce laws and regulations that are outmoded, inefficient, or counterproductive.

Evasive entrepreneurs rely on a strategy of permissionless innovation in both the business world and the political arena. They push back against the permission society by creating exciting new products and services without always receiving the blessing of public officials before doing so. While evasive entrepreneurialism has always been with us to some extent, many of the responses to the pandemic would not have been possible even just a few decades ago. Recent advancements have supercharged in a more technologically empowered world of information abundance and decentralized, inexpensive tools.

As I show in the book, evasive entrepreneurs are taking advantage of the growth of what we might think of as technologies of freedom or resistance. These are devices and platforms that let citizens circumvent (or perhaps just ignore) public policies that limit their liberty or freedom to innovate or to enjoy the fruits of innovation. These can include common tools like smartphones, computers, and various new interactive platforms, as well as more specialized technologies like cryptocurrencies, private drones, immersive technologies (like virtual reality), 3D printers, the “Internet of Things,” and sharing economy platforms and services. But that list just scratches the surface. When the public uses tools such as these to explicitly evade public policies on moral grounds because they find then offensive, illogical, or perhaps just annoying, we can think of that as technological civil disobedience.

Common Sense Prevails

Evasive entrepreneurialism and technological civil disobedience accelerated during the pandemic because both the practicality and morality of government policies came into question in stark fashion. The first month of the crisis witnessed “a torrent of governmental incompetence that is breathtaking in scale,” my Mercatus colleague Scott Sumner argues. “There are regulations so bizarre that if put in a novel no one would believe them,” he notes. “In contrast, the private sector has reacted fairly well, and has been far ahead of the government in most areas.”

Indeed, the pandemic has been a stress test for our institutions, and many of them have failed it. Confusing rules and inflexible agencies that should have been reformed years ago were suddenly exposed and judged harshly. Philip K. Howard, founder of Common Good, says that “Covid-19 is the canary in the bureaucratic mine.” Bloated bureaucracies and overbearing regulatory systems, he argues, have created a “toxic atmosphere that silenced common sense” and managed to “institutionalize failure.” Cato’s Paul Matzko has documented how the FDA has been particularly guilty of blocking sensible forms of progress on simple things like face mask production or distribution.

While countless others lambasted the practical failures of our institutions, the morality of government policies was also coming into focus. Why should citizens have their innovative efforts to help others stifled at seemingly every juncture? Must we really follow the law when it undercuts the basic human need to care for others and ourselves?

These are the issues addressed in my new book, which explains the practical reasons why evasive entrepreneurialism is on the rise and then provides a moral defense of it. When innovators and average citizens use tools and technological capabilities to pursue a living, enjoy new experiences, or improve the human condition, they often disrupt legal or social norms in the process. That is not necessarily a bad thing. In fact, evasive entrepreneurialism can transform our society for the better because it can help expand the range of life-enriching (and often life-saving) innovations. Evasive entrepreneurialism can help citizens pursue lives of their own choosing—both as creators looking for the freedom to earn a living and as individuals looking to discover and enjoy important new goods and services.

Defending evasive entrepreneurialism is easy after it occurs, but few defend it before or as it is happening. I argue in the book that the freedom to innovate is essential to human betterment—for each of us individually and for civilization as a whole—and that freedom deserves to be taken more seriously today. The COVID-19 pandemic has made this more apparent than ever before.

There are few things more human than acts of invention. At its root, innovation involves efforts to discover new and better ways of solving practical human needs and wants. People have a right to innovate and create technologies because they possess a more general right to take steps to improve their lot in life and the lives of others around them. When misguided or archaic government programs and policies blocked that potential during the pandemic, people began ignoring or evading them. That was both practically sensible and morally justifiable.

Innovation as the New Checks and Balances

By extension, the response to the pandemic has proven the second thesis set forth in my book: Evasive entrepreneurialism and technologically enabled civil disobedience can actually help us improve government by keeping public policies fresh, sensible, and in line with common sense and the consent of the governed. Evasiveness and technological disruption can act as a sort of relief valve or circuit breaker to counteract negative pressures in the system before things break down completely. By challenging legislators and regulators to reevaluate the wisdom of their policies, evasive entrepreneurs can help us break political logjams and force governments to become more adaptive and accountable.

The proof is in the pudding. As the crisis unfolded, agencies at the federal, state, and local levels were forced to suspend hundreds of regulations that were clearly undermining helpful responses. These “rule departures” would not have been necessary if governments had engaged in periodic spring cleanings earlier. When COVID-19 hit, it became essential to suspend or repeal hundreds of misguided old rules that clearly undermined public health. The only question now is whether those inefficient, counterproductive policies will be put back on the books to do harm again in the next crisis.

But even before the current crisis, rule departures by government actors were becoming more common because even government officials could no longer understand their own rules. Just as private citizens have increasingly resorted to evasive techniques to get things done, many regulatory agencies have given up trying to “go by the book” themselves because endless regulatory accumulation has made it impossible to understand what the law means.

My book documents many cases of public officials essentially ignoring their own policies and making up governance solutions as they go along. This is another sign of profound institutional failure, yet it should also give us some hope that even policymakers themselves now realize that government cannot just grow forever without breaking down at some point. The need for comprehensive reform is now abundantly clear, and the pandemic has moved the so-called “Overton Window” (i.e., the acceptable range of possible policy reforms) on many fronts.

A New Approach to Governance

Policymakers need a new approach for technological governance that is more in line with modern realities. Flexibility and humility will be essential. Regulators do not need to throw out the old rulebooks altogether, though. Some precautionary rules still make sense, particularly in cases involving extreme risk. But why not embrace the entrepreneurial spirit of the citizenry and allow more experimental trials, flexible testing procedures, and perhaps even prizes for particularly innovative ideas?

When enforcing the rules that remain on the books, policymakers should also consider targeted waivers and ex post regulatory reviews as opposed to ex ante regulatory prohibitions on any and all evasive innovations. Liability rules can also be tweaked so innovators do not have to live in constant fear of getting sued for trying to make the world a better place. Finally, post-market monitoring and recall notices can also be used to ensure flexible experiments have some regulatory guardrails.

But shutting down creative solutions and unique thinking simply because they run counter to some crusty old rulebook is never the right response. We should view evasive entrepreneurialism as an important part of a broader discovery process that incorporates the profound importance of ongoing, decentralized, trial-and-error experimentation to the process of societal learning and improvement. Lawmakers should find a way to accommodate a little more outside-the-box thinking and innovating—and not just when our lives are on the line.

Even as over one billion students around the world endure unchosen school-at-home during the COVID-19 pandemic, interest in authentic homeschooling has grown. A new survey by EdChoice found that more than half of respondents have a more favorable view of homeschooling as a result of this global health crisis, while 26 percent have a less favorable view. As a homeschooling mother of four children and author of Unschooled: Raising Curious, Well-Educated Children Outside the Conventional Classroom, I can confidently say that what we are all experiencing now, being stuck at home with our children and isolated from our larger community, is nothing like genuine homeschooling, but it is nevertheless encouraging to see more favorable perceptions of the practice. For opponents of homeschooling, however, heightened public interest in this educational approach is triggering calls for increased regulation and even “presumptive bans” on homeschooling, as put forth in a recent Harvard Magazine article. Here are some reasons that is a bad idea:

The “liberty interest of parents”

In the landmark 1925 US Supreme Court case Pierce v. Society of Sisters, the court overturned an Oregon law banning private education, stating that the “child is not the mere creature of the State.” That case examined private education broadly and did not specifically address homeschooling, which was virtually non-existent at the time. As the modern homeschooling movement emerged in the late-1970s, courts grappled with how to interpret a parent’s right to educate a child outside of a conventional schooling environment, and the practice became legally recognized in all US states by the mid-1990s.

As the number of homeschoolers swells to nearly two million US children today, courts continue to uphold parents’ rights to home educate their children. In 2018, the Georgia Court of Appeals overturned a lower court ruling against homeschooling, stating: “The liberty interest of parents to direct the upbringing, education, and care of their children is the most ancient of the fundamental rights we hold as a people, and is ‘deeply embedded in our law.’ This cherished right derives from the natural order, preexists government, and may not be interfered with by the State except in the most compelling circumstances.”

Compelling circumstances for government intervention include child abuse, where it is important to protect a child from harm. Homeschooling opponents argue that because homeschooled children are not in schools where there are “mandated reporters” of suspected abuse, they could be abused by parents and, therefore, homeschooling families require government monitoring or outright bans. Tragically, child abuse occurs everywhere, including in public and private schools. Singling out a particular group of people for increased suspicion and monitoring without cause simply because they choose to live and learn differently is a gross violation of privacy and liberty. Child abuse laws exist in all states and should be duly enforced, but subjecting an entire group to government oversight on speculation rather than proof is troubling.

Glass houses and stones

Abuse in public schools is disturbingly common; yet those who propose bans on homeschooling in the name of child welfare don’t suggest the same for public schools. According to a 2004 report by the US Department of Education, 1 in 10 students will experience sexual abuse by a public school educator by the time they graduate from high school. Additionally, physical abuse against public school students by teachers and administrators also regularly occurs, as does bullying and abuse by peers. Moreover, many students are deeply unhappy at school. A new Yale study finds that nearly three-quarters of American high school students have negative feelings toward their schooling. “Concern about the environment of other schools, including safety, drugs, and negative peer pressure,” is a primary motivator for today’s homeschooling families who choose to refrain from sending their children to schools that they deem unsafe or undesirable.

Families choose homeschooling for a panoply of reasons, but much of the recent growth in the U.S. homeschool population is being driven by urban, secular families who want a more personalized, less standardized learning environment for their children, as well as families of color who want to escape low-performing schools and institutional racism. Bans on homeschooling or increased regulation of the practice force compliance with government-imposed education standards that, in many cases, are exactly what families are fleeing when they choose homeschooling.

Homeschooling opponents, such as Harvard Law School professor Elizabeth Bartholet, argue for bans on homeschooling, saying it’s “important that children grow up exposed to community values, social values, democratic values, ideas about nondiscrimination and tolerance of other people’s viewpoints.” But recent research on homeschooling by Daniel Hamlin at the University of Oklahoma finds that homeschooled children actually have higher participation in cultural activities than their schooled peers, spending ample time in local libraries, museums, and other cultural venues. This echoes earlier research by Richard Medlin of Stetson University who found that homeschooled students exhibit strong civic engagement and social skills.

While more research is needed, most peer-reviewed studies on homeschooling outcomes show that homeschoolers academically outperform students who are conventionally schooled. Meanwhile, the most recent results of the National Assessment of Educational Progress (NAEP), also known as the Nation’s Report Card, show lackluster academic achievement in conventional schools, particularly in reading where two-thirds of American children do not demonstrate proficiency. Parents should be free to pursue an educational path for their children that is not tied to a government system of questionable competence, both in educating children and in securing their overall welfare.

In the recent Harvard Magazine article against homeschooling, Professor Bartholet expresses concern about “authoritarian control” over children as a justification for banning homeschooling, but banning homeschooling is itself authoritarian. Parents have an evolutionary imperative to ensure their child’s well-being. Indeed, they have been the ones most capable of sustaining our survival as a species for millennia. They may not always succeed, but neither does the state. Placing trust in families, and preserving their “liberty interest” in raising and educating their children as they see fit, is the preferred pathway toward a free and tolerant society.

Last week, Cato launched a new project that aims to put various national security challenges and threats to public safety into perspective.

With the current COVID-19 pandemic, many people are fearful of one big thing – albeit an invisible thing — but this may in fact be the perfect time to look at how we are often overly afraid of certain dangers, and not scared enough by others.

It is with that idea in mind that Cato held a livestream event yesterday, “What Frightens Us? And Why? Threat Perception During and After COVID-19.” Panelists looked to answer questions such as: What explains public fears and the government’s response to them? To what extent does national security strategy shape public attitudes—or is it mostly shaped by them? And how will strategic planners prioritize the allocation of resources between traditional and nontraditional threats post–COVID-19?

Rose McDermott, a professor of international relations at Brown University, argued that a lot of threat inflation comes from overrated low probability risks and underrated high probability risks. Things like terrorism or great power wars are low probability risks, but are highly overrated in public perception and public policy. People feared a terrorist incident far more than a global pandemic, even if such a pandemic was much more likely — and ultimately more deadly. A lot of it comes down to humans being visual creatures. A terrorist attack is something that can be seen, and is highly traumatic, thus more fear-inducing; a virus that can be seen only through an electron microscope is generally misunderstood. The public will more readily dismiss fears of it, and policymakers won’t be rewarded for measures that might have stopped a pandemic from happening, or at least minimized its effects. As Eugene Gholz, a professor of political science at the University of Notre Dame, points out, public discourse in the United States has become so politically divided that it’s harder than ever for the public to distinguish what is a real threat and what has been inflated.

Today’s crisis is not a result of a “failure of imagination” or preparation, said Gholz, as there are just too many different possible outcomes to fully prepare for each and every one of them. He warned against getting trapped into a mind set of “You-Never-Knowism” — attempting to account for every potential threat, no matter how unlikely. Governments should be looking to the most realistic threats and investing resources into preventing or minimizing those, rather than playing into fears of grander, more visible threats that are, in reality, remote possibilities. As Chris Preble said in his opening remarks, the last time the United States engaged in a “better safe than sorry” war, we ended up in Iraq for almost 2 decades, costing trillions of dollars, and the lives of thousands of Americans, and hundreds of thousands of Iraqis.

COVID-19 presents an opportunity for the public and policymakers to reevaluate what is important. We should strive for an accurate perception of threats to our health and safety, and aim to ensure that resources are being directed where they are most needed.

You can see the event in full below:

As the $2.2 trillion CARES Act sailed through Congress, the general mood was that money had to get out the door as quickly as possible to provide relief for households and businesses.

Details were of second-order importance – lawmakers simply wanted dollars flowing to businesses through loans and payroll support, to households through checks, and to those laid off because of COVID-19 through more generous unemployment insurance benefits. One might say Congress threw everything but the kitchen sink at the relief effort, in the hope that at least one program would cover everyone suffering.

Well, it turns out there are unintended consequences of throwing dollars through programs with different aims simultaneously. One obvious example is how the more generous benefits for unemployment insurance and the small business-focused Paycheck Protection Program come into conflict.

The CARES Act’s Pandemic Unemployment Assistance waived job-search requirements for unemployment insurance and hugely expanded eligibility for those affected by the pandemic. Most importantly, the federal government agreed to pay anybody eligible $600 per week on top of their state unemployment insurance benefits.

As a result, many workers would now be better off out of work than in work, even more so given going to work brought greater risk of contracting the virus. Senator Lindsey Graham, and several commentators, pointed this out as a problem at the time. But his concerns were largely dismissed — paying people to stop activity was seen as a feature, not a bug.

At the same time, the recently expanded Paycheck Protection Program aimed to supply small businesses, hospitality industry companies, and some other eligible businesses with federal guaranteed loans to cover costs, such as payroll, rent, and utilities. But the main aim of the program was for businesses to keep employees on payroll. To do this, businesses were given a financial incentive: the loans would be forgiven if the business avoided cuts to headcount or curbs on wages over eight weeks after funds were dispersed. The more payroll outlays fell, the smaller the part of the loan forgiven.

Can you spot the problem businesses face yet?

Employees might often find themselves financially better off in the short-term if they are laid off. But if employers want to have the PPP loan forgiven, they have to avoid having reduced headcount. Some employees are urging employers to lay them off, while many employers are desperate to retain or quickly rehire those same workers to keep their businesses viable through a forgiven loan.

Now, employees can’t just leave the business unilaterally to start claiming unemployment insurance. At least in theory, they must be fired. But what we are seeing is that these laws combined are putting business owners in a very difficult position.

CNBC reports on a spa owner informing her staff of success in obtaining a PPP loan, for example:

When Black-Lewis convened a virtual employee meeting to explain her good fortune, she expected jubilation and relief that paychecks would resume in full even though the staff — primarily hourly employees — couldn’t work.

She got a different reaction.

“It was a firestorm of hatred about the situation,” Black-Lewis said.

The animosity is an unintended consequence of the $2.2 trillion coronavirus relief package enacted last month.

…

The anger came from employees who’d determined they’d make more money by collecting unemployment benefits than their normal paychecks.

On Twitter, one business owner said that he tried to keep a skeleton food service going, but workers were anxious about interacting with each other, so he laid them off so they could claim unemployment insurance. Yet that made applying for PPP problematic, because he would have had to rehire staff who currently would prefer not to work. So he passed up on the PPP, meaning he is still facing bills with no assistance. NPR reports too of a coffee shop owner in Harlan, Ky. who closed her doors after employees urged her to lay them off so that they could obtain unemployment insurance.

Meanwhile, business owner Kurt Huffman wrote for the Wall Street Journal:

…we realized that we needed to hire back some of our staff to help with the demand. That proved harder than we expected.

We started making the calls last week, just as our furloughed employees began receiving weekly Federal Pandemic Unemployment Compensation checks of $600 under the Cares Act. When we asked our employees to come back, almost all said, “No thanks.” If they return to work, they’ll have to take a pay cut.

More generous unemployment insurance, in other words, is making laid off workers less likely to accept re-hiring and current employees more likely to request employers lay them off. But PPP loan forgiveness for businesses is conditional on them not reducing headcount or wages by June 30th. So businesses suffer financially for doing what is financially better for many of its employees. The two programs directly clash in terms of incentives and are producing discord in the businesses Congress sought to keep mothballed.

Governments often fail because they tend not to learn lessons. They make similar mistakes over and over for reasons described in this study.

The FDA botched its COVID-19 response by using its regulatory powers to monopolize the development of virus tests. I have not heard any apologies for the failure or that any officials have been fired. As a Wall Street Journal investigation of HHS leadership suggests, the gross testing failure has led to lots of finger pointing, but not institutional reforms.

After the testing debacle, one might think that federal leaders would hesitate to impose further one-size-fits-all solutions for COVID-19. But no—the Wall Street Journal reports that House Democrats want to require OSHA “to order all companies to implement comprehensive plans to protect workers who continue in their jobs during the pandemic. The new, emergency standard would have to be issued within seven days after any legislation is signed into law.”

Thus, in seven days federal bureaucrats would apparently write-up a Giant Safety Plan to impose on millions of businesses in hundreds of industries across our huge and diverse nation. That makes no sense.

Federal policymakers seem to have little comprehension that their actions often sideline the vast brain power and innovation that lives outside of Washington. At the stroke of a pen, federal regulations nullify the experimentation, dynamism, and speed that America’s private sector can mobilize to solve problems.

As they consider imposing COVID-19 safety regulations, policymakers should ponder the pro-active steps that businesses are already taking or actively considering, as discussed in another Wall Street Journal article. Businesses are separating workspaces, taking temperatures and screening health at work entrances, testing employees before they get to work, closing lunch rooms, installing workspace partitions, adjusting shifts, modifying production lines, changing entrances and exits, closing facilities and tracing contacts if workers test positive, placing materials down rather than handing them to others, sanitizing workspaces, having safety experts instruct workers, spacing bathroom urinals, wearing electronic bands to alert workers if others are too close, and providing masks, gloves, and hand sanitizer.

A central plan quickly thrown together in Washington could not impose a “best” way for millions of businesses to install these sorts of changes. Every business is unique. Here are some reasons why allowing businesses to address their own safety challenges is superior to top-down federal mandates:

Trial-and-Error. The Journal story puts a negative spin on diverse business approaches to safety as a “patchwork” and “ad hoc.” But anyone who studies innovation knows that trial-and-error processes are crucial to economic and societal improvements. Private institutions change direction all the time as they try different things and receive feedback from stakeholders. To discover the best ways to adjust each workplace for COVID-19, businesses need the freedom to experiment and to change course.

Government regulations undermine the steady improvements that are the hallmark of markets and free societies. Imposing COVID-19 safety regulations would reduce business incentives to implement new and better approaches. The question around every workplace would change from “Are we doing this safely and can we do it better?” to “Are we conforming to the OSHA rules?”

Horizontal Learning. Volkswagen is reopening some of its European factories after making 100 workplace changes. VW has been flooded with requests from other businesses about the safety procedures it is using, and so the company has posted its ideas online. American businesses are also studying Chinese businesses that were able to open safely. This sort of horizontal learning is superior to the often-ill-informed edicts from Washington. Similarly, horizontal sharing of resources during crises is better than vertical intervention, as discussed here.

Costs and Benefits. In theory, federal bureaucrats are supposed to design regulations by comparing the costs and benefits of various possible rules, but the process is a crude way of making decisions in an economy, even after rules have been studied for years. In the current crisis, regulators would have little time to even try and make balanced decisions. Business leaders know their own facilities, employees, and customers, and they can make better reopening decisions based on their local knowledge.

Flexibility. The nature of the COVID-19 threat will change over time. Scientists may learn more about virus transmission on surfaces and in the air. Drugs may be developed to reduce the health risks. New safety approaches and technologies may be developed. As such, businesses need the freedom to adjust their safety procedures over time. Regulations would lock-in rules that may be quickly outdated as conditions change.