George Gibbs Center for Economic Prosperity

In Coronav⁠i⁠rus cr⁠i⁠s⁠i⁠s lessons for recovery from ⁠t⁠he Gulf Coas⁠t⁠’s Deepwa⁠t⁠er Hor⁠i⁠zon D⁠i⁠sas⁠t⁠er

By: Dr. J. Robert McClure / 2020

May 15, 2020

By: Dr. Bob McClure

Last month a ten-year anniversary passed with little notice. On April 20, 2010, the Deepwater Horizon offshore oil platform suffered an explosion that resulted in the largest marine oil spill in history.

Over the next several weeks, close to five million barrels (approximately 210 million gallons) of oil seeped out into the Gulf of Mexico.

The consequences of the event are largely considered the greatest environmental catastrophe in U.S. history and an economic disaster for the communities along the panhandle of Florida through Alabama and Mississippi.

Economically, the cost to the Gulf coast was estimated in the tens of billions of dollars.

There is an important lesson from that disaster that could offer a novel approach to the economic challenges ahead of us today.

In response to the Deepwater Horizon crisis, the State of Florida established Triumph Gulf Coast, Inc. – a nonprofit designed solely to administer Florida’s portion of the relief funds.

The Triumph board was appointed by elected leaders at the state level to oversee the collection and distribution of funds for the recovery, diversification, and enhancement of the eight Florida counties impacted.

In the years since its formation, Triumph Gulf Coast has distributed close to $250 million in relief directly to affected businesses and communities – and has done so as a model of efficiency and effectiveness.

In response to the COVID-19 economic lockdowns established in almost all states, our national economy has gone from a Ferrari to a seized engine in just a few short weeks.

The national unemployment rate of 3.5 percent (a 50-year low) jumped to 4.4 percent in March and then 14.7 percent in April, meaning 20.5 million Americans lost their jobs in April alone.

The economic fall-out is prompting discussions about a “Great Depression 2.0” by summer. And the federal government, seeking to do whatever it can to design relief packages, is proving once again to be as inefficient, ineffective, and special-interest-pandering as its 11 percent approval rating would suggest.

We’ve added more than $2 trillion to our national debt, and the trajectory has us on course to spend another $2 trillion before the year is out.

The next phase of economic relief may well include up to $500 billion to states to help address revenue shortfalls. More direct relief to businesses and individuals may also be in the future.

As we confront this fiscal shock, our leaders should apply the lessons from Deepwater. Adopting the approach Florida took 10 years ago to combat a previous crisis, we can ensure that future relief monies are used in the best possible manner, while minimizing inefficiencies and the fraud or misuse that the federal government can’t seem to eliminate (we’re looking at you Kennedy Center).

Between now and the end of May, each state should work to establish its own “COVID-19 Economic Recovery Inc” nonprofit, with a board made up of a cross-section of policymakers, local officials, business leaders, and community stakeholders.

Those boards should possess the authority and accountability to determine the most valuable methods, channels, and strategies for using federal aid dollars.

While many conservatives may question the merits of more federal debt in the form of cash to states, the reality is there is zero chance Congress won’t authorize more spending.

Let’s ensure the money is spent in a way that maximizes value and targets direct and specific needs. Let’s face it — each state is unique – in demographics, governing structures, and economic conditions.

The best use of $5 billion dollars will look quite different in New York than it will in New Mexico. How a small business grant program works in Colorado should probably be structured and function differently than it would in Connecticut.

In a state like Illinois, with substantial fiscal challenges, CARES Act funds may need to be allocated to social programs in urban centers more than in a state like New Hampshire, which doesn’t have the same fiscal conditions.

Some may make the case, not unreasonably, that the state legislature should control this money, since they are elected by the people to create a budget and this is part of that function. But in many states, public-private partnerships have proven to be of tremendous value in addressing specific challenges.

The concept of mobilizing the business community, in concert with partners in state and local government and community leaders, has the potential to not only ensure that future relief funds are channeled in the most valuable manner, but also to generate new avenues for resources.

Throughout our 233-year history as a constitutional republic, citizens have shown up when called. Let the states tap into their resources to make the economic recovery as powerful as it can be.

Dr. J. Robert McClure III is a seventh-generation Floridian and is president and CEO of the James Madison Institute, a non-partisan think tank based in Tallahassee devoted to research and education on public policy issues.

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