David Dayen in his Unsanitized Report...
While the Feds decided no national response was going to be just fine, they also choked the states via the CARES Act
But it’s important to understand the dynamics underlying this second half of the first wave, and why we failed where so many other developed countries succeeded. It goes back to the CARES Act.
The legislation, as you recall, paid people for staying at home during the lockdowns, which was an important step at that time.
Not only were millions of people coming off of payrolls (Many states do tax unemployment but some, like California and New Jersey, do not), but reduced economic activity was crushing sales tax revenues as well as use taxes like road tolls. States were staring at hundreds of billions of dollars in shortfalls, and unlike the federal government, they could not borrow their way out of trouble or keep their budgets unbalanced.
The goal was to use the unemployment system to keep people safe, alive and afloat while the country tried to manage the outbreak. (The PPP also paid businesses to keep people on payroll, but unemployment was the more dominant mechanism here.)
What the CARES Act did not do was protect cities and states who were about to lost giant chunks of tax revenue as a result of this plan.