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Justin Fox

Washington Needs to Embrace Its Role as Ultimate Risk Manager

Get over it, Mitch McConnell. Our government has to manage the risk of a pandemic, and it needs to get better at it.

Running in to help.

Running in to help.

Photographer: Drew Angerer/Getty Images

The actions that the federal, state and local governments in the U.S. have taken to stop the spread of the new coronavirus and to mitigate the resulting economic fallout have been tagged with the term “unprecedented” a lot over the past few weeks. In sheer scale and speed, they are. But government’s role as risk manager in a crisis isn’t new at all. It dates to the beginnings of the nation.

In the sharp economic downturn of the early 1780s, state after state passed “stay” laws giving those with mortgage debts protection from foreclosures, even as wealthy property owners such as Virginia’s James Madison lamented “such an interposition of the law in private contracts.” In Massachusetts, where the legislature failed to enact such protections, one result was the Shays Rebellion of angry farmers in the western part of the state. Federal troops crushed the rebellion in 1787, and the U.S. Constitution crafted that year by Madison and others took aim at debt-forgiveness by barring states from passing any “Law impairing the Obligation of Contracts.” But Massachusetts finally enacted a debt moratorium that year as well, and even after the Constitution was ratified “the states continued passing stay laws, installment laws, and numerous other infringements on existing debt contracts in times of distress,” historian David Moss wrote in “When All Else Fails: Government as the Ultimate Risk Manager.”