We now know that millions of unemployed workers won’t be kicked off unemployment insurance (for at least 11 weeks) and will now get $300 every week in addition to their current state benefit; a vast majority of Americans will receive $600 direct payments from the government; and small businesses will have access to a modest new tranche of forgivable government loans.
After about six months of dire warnings from economists, business owners and the Federal Reserve that the economy was going to need a follow-up coronavirus relief package, Congress finally struck a last-minute $900 billion compromise over the weekend.
If this bill, which also includes new public health funding, were in response to a normal recession, its measures would be seen as a gargantuan effort. But in these times, many voices are reasonably arguing that it’s not enough, that it came too late and that it was driven by unsavory politics as much as it was by the needs of the population.
For a long while, many Republican senators in particular insisted that another large dose of aid either wasn’t needed, was too expensive — or that any further relief had to be paired with a broad “liability shield” for businesses. After all, many reasoned, the unemployment rate has been more than halved since the darkest days of April and is roughly what it was in late 2013. The Atlanta Federal Reserve recently estimated that G.D.P. growth, right now, could be as high as 11 percent at an annualized rate. The stock market is hitting record highs, and a couple of vaccines that promised to be startlingly effective are already being distributed.
But these bright aggregate figures don’t capture the full picture. As the tens of millions of families and businesses struggling while the coronavirus tears through the country already knew, the recovery from the economic crash of the spring has been substantially uneven. Combined with the long-coming downturn in economic activity this winter, more action from the federal government was always going to be necessary.
The drawback of this bill, besides the unnecessary delay of its passage, is how its two most direct approaches to economic relief — direct payments and unemployment benefits — appeared to have been played off each other to keep spending under the completely arbitrary budgetary price tag of $1 trillion, a limit pushed for by the Senate majority leader, Mitch McConnell, and supported by most of his caucus.
This penchant for penny-pinching among leading senators undermined meeting objective economic and humanitarian needs. For instance, in an earlier compromise effort, a bipartisan group of senators led by Mitt Romney and Joe Manchin decided to keep the cost of their proposal below $1 trillion by including 16 weeks of expanded unemployment payments but excluding any mass direct payments.
To cloistered senators, some of whom have already been vaccinated, the horse trade that was agreed to over the weekend — which switches in direct checks and cuts the expansion back to 11 weeks to stay under that magic number — may feel like a return to sensible give-and-take in divided government. But for the jobless, the five-week difference could mean a loss of at least $1,500 for their households.
As many economists have pointed out, large helpings of government spending right now don’t carry any long-term cost or monetary risk. Interest rates are low and projected to stay low. Even the Federal Reserve, with its statutory mandate to watch out for inflation, is practically begging Congress to spend more. And with the prospect of a widely vaccinated population still agonizingly far away, there’s little reason to think more relief won’t be called for in 2021.
The damage inflicted on Americans’ personal finances can’t be undone by a vaccine: restaurant managers and workers or caterers and fitness instructors in colder areas of the country, who will technically remain employed but may see their incomes evaporate as outdoor gatherings get too frigid to be enjoyable; laid-off workers who got their jobs back but are still in the hole for rent; hourly municipal workers who’ll have their hours cut because of the bill’s failure to include robust support to state and local governments that have little or no cash left. This harm, which can’t be fully captured by aggregate numbers, is still real.
High-incomes households have largely seen the balances in their bank accounts rise throughout the year. But households at the medium and especially the low end of the income spectrum have had their cash buffers shrink since summer.
That’s why direct checks are an empathetic and efficient inclusion. They can reach anyone in financial distress, but also spur overall consumer spending. And $600 is the minimum many families will receive overall: Most two-parent families of four are likely to receive $2,400 relatively soon. Here, the bipartisan intervention of Senators Bernie Sanders and Josh Hawley, who said they could not support an earlier bill because it didn’t include direct payments, may deserve its due.
The first set of 160 million “checks” (most are direct deposits) that the Treasury Department sent out on Congress’s behalf in spring were visible, popular close to universal yet less expensive then the unemployment expansion, and they served as a rare source of solid public approval.
American politics now finds itself in a peculiar place in relation to its fixations on supply-side “job creators,” not “crowding out” private investment and guarding against deficit spending. This year, the government’s combined multitrillion dollar relief efforts were so huge that in April household incomes actually went up. Afterward, both economists (focused on sustaining consumer demand) and the majority of Americans said more was needed, a demand even Republicans in Congress eventually caved to. Next year, as people reap the benefits of their belated concessions, they’ll likely see that the nation’s public finances remain intact, despite fearmongering.
Maybe this potential eye-opener is what the remaining supply-side voices and small-government types in the Republican Party like Senator Ron Johnson were so afraid of when they either threw roadblocks in front of new relief bills or opposed them altogether: If government can afford to bolster the incomes and living standards for a broad segment of the population in a crisis, they might ask, then why couldn’t it have done more from the start?
Matthew Zeitlin is a reporter covering finance, economics and public policy.
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