Conservatives Say It’s Time to Stop Spending on Coronavirus Relief

By Yuval Rosenberg

Bernanke, Yellen and More Than 140 Top
Economists Call for Massive New Coronavirus Relief Bill

A group of more than 140 top economists, including former
Federal Reserve chairs Ben Bernanke and Janet Yellen as well as
Nobel laureates and former chairs of the Council of Economic
Advisers, is calling on Congress to pass another aggressive
coronavirus relief package.

"Congress must pass another economic recovery package before
most of the support in the CARES Act expires this summer," the
economists write in a
letter to congressional leaders published Tuesday
by the Washington Center for Equitable Growth, a think-tank focused
on inequality.

"Given current projections of economic need, this new bill
should provide, at a minimum, continued support for the unemployed,
new assistance to states and localities, investments in programs
that preserve the employer-employee relationship, and additional
aid to stabilize aggregate demand. While the signers of this letter
have different views on the optimal size and composition of the
package, we all agree that an adequate response must be large,
commensurate with the nearly $16 trillion nominal output gap our
economy faces over the next decade, according to CBO
estimates."

Besides Bernanke and Yellen, other notable signatories include
Jason Furman, Austan Goolsbee and Christina Romer, who led the
Council of Economic Advisers under President Obama; Martin
Neil Baily, who headed the council under President Clinton;
Alan Blinder and Donald Kohn, who were vice chairs of the
Fed; and economists Heather Boushey, J. Bradford
DeLong, Emmanuel Saez, Robert Solow and Cecilia Rouse.

The economists warn that, absent further congressional action,
"state and local governments face potentially disastrous budget
shortfalls" and the unemployment rate is projected to stay in
double-digit territory through the end of the year. And, they say,
lawmakers should try to learn from the response to the 2008-2009
recession:

"Insufficiently bold congressional policy responses to
the Great Recession unnecessarily prolonged suffering and stunted
economic growth. Congress should not make this mistake again. …
Congress should address this risk, and the already occurring
economic damage, by passing, as soon as possible, a multifaceted
relief bill of a magnitude commensurate with the challenges our
economy faces."

Conservatives say it’s time to stop spending on
coronavirus relief: The economists’ statement comes on the same
day that a group of 20 conservative leaders, some with close ties
to the White House, urged President Trump and Senate Majority
Leader Mitch McConnell to stop deficit spending on coronavirus
relief.

"Government spending – and policies such as paying
millions of workers more money to stay unemployed than to go back
to work, and paying states more money to enable them to stay shut
down – is inhibiting the fast recovery we want in jobs and incomes,
not stimulating it," the conservatives wrote in a letter. "In
short, runaway government spending is the new virus afflicting out
[sic] economy."

The conservatives, including economists Stephen Moore and
Arthur Laffer, anti-tax activist Grover Norquist and Tea Party
Patriots co-founder Jenny Beth Martin, write that a repeal of the
payroll tax would be "the best way to supercharge the economy."
President Trump has pushed for a payroll tax holiday, though the
idea has met with resistance from lawmakers in both
parties.

Congress and the administration have provided
$4 trillion in emergency coronavirus relief so
far. Both Trump and McConnell have indicated that another round of
pandemic legislation is likely, though lawmakers are still debating
the proper size and scope of an additional package. White House
trade adviser Peter Navarro told cable news networks in recent days
that Trump wants the next bill to be
"at least $2 trillion." Formal negotiations on the
next bill are expected to begin next month.

Quote of the Day: Powell on the Recovery

"[T]he levels of output and employment remain far
below their pre-pandemic levels, and significant uncertainty
remains about the timing and strength of the recovery. Much of that
economic uncertainty comes from uncertainty about the path of the
disease and the effects of measures to contain it. Until the public
is confident that the disease is contained, a full recovery is
unlikely."

–
Federal Reserve Chair Jerome Powell, in semiannual

testimony before Congress on Tuesday. Powell also
said that the pandemic-driven downturn could widen economic
inequality. "The burden of the downturn has not fallen equally on
all Americans," he said. "Instead, those least able to withstand
the downturn have been affected most."

Coronavirus Spending Will Add $2.4 Trillion to Deficit:
CBO

The four pieces of legislation Congress passed in March and April
to provide relief and stimulus during the coronavirus pandemic will
add about $2.4 trillion to the deficit, the Congressional Budget
Office
said Tuesday.

The CARES Act — which provided $1,200 relief checks for many
adults, enhanced unemployment benefits of $600 a week and billions
in forgivable loans for small businesses, among other things —
accounts for most of the deficit spending, roughly $1.7 trillion.
The recent extension of the small business loan program will add
another $483 billion, CBO said.

Two earlier bills, which focused on assisting health care
providers and funding the medical response and further research,
will increase the deficit by about $200 billion.

Paycheck Protection Program Saved 16 Million
Jobs: Moody’s

The Paycheck Protection Program of loans to small businesses has
safeguarded about 16 million jobs, or about 10% of the pre-pandemic
U.S. labor force, according to a new analysis by Moody’s
Analytics.

Moody’s Analytics economist Bernard Yaros says the
program, which has seen more than $500 billion in forgivable loans
approved to more than 4.5 million businesses, likely fueled the
surprising gains seen in the government’s May labor market report,
potentially contributing between 9.2 million and 10.9 million jobs.
And the PPP gains could continue this month.

"A couple of million more jobs could show up in the
June employment report thanks to residual PPP-induced
rehiring," Yaros said in a statement. "However, as
small businesses that were the first to receive their loans in the
first half of April exhaust their PPP funds by mid-June, as many as
4.5 million jobs that were rehired thanks to PPP could be at risk
of layoffs."

Trump Signs Executive Order on Police Reform, Calls for More
Funding

President Trump signed an
executive order Tuesday to encourage changes in
policing nationwide, including a ban on chokeholds except when an
officer’s life is at risk. The order would also create a national
database of excessive force complaints, and it seeks to use the
allocation of federal grant money to drive police departments to
meet certain credentialing standards regarding use-of-force and
de-escalation. Trump lauded law enforcement at the signing event
and rejected calls to "defund" the police. "In many cases local law
enforcement is underfunded, understaffed and undersupported," he
said.

Trump’s order "will have little immediate impact," The New York
Times
reports, "and does not address calls from
activists and protesters nationwide for broader action and a new
focus on racism."

National Health Spending Plunged 24% in April Compared With
2019

As the coronavirus pandemic spread and much normal activity was
halted, national health spending in April fell by 24.3% compared to
the previous April, according to an
analysis by consulting firm Altarum. Health
spending in April was $2.88 trillion (seasonally adjusted annual
rate), down from $3.57 trillion in March and $3.8 trillion in April
2019.

"While March 2020 exhibited the only previous occurrence in our
historical time series (which goes back to 1989) of a monthly
decline from the previous year, the April reading dwarfs the March
value," the report says.

Spending on hospitals and doctors fell by more than 40%,
reaching the lowest monthly levels in more than a decade. Spending
on dental services, meanwhile, fell by more than 60% year over
year.

The only health care areas to see increased spending were
nursing home care and prescription drugs, which rose 6.3% and 5.1%,
respectively. Altarum’s analysts say that, with the economy
starting to reopen in May, they expect to see the declines in
spending reverse.

HHS Sent $50 Billion to Health Care Companies Accused of Fraud:
Report

The Department of Health and Human Services gave more than $50
billion in loans and grants to health care companies accused of
bilking taxpayers by inflating Medicare or Medicaid expenses,
Bloomberg News reports:
"Companies that settled cases involving overbilling or fraud
-- among them Tenet Healthcare Corp., Universal Health Services
Inc. and Beaumont Health -- received more than $36 billion in
interest-free loans from a U.S. Health and Human Services
Department program to help providers handle cash-flow shortages
caused by the pandemic, according to data compiled by Bloomberg and
Good Jobs First, a watchdog group that has been monitoring federal
relief payments.
"That’s more than one-third of the $100 billion distributed
through the loan program. In addition, companies accused of
wrongdoing got more than $20 billion in grants issued by HHS to
stave off coronavirus-related losses. In most of the cases, there
was no determination of liability."


Read more at Bloomberg.

The $2,315 Coronavirus Test

In April, an otherwise ordinary medical test facility outside of
Dallas, Texas, was charging unusually high prices for coronavirus
tests, with some patients receiving bills of $2,315 for a single
procedure. Many major labs charge about $100 for the same analysis.

While the lab has since said that the pricing — which was
applied to more than 100 tests, with 23 of those being paid in full
— was the result of "human error" and dropped its standard fee to a
still-high $500, Sarah Kliff of The New York Times
says that such shockingly high charges are not
unusual in the U.S. due to one simple factor: the lack of
government regulation in health care pricing.

That lack of regulation produces two outcomes that crop up again
and again in the health care system, Kliff says. The first is that
prices tend to be much higher for all kinds of procedures in the
U.S. than in other wealthy countries. The second is that there is
massive variation in prices between providers. (Kliff cites one
study that found prices in California for a basic appendectomy
ranging from $1,529 to $182,955.)

Currently, the data show considerable variation in prices
for coronavirus tests — though it’s hard to be sure how much is
actually being paid, since much of the payment information is
private. What is clear is that all of the tests are basically the
same, even though some individuals and insurers are paying much
more than others. "There is little evidence that higher prices
correlate with better care," Kliff says. "What’s different about
the more expensive providers is that they’ve set higher prices for
their services."

Poll of the Day: Americans Unhappier Than They’ve Been in
Decades

Americans are unhappier than they have been in almost 50 years,
according to a new
report from the National Opinion Research Center
(NORC) at the University of Chicago.

Using public opinion data from the General Social Survey, the
report finds that only 14% of American adults describe themselves
as being very happy, an all-time low for the survey since the
question was first asked in 1972. (The number of Americans who say
they are "pretty happy," the orange line in the chart below, has
taken a sharp turn higher.)

At the same time, an all-time high of 80% report that they are
satisfied with their family’s financial situation. Yet optimism for
the future also reached a decades-long low, with 43% of Americans
believing that the children will grow up to enjoy a better standard
of living than they do, down sharply from 57% in 2018.

Interviews for the study were conducted in May. The survey
was completed by 2,279 adults and has a margin of error of 2.9
percentage points.

News

Views and Analysis