A New Attempt to Kickstart Stimulus Talks

By Yuval Rosenberg

Pelosi Says House Must Stay in Session Until Covid Relief Deal
Reached; Moderates Try to Kickstart Talks

Speaker Nancy Pelosi (D-CA) said Tuesday that the House, just
back in session after its summer recess, won’t leave for the
November elections until a deal is reached on another coronavirus
relief package.

“We have to stay here until we have a bill,” Pelosi reportedly
told House Democrats on a conference call. The House is scheduled
to adjourn on October 2, but Pelosi faces pressure from
rank-and-file members reluctant to head home for the final stretch
of the campaign season without being able to show action on the
pandemic and its economic effects.

But “stay here” doesn’t necessarily mean “stay here.” Democratic
Majority Leader Steny Hoyer of Maryland
reportedly said Tuesday that lawmakers would be on
stand-by next month to vote on any deal and wouldn’t be required to
stay in town.

Some lawmakers press for action: The Problem Solvers
Caucus, a bipartisan group of some 50 House members, put out its
own
framework for a Covid relief deal Tuesday, saying
it was aiming to get negotiators talking again. The roughly $1.5
trillion package — it’s ultimate price tag could vary depending on
the course of the pandemic — calls for another round of stimulus
checks; additional unemployment aid; $500 billion for state and
local governments; $400 billion for election assistance; $290
billion for small business loans; $145 billion for schools and
child care; and $100 billion in funding for virus testing and other
health care.

The Problem Solvers' plan would set supplemental federal
unemployment payments at $450 a week for eight weeks and then up to
$600 a week, but with those payments not to exceed the person’s
previous wage, addressing Republican concerns that jobless people
were making more in benefits than they were at work.

The lawmakers say their framework is meant to provide enough
support for six months, with the state and local funding lasting
for a full year.

The plan reportedly developed over six weeks with the knowledge
of the White House and bipartisan congressional leadership, but it
appears unlikely to gain much traction. The Washington Post reports
that the proposal “is likely to meet sharp resistance in the
Senate, where Republicans are expected to balk at the price tag,”
which is much higher than the roughly $650 billion the GOP provided
in its last bill.

Eight Democratic House committee chairs quickly rejected the
proposal, too. “When it comes to bolstering the public health
system, supporting state and local governments, and assisting
struggling families, the Problem Solvers’ proposal leaves too many
needs unmet,” the Democrats said in a
statement. “With the general election just 49 days
away and the Postal Service sabotaged by the Trump administration,
their proposal also abandons our responsibility to protect the life
of our democracy.”

What’s next: There are still no signs of renewed talks
between congressional Democrats and the White House. Pelosi
continues to press for a roughly $2.2 trillion package and to
insist that a “skinny” bill like those proposed by Republicans
would be insufficient. And Jared Kushner, senior adviser and
son-in-law to President Trump, told CNBC on Tuesday that a deal may
have to wait until after the election.

“At the same time,” The Washington Post’s Erica Werner

reports, “if it becomes clear in coming days that
no comprehensive deal is in reach, Pelosi may start holding votes
on individual issues such as funding for coronavirus testing, to
show House Democrats trying to address the problem.”

An Economic ‘Wasteland’ Without More Stimulus?

Economists worry that the U.S. economic rebound will weaken
without a new round of stimulus, creating more long-lasting damage,
fueling further inequality and weighing on the global economy,
too.

“What they are doing now, or rather what they are not doing now,
is raising the risk that large bits of the economy will be a
wasteland by the time a [Covid-19] vaccine comes through,” Ian
Shepherdson, chief economist at Pantheon Macroeconomics, tells the

Financial Times. “That doesn’t mean it can never recover
but it does mean that the recovery will be longer and harder and
more painful and there’ll be a lot more misery in the meantime. It
seems very counterproductive to me.”

But getting another relief deal is about more than just pumping
money into the economy. As Axios’s Caitlin Owens
writes, continued gridlock in Washington will make
it harder to get the virus under control.

“The U.S. containment strategy, as flawed as it is,
depends on people who may have the virus getting tested and staying
home until it's safe to come into contact with others again,” Owens
writes. “But staying home is harder for people living
paycheck-to-paycheck, and for those who don't have homes.”

Brown University's Ashish Jha tells Owens: “No doubt about it,
the failure to pass this will make it much harder to contain the
virus in the fall, and that means we will see larger outbreaks,
more people getting sick, more schools closed and more economic
devastation across the nation."

Why Joe Biden Wants to Go Big on a Stimulus Package

Some Democratic economic policy wonks have long believed they
made a serious mistake during the Great Recession: The $787 billion
stimulus package President Barack Obama signed into law in 2009
just wasn’t big enough relative to the size of the crisis at hand.
According to Politico’s Ben White, former Vice President Joe Biden
is determined not to make the same mistake twice.

“Should Biden take the White House and get a Democratic Senate,”
White
said Tuesday, “it will likely all translate into
an immediate push to roll back President Donald Trump’s corporate
tax cuts, slap significantly higher taxes on wealthy Americans and
push through a multitrillion-dollar stimulus spending package aimed
at fighting the Covid-19 virus, sending cash directly into people’s
pockets, renewing enhanced unemployment benefits, rescuing
struggling state budgets and investing in new infrastructure
projects.”

One reason for Biden’s change in perspective, White says, is the
influence of a team of economic advisers — including Sen. Elizabeth
Warren (D-MA) and economists Heather Boushey, Raj Chetty and Jared
Bernstein — who come from the left wing of the Democratic Party,
and who are less concerned with “appeasing budget hawks and Wall
Street bankers who tend to worry about soaring deficits.”

Additionally, some of the key centrist advisers from the Obama
administration Biden has been consulting, such as former Treasury
Secretary Larry Summers, have moved left in recent years, adding
weight to more progressive policy proposals.

A major concern for the Biden team is the possibility that,
without substantial further stimulus, the economy will get stuck in
low gear and perform below potential for years. Another worry is
that without more aid, state and local governments will serve as a
drag, much as they did after the Great Recession, as they maintain
austerity budgets that hinder the recovery.

How big is big? Biden hasn’t released a detailed proposal
for a stimulus package, saying much depends on what kind of deal
Congress can make in the coming weeks and what happens with the
economy between now and January. But he said earlier this year that
the stimulus should be “a hell of a lot bigger” than the $2
trillion Cares Act Congress passed in March. Separately, Biden has
proposed more than $3 trillion in new spending on a variety of
programs, including clean energy, infrastructure and education, and
those could conceivably be folded into an eventual stimulus
package.

Debt less of a concern. The Obama administration’s
undersized stimulus package was driven in part by concerns about
running up the national debt, and by fears about sparking a
political war with conservatives over spending levels. But a
growing chorus of debt skeptics has pushed back against those
centrist concerns, and they appear to have Biden’s ear, at least at
the moment.

“The idea that the U.S. faces any major risk from our debt
burden is simply wrong,” Dean Baker of the progressive Center for
Economic Policy and Research told White. “If for some reason
private investors became more reluctant to hold U.S. debt, the Fed
could simply step in and buy it. If the U.S. is struggling to
recover from this recession, there is no reason to be concerned
about running large deficits.”

More Uninsured Last Year, Even as Poverty Shrank to Record
Low

Nearly 30 million people lacked health insurance at some point
in 2019, the U.S. Census Bureau
said Tuesday, an increase of about 1 million from
the year before. The number of uninsured increased for the third
year in a row.

“The number of Americans uninsured increased by 2.3
million from 2016 to 2019, after dropping by 20 million in the
years following passage of the Affordable Care Act in 2010,” Larry
Levitt of the Kaiser Family Foundation
tweeted Tuesday. Levitt said the “nicks and cuts
inflicted on the ACA” by the Trump administration are a likely
cause of the increase in the number of uninsured, and cited
“massive cutbacks in outreach, leeway given to states to restrict
their Medicaid programs, and repeal of the individual mandate
penalty.”

The health insurance numbers stand in contrast to
the data on income and poverty also reported by the Census. A
record low share was living in poverty in the U.S. in 2019, the
government
said, with 10.5% of the population in poverty,
down from 11.8% in 2018 — the lowest figure since 1959, when
estimates were first published. Median household income rose to
$68,700, the highest level recorded in the data series, which
stretches back to 1967.

Poll of the Day: Changing Focus in the Election

Back in February, health care was the top issue for voters in
the upcoming presidential election. Seven months later, with a
pandemic killing more than 190,000 people and the unemployment rate
still at alarmingly high levels, the economy and the coronavirus
outbreak are now the top two issues, according to a
new poll from the Kaiser Family Foundation.

There is a strong partisan divide, however, with Republicans far
more focused on the economy and Democrats more concerned about the
coronavirus.

Other interesting data points from the tracking poll: Most
voters don’t expect to see a vaccine before the election, and about
60% are worried that the Food and Drug Administration will rush the
process due to pressure from the Trump administration.

Send your tips and feedback to yrosenberg@thefiscaltimes.com.
Follow us on Twitter:
@yuvalrosenberg,
@mdrainey and
@TheFiscalTimes. And please tell your
friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis