Biden Eyes Massive Stimulus Plan

By Michael Rainey

Biden Eyes Trillion-Dollar Stimulus as
Negotiations Stall

September is just around the corner, but the impending arrival
of fall has done little to inspire lawmakers and the Trump
administration to come to an agreement on the next coronavirus
stimulus bill.

White House Chief of Staff Mark Meadows said late last week that
the Trump administration would support a $1.3 trillion bill, moving
up from the $1 trillion he has cited in the past – and higher than
some Senate Republicans have said they would support.

Saying she was willing to meet Republicans halfway, House
Speaker Nancy Pelosi indicated that she would reduce the size of
her proposed stimulus bill from $3.4 trillion to $2.2 trillion. But
that still leaves an enormous gap between the two parties.

On “Meet the Press” Sunday, Meadows sounded like he had reached
his limit,
accusing Pelosi of being “willing to turn down
$1.3 trillion of help that goes to the American people because she
would rather them have nothing than to give way” on her offer.

‘Bad blood’ not making things easier. Part of the
problem, The Hill’s Mike Lillis and Scott Wong say, is the
fundamental lack of respect between Meadows, a tea part insurgent
who has embraced President Trump, and Pelosi, the ultimate
Washington insider. “As the parties scramble for an elusive deal on
another round of coronavirus relief, mistrust and bad blood between
two of the principal negotiators ... have snarled the talks and
complicated the path to a timely agreement,” they
wrote Monday.

While some of the sniping between the two leaders could be
dismissed as political maneuvering that aims to motivate voters
ahead of the election, there are fundamental political and
philosophical issues at stake. The dispute highlights “the stark
ideological differences between the sides when it comes to the
government’s role in responding to the public health and economic
crises sparked by the coronavirus pandemic — differences all but
epitomized in the figures of Pelosi and Meadows,” Lillis and Wong
say.

Biden mulls his own coronavirus relief package. If
negotiators are unable to move beyond the current stalemate,
Democratic presidential nominee Joe Biden may need to move quickly
on a coronavirus relief package in January, should he win the
election, Axios
reported Monday.

Biden’s economic advisers are “are growing increasingly worried
that the economy is deteriorating by the day,” Axios’ Hans Nichols
and Felix Salmon said, and are warning that “problems can compound
and cascade — including business bankruptcies, supply chain
disruptions, mass evictions, and huge shortfalls in state and local
budgets.”

Jake Sullivan, a senior policy adviser to Biden, told Axios
that, “We have always contemplated the need for additional
stimulus. We will confront the situation we find in January.”

While Biden’s team hasn’t discussed the plan publicly, advisers
say the stimulus package would be in the $1 trillion to $2 trillion
range, depending on what Congress is able to do before January. And
that’s completely separate from Biden’s previously announced plan
to spend roughly $3.5 trillion on clean energy, infrastructure,
education and a host of other initiatives designed to revitalize
the economy and combat inequality.

One thing motivating Biden’s advisers, many of whom served in
the Obama administration, is the perceived failure of the fiscal
response to the Great Recession. “They feel that the 2009 stimulus
package — the $787 billion American Recovery and Reinvestment Act —
was woefully inadequate,” Nichols and Salmon said. “And they're
determined not to make the same mistake twice.”

Republicans have also said that they would push more relief
spending in January, should Trump win the election. “Trump's call
for a $2 trillion infrastructure bill back in March would be a
starting point for a 2021 stimulus,” Nichols and Salmon said.

Quote of the Day

“If people want chaos, and I think there’s some people who do
— I’m not ascribing that point of view to anyone. I just think
there are some people who are motivated by chaos. They think it
helps them politically. Then there’s nothing we can put together to
make them happy.”

-- Sen. John Kennedy (R-LA),
commenting on the possibility that Congress will
seek to combine a coronavirus relief bill with a funding package
for the 2021 fiscal year, which begins October 1. Lawmakers are
expected to pass a continuing resolution to keep the government
funded in the new fiscal year, and stimulus money may become an
issue as the legislation is negotiated.

Trump’s Payroll Tax Deferral Gets
Rolling

The IRS issued guidance late Friday that provides details on
President Trump’s executive action to allow employers to stop
collecting Social Security taxes for employees starting September 1
through the end of the year.

According to the guidance,
employers who choose to participate in the program will stop
collecting the 6.2% payroll tax that is the employee’s share of
Social Security taxes for the next four months for workers who earn
up to $104,000 per year. The employers will then be required to
collect twice as much from January to April next year.

According to Richard Rubin of The Wall Street Journal, a worker
making $75,000 a year would save about $1,550 by December 31 – but
then would owe the same amount in 2021.

“The government’s action doesn’t actually change the underlying
taxes, because only Congress can do that,” Rubin
said. “Employees would still owe the taxes
eventually.

Many businesses have expressed their doubts about the plan,

Federal workers drafted into the program. One employer
that will participate is the government. “The federal government
will implement an across-the-board payroll tax deferral by all
federal payroll providers, so all federal employees who meet the
income threshold will see savings,” a senior administration
official told
Federal News Network Monday. The deferral is
expected to begin with the second paycheck of September, and will
apply to those with gross Social Security wages of less than $4,000
per pay period.

Unions representing federal workers spoke out against the plan.
“Either way, the employee loses,” said Randy Erwin, president of
the National Federation of Federal Employees. “If the tax deferment
becomes permanent, and provided it is legal, the employee could get
a lower payout in retirement. If the deferment is temporary, the
employee risks getting a huge tax bill plus interest and penalties
early next year.”

Rep. Don Beyer (D-VA), whose district includes thousands of
federal workers, also criticized the move. “The Trump
administration’s plan to initiate payroll tax deferrals for civil
servants treats the federal workforce as a guinea pig for a bad
policy that businesses already rejected as ‘unworkable,’” he said,
referring to a statement by the U.S. Chamber of Commerce. “This
payroll tax deferral does not really put money in workers’ pockets,
it simply sets up the members of the federal workforce who can
least afford it for a big tax bill that many will not expect.”

Op-Ed of the Day: Once Again, Infrastructure

Real interest rates are negative, which means the federal
government is essentially getting paid to borrow money right now,
once inflation is taken into account. Writing at Bloomberg Monday,
Wall Street analyst Paul Podolsky argues that short of widespread
social chaos or a balance of payments crisis, the only thing that
could push real interest rates back above zero is massive public
investment in infrastructure. Doing so would kill two birds with
one stone by making much-needed investments in public goods while
restoring interest rates to a more normal range.

While both Republicans and Democrats have talked
enthusiastically about infrastructure investment, the problem –
aside from their notable inability to get anything done – is that
their proposals in the range of $1 trillion to $2 trillion are too
small. “To boost growth above its economic potential of about 1.5%
a year and match estimates of what is needed to be spent on
infrastructure, an investment of around $4 trillion, or close to
20% of gross domestic product, is warranted,” Podolsky says.


Read Podolsky’s argument here.

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