Senators Float $908 Billion Stimulus Compromise

By Yuval Rosenberg

Centrist Senators Float $908 Billion Stimulus Deal

In an effort to break the stalemate over the next coronavirus
relief bill, a bipartisan group of lawmakers on Tuesday released
the outline of an emergency spending package totaling $908
billion.

Talks between Democratic and Republican leaders have gone
nowhere for months, with House Speaker Nancy Pelosi (D-CA) calling
for a relief bill worth upwards of $2.2 trillion, while Republican
lawmakers have shown little interest in any package exceeding $500
billion.

Led by Sens. Susan Collins (R-ME) and Joe Manchin (D-WV), the
group of centrists is trying to kickstart negotiations at a time
when Covid hospitalizations are soaring and economists are growing
increasingly concerned about another severe slowdown this
winter.

"It’s inexcusable for us to leave town and not have an
agreement," Manchin said at a press conference. "Our action to
provide emergency relief is needed now more than ever before. The
people need to know we are not going to leave until we get
something accomplished."

Other supporters of the new proposal include Republican Sens.
Lisa Murkowski (AK), Mitt Romney (UT) and Bill Cassidy (LA), as
well as Democrats Mark Warner (VA), Jeanne Shaheen (NH) and
independent Angus King (ME). Some members of the Problem Solvers
Caucus in the House, which released a $1.5 trillion stimulus plan
in September, have also been involved, including Reps. Josh
Gottheimer (D-NJ) Tom Reed (R-NY).

What’s in the plan: Warner described the plan as an
"interim package" designed to provide financial support until
President-elect Joe Biden takes office in January. Biden echoed
that idea Monday, saying, "Any package passed in lame duck session
is at best just a start."

Although the final details have not yet been agreed upon, a
draft of the plan shows that it would provide $288 billion for
small businesses; $160 billion for state and local governments; and
$180 billion for unemployment aid, including a $300 per week
supplemental benefit through March.

It would also include short-term liability protections
from coronavirus litigation, to protect businesses while states
draw up their own rules. It would not, however, provide another
round of $1,200 checks for individuals.

Where the money comes from: Romney said the plan
involves $348 billion in new money, with the rest coming from
unspent funds provided by the Cares Act in March.

"Now, I happen to be a deficit hawk," Romney said. "I
don’t like borrowing money, I don’t like spending money we don’t
have. But the time to borrow money, maybe the only time to borrow
money, is when there’s a crisis." Referring to an earlier
coronavirus proposal supported by Treasury Secretary Steven
Mnuchin, Romey added, "This is not a $1.8 trillion stimulus bill.
This is a relief measure -- half that amount."

Steep hill to climb: The plan faces critics on all
sides, and The Washington Post’s Jeff Stein
reports that congressional aides have expressed
doubts that it will go anywhere. There is some hope, however, that
parts of the proposal could be incorporated into the government
funding bill that must pass by December 11 — which could provide
the only realistic chance of providing Covid relief funds before
Biden takes office. Alternatively, the proposal could provide a
starting point for negotiations in the next Congress.

In any event, the bill faces the basic problem of coming from a
small group of centrists, who have been far from the center of
power in recent years. As Politico’s Jake Sherman and Anna Palmer

put it Tuesday, "Congress is run by the
leadership, and most every deal comes … from the leadership. At
best, this is a guideline for what a chunk of the Senate is willing
to accept. But view this as a Senate version of the Problem Solvers
Caucus. And that went nowhere."

Pelosi and Mnuchin speak: Pelosi and Mnuchin spoke by
telephone Tuesday for the first

time since October. They reportedly discussed coronavirus relief
and the government funding bill, with Mnuchin saying that the White
House wants to avoid a shutdown and would prefer to pass a full
appropriations bill rather than another short-term continuing
resolution.

After the call, Pelosi released a brief statement
citing progress in the funding talks while calling for action on
the coronavirus relief bill, saying that "[a]dditional COVID relief
is long overdue and must be passed in this lame duck session."

McConnell circulates new plan: Saying "[w]e just don’t
have time to waste time. We have a couple of weeks left here,"
Senate Majority Leader Mitch McConnell (R-KY) reportedly
circulated a coronavirus relief plan Tuesday that is considerably
smaller than the bipartisan proposal released earlier in the day —
in effect rejecting the centrist effort while defining what he is
willing to accept in a "targeted relief bill."

McConnell said he expects relief funds to be included in
the government funding bill. His specific proposal is unlikely to
gain bipartisan support, however, since it lacks funds for state
and local governments and provides less money for the unemployed,
among other non-starters for Democrats.

The Next Great Debt Debate Is
Here

Debates about the national debt and federal budget deficit
dominated political and policy clashes throughout the Obama
administration, but largely disappeared during President Trump’s
time in the White House, even as the debt held by the public surged
from $14.4 trillion on the day Trump was sworn in to more than
$21.2 trillion now.

As President-elect Joe Biden prepares to take office and
economic fears rise in conjunction with a surge in coronavirus
cases, those debates are back — or, at the very least, GOP deficit
warnings are. Following the passage of the more than $2 trillion
coronavirus response package in March, Republicans have renewed
their admonitions about the growing debt and resisted the larger
additional stimulus Democrats have sought.

As The Washington Post’s David J. Lynch
notes:

"Sen. Lindsey Graham (R-S.C.), slated to chair the Senate
Budget Committee if Republicans maintain control of the upper
chamber, told reporters after the Nov. 3 election that he wants to
‘finally begin to address the debt.’
Likewise, Sen. John Thune (S.D.), the No. 2 Senate Republican,
said he expects to focus next year on curbing spending on
entitlement programs, adding: ‘I think that’s kind of getting back
to our DNA. ... I think spending, entitlement reform, growth and
the economy are all things that we’re going to have to be focused
on.’"

Progressive pushback: Some on the left, meanwhile, say
that the GOP’s renewed deficit concerns are a hypocritical, if
entirely predictable, way to resurrect the obstructionist playbook
used during the Obama years, arguing that one-time deficit hawks
were perfectly willing to drive up the debt via their 2017 tax cuts
— and that past predictions that rising debt would lead to soaring
interest rates and rampant inflation not only proved wrong but also
hampered the recovery from the Great Recession.

President-elect Joe Biden, while he has in the past urged fiscal
restraint, signaled this week via his choice of top advisers that
his top economic priority will be to
spend as needed to address the pandemic and revive
the labor market and economy. For example, Janet Yellen, the former
Federal Reserve chair who is Biden’s nominee for Treasury
secretary, has warned in the past that U.S. debt is unsustainable —
but has been a vocal proponent of additional coronavirus relief
spending. "It’s an American tragedy, and it’s essential that we
move with urgency," she
said Tuesday. "Inaction will produce a
self-reinforcing downturn causing yet more devastation."

As New York Times columnist Paul Krugman writes approvingly in
his email newsletter, Biden’s picks "are, as a group, a bevy of
deficit doves." Mike Konczal of the liberal Roosevelt Institute
(also approvingly) describes
Biden’s choices as "All people who understand how important
executing the recovery and getting to full employment will be.
They’ll also have strong antibodies against cynical debt hysteria
and conservative boilerplate."

A shift in economic thought: "The Biden team’s push for
government borrowing to fill the pandemic-sized hole in the economy
also reflects a broader shift in some leading economists’ view of
public debt," the Post’s Lynch writes. "By cutting interest rates
to near zero — and all but exhausting its conventional tool kit —
the Federal Reserve has made such borrowing more attractive and
left the nation’s fiscal authorities in Congress with a greater
role in propping up the economy, they say."

Economists have by and large warned that a failure by the
federal government to provide additional coronavirus relief could
result in a slower and more painful recovery. "You’re going to get
the recovery starting in April, May, whether or not we get this
package," economist Adam Posen, head of the Peterson Institute for
International Economics, told the Post. "Whether we get stimulus in
December or January is about how much human suffering there is
between now and then."

Furman and Summers call for a "revolution" in fiscal
policymaking: Democratic economists Jason Furman, who chaired
the Council of Economic Advisers under President Obama, and
Lawrence Summers, who was Treasury secretary under President
Clinton and head of the National Economic Council under Obama,
argue in a new paper released Tuesday that persistently low
interest rates call for a "revolution" in thinking about the
dangers of debt and deficits.

They argue that low rates have made debt more manageable and
that past concerns about rising government debt "crowding out"
private investment "have much less force" in the current
environment. Fiscal policy should thus be oriented toward new
goals: "As a new guidepost, we propose that fiscal policy focus on
supporting economic growth while preventing real debt service from
being projected to rise quickly or to rise above 2 percent of GDP
over the forthcoming decade."

They do note some longer-term worries, though: "While current
projections do raise concerns over the fiscal situation beyond 2030
we note that that there is enormous uncertainty and that much of
the issue would be addressed if necessary reforms internal to
Social Security and Medicare were undertaken."

And not everyone is convinced that fiscal policy can ignore the
long-term dynamics of debt. In response to the Post piece Tuesday,
the Committee for a Responsible Budget, which promotes fiscal
discipline, tweeted,
"We must borrow now to address the current crisis, but we will need
to address the long-term national debt in a reasonable way after
the economy recovers."

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