Biden Calls for Urgent Action on $900B Stimulus Deal

By Yuval Rosenberg

Biden Warns of ‘Very Bleak’ Future Without Stimulus

President-elect Joe Biden on Friday called for “urgent
action” on a coronavirus-relief package, indicating that lawmakers
should pass a bipartisan compromise package as a “down payment”
toward additional coronavirus aid after he takes office.

“Americans need help and they need it now,” the
president-elect said Friday. “And they need more to come early next
year. But I must tell you I am encouraged by the bipartisan efforts
in the Senate around a $900 billion package for relief.”

Biden warned that without quick action to provide relief
as Covid cases surge across the country, “the future will be very
bleak.”

Biden made clear that he would seek to work with
Republicans to provide more economic stimulus next year. “Congress
and President Trump must get a deal done for the American people,
but any package passed in the lame duck session is not enough. It’s
just the start,” he said. “Congress will need to act again in
January.”

Biden said he was confident that he’ll be able to get
Republicans to go along with an additional Covid package next year
because the need will be so dire.

He also touched on the deficit concerns that have been
raised by some Republicans in arguing against additional stimulus.
“By acting now, even with deficit financing, we can add to growth
in the near future,” he said. “In fact, economic research shows
that with conditions like today’s crisis — especially with such low
interest rates — not taking the actions I’m proposing, will hurt
the economy, scar the workforce, reduce growth, and add to the
national debt.”

Pelosi says “there is momentum” toward a
deal: House Speaker Nancy Pelosi on Friday said
that momentum is building on Capitol Hill toward a coronavirus
relief deal and defended her past handling of negotiations,
including her pushback on a White House offer of about $1.8
trillion, larger than the deal now being discussed.

At her weekly press conference, Pelosi (D-CA) said she had
spoken with Senate Majority Leader Mitch McConnell (R-KY) by phone
on Thursday and said talks were making progress after a bipartisan
group of lawmakers earlier this week proposed a $908 billion
compromise deal.

“There is momentum,” Pelosi told reporters. “And so I am
pleased that the tone of our conversations is one that is
indicative of the decision to get the job done.”

Aid to state and local governments, which many Republicans
oppose, and a “liability shield” protecting businesses and
hospitals from coronavirus-related lawsuits, which Democrats have
rejected, remain contentious issues. Negotiators have agreed
that aid to state and local governments should be tied to a
jurisdiction’s loss of revenue, not its population, The Washington
Post
reports.

‘Not a Mistake’: Pelosi said her
handling of earlier talks was
“not a mistake” and explained that she was now
willing to accept a smaller deal — the sort she had long rejected —
because the election of Joe Biden as president and the development
of promising vaccine candidates had changed the dynamic, creating
the promise that an additional Covid-related rescue package could
be done next year.

“With a Democratic president committed to a scientific
solution for this, with the idea that we will have a vaccine, it’s
a complete game-changer from then,” she said.

After months of stalemate, Pelosi said that Congress would
not leave for the upcoming holidays without reaching a deal. “We
must get it done before we leave,” she said. “We cannot leave
without it.”

Sanders comes out against $908 billion
package: As lawmakers scramble to reach a deal,
the latest coronavirus relief plan still faces plenty of hurdles.
Sen Bernie Sanders (I-VT) on Friday said he would vote against the
compromise package and would require significant revisions before
he could support it.

The framework being considered doesn’t include another
round of $1,200 direct payments. “Tens of millions of Americans
living in desperation today would receive absolutely no financial
help from this proposal. That is not acceptable,” Sanders said in a
statement.

Some conservative lawmakers have also come out against the
proposed package. “There’s widespread opposition among
conservatives, particularly among our activists who are sick of
Congress spending money we don’t have,” Jason Pye, vice president
for legislative affairs for FreedomWorks, a conservative advocacy
group, according to The Washington Post.

What’s next: Negotiators hope to reach
a deal and release the legislative text by Monday.
Pelosi and McConnell hope to tie the coronavirus-relief
legislation to a broader, $1.4 trillion omnibus spending package,
but time is running short. “The sheer number of outstanding items
at such a late stage makes it increasingly likely that
congressional negotiators will require a brief stopgap spending
bill to complete their work before leaving for the holidays,”
Politico
reports. “Such a decision could be made early next
week if lawmakers fail to make significant progress over the
weekend.”

Economy Flashing Yellow Lights as Job Growth Slows

The U.S. economy added a disappointing 245,000 jobs in
November, the Labor Department announced
Friday, the weakest job growth since the economy started recovering
in May from the first wave of coronavirus shutdowns.

Job growth has declined for five months in a row, raising
alarms about the waning strength of the recovery and the fate of
millions of workers who have lost their jobs in an economy still
battered by the Covid-19 pandemic. The U.S. remains about 10
million jobs short of its peak in February, and 11 million shy of
the trend line in place in the pre-Covid economy.

The unemployment rate fell by two-tenths of a percentage
point to 6.7% in November, but the decline was driven largely by
more than half a million workers leaving the labor force. According
to an
analysis by Jason Furman, who served as chair of
the Council of Economic Advisers in the Obama administration, a
more realistic unemployment measure that takes into account those
who have dropped out puts the jobless rate at 8.5%.

A worrying trend: The number of people
experiencing long-term unemployment has been rising sharply. “The
jobs report offers clues that what was once temporary unemployment
is becoming more permanent — in ways that, if unchecked, could do
long-term damage to millions of families and to the economic
potential of the United States,” Neil Irwin of The New York Times

wrote.

Since September, the number of people jobless for more
than 27 weeks has risen by 1.5 million, and some economists fear
that the job market will get worse before it gets better. “The
recovery is not insulated from the effects of the pandemic,” Daniel
Zhao, an economist at Glassdoor,
told the Associated Press. “This is the calm
before the storm. We face a long and difficult winter
ahead.”

Biden calls for more stimulus:
President-elect Joe Biden said the report underscores the
need for Congress to provide further stimulus. “This is a grim jobs
report. It shows an economy that is stalling. It confirms we remain
in the midst of one of the worst economic and jobs crises in modern
history,” Biden said in a statement.

Senate Democratic leader Chuck Schumer also cited the
latest employment numbers as he pushed for a deal. “This jobs
report is blaring warning that a double-dip recession is looming
and must be a wakeup call for anyone who is standing in the way of
true bipartisan emergency relief,” he said in a
statement.

Rep. Tom Cole, a Republican from Oklahoma, agreed on the
implications of the report: “I think today’s jobs numbers really
help” the effort to pass another round of stimulus. “We may
disagree about the specifics but there is no doubt the economy
needs help.”

The conservative U.S. Chamber of Commerce said the
“slumping economy” makes it clear that lawmakers need to reach a
deal quickly. “The fire alarm is sounding on our economy and the
only question is whether Congress will respond,” a Chamber
representative said in a
statement. “The time for Congress to move a
bipartisan bill is now. The U.S. Chamber strongly urges lawmakers
to support bipartisan efforts to enact pandemic relief
...”

Blue and Red States Face Deep Budget Cuts

The bipartisan relief proposal being discussed on Capitol Hill
calls for providing $160 billion in aid to state, local and tribal
governments. The New York Times’ Patricia Cohen writes that,
contrary to some GOP objections to a “blue-state bailout,” it is
not just Democratic-led states that are in dire need of federal
help in dealing with the coronavirus pandemic and the resulting
budget crises that threaten to force deep cuts:

“Governors, mayors and county executives
have pleaded for federal aid before the end of the
year. Congressional Republicans have scorned such assistance, with
the Senate majority leader, Mitch McConnell of Kentucky, calling it
a ‘blue-state
bailout.’
“But it turns out this budget crisis is colorblind. Six of the
seven states that are expected to suffer the biggest revenue
declines over the next two years are red — states led by Republican
governors and won by President Trump this year, according to a
report from Moody’s Analytics.
“Those on the front lines agree. ‘I don’t think it’s a
red-state, blue-state issue,’ said Brian Sigritz, director of state
fiscal studies at the National Association of State Budget
Officers. …
“In reality, the degree of financial distress turns less on
which party controls a statehouse or a city hall than on the number
of Covid-19 cases, the kinds of businesses undergirding a state’s
economy, and its tax structure.”


Read more at The New York Times.

Time to Stop Worrying About the Deficit?

We told you
earlier this week that the debate about the
national debt and deficits has heated up again and is bound to
color policy discussions for the incoming Biden administration. The
get a preview of the coming clashes, tune into Bloomberg TV tonight
at 7 p.m. ET for an actual debate on the issue produced by
Intelligence Squared U.S. The motion being debated: "Stop Worrying
About National Deficits."

Arguing for the motion are Stephanie Kelton, an economics
professor at Stony Brook University and a leading proponent of
Modern Monetary Theory, which holds that deficit fears needlessly
prevent fiscal policy from responding to economic needs. She’s
joined by James Galbraith, an economist at the University of Texas
at Austin and former executive director of the Joint Economic
Committee in Congress.

Arguing against them are Todd Buchholz, director of
economic policy under President George H. W. Bush, and Otmar
Issing, former chief economist of the European Central
Bank.

Below are selected highlights from their arguments. Video
of the debate will be available Monday at https://intelligencesquaredus.org/.

Kelton: “When the government eliminates deficits,
balances its budget or moves it into surplus, then it's operating
its budget like a vacuum, it's hoovering those dollars away from
the rest of us. And that reduces our wealth. So think about whether
you want the government to be running deficits which produce your
surpluses, or whether you'd prefer them to hoover away some of the
financial assets that you hold. …

“No one is arguing for unbridled deficit spending, out of
control, never-ending larger and larger deficits. Deficits can be
too big. And inflation can be evidence of a deficit that's gotten
too big. But deficits can also be too small, and evidence of a
deficit that is too small is unemployment. That's what we have
today. And that's what Dr. Galbraith and I would like to convince
you of. Let's worry about the unemployment and the death and the
depressed economy, not the government deficit.”

Galbraith: “What we did in 2020 when
we were hit with a pandemic was utterly remarkable. In the United
States, we poured over $2 trillion into the economy, over 10% of
our national income, to support people's income, to replace their
lost wages, to keep them in their homes. We're running out of money
now. We need to put some more in. It's as simple as that. To say we
can't do it for some reason that wasn't apparent seven months ago
is a sad proposition which has no foundation in any reality that
we're currently facing.”

Buchholz: “No one believes during a
pandemic that we should cut spending, or be concerned about the
deficit. That is not today's discussion. Having said that, our
concern is that Modern Monetary Theory says that you should engage
in reckless grand spending even in good times, and it interests
populist politicians with far too much power to do ill.
…

“We are confronting a situation where the next 10 years,
Social Security and Medicare in the U.S. — those trust funds will
go dry. And there will be automatic spending cuts if nothing is
done. Now our colleagues here say, well, we can keep spending until
inflation shows up. I would like to ask why is it our distinguished
colleagues have so much trust in politicians to do what politicians
hate to do, that is, cut spending and raise taxes when inflation
comes?”

Issing: “A renowned German economist
once remarked, expecting public politicians to resist the
temptation of free public spending is like expecting a dog to sit
disciplined before a box of sausages. … The proposal to ignore
public deficits and debt is pure populism, promising a land of milk
and honey, the surest way to undermine and ultimately destroy the
value of currencies.”

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