Dems Ready to Go It Alone on Massive Covid Relief Bill

Dems Ready to Go It Alone on Massive Covid Relief Bill

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Plus - 8 million more in poverty
Monday, January 25, 2021

Democrats Ready to Go It Alone on Covid Relief Bill

Democrats are moving ahead with a version of President Joe Biden’s $1.9 trillion relief and stimulus package that could pass without Republican support. Initial votes in the House and the Senate could occur as early as next week, The Washington Post’s Erica Werner and Jeff Stein reported Monday.

White House Press Secretary Jen Psaki said that Biden wants lawmakers to act quickly. “There’s urgency to the American people for this package to move forward, because we are going to hit a cliff” in March, she said. “We’re going to hit a point where we won’t have enough funding for vaccine distribution,” she added.

After emphasizing last week the importance of bipartisan cooperation, Psaki sounded more open to the idea of passing a bill through budget reconciliation, which would allow Democrats to bypass the filibuster and proceed with a simple majority in the Senate. “Reconciliation is a means of getting a bill passed. There are a number of means of getting bills passed. That does not mean, regardless of how the bill is passed, that Democrats and Republicans cannot both vote for it,” Psaki said.

Senate Majority Leader Chuck Schumer (D-NY) said Monday that he hopes to pass another Covid relief bill to meet the March deadline, suggesting that he, too, is on board with using reconciliation. “We’ll try to get that passed in the next month, month and a half,” Schumer reportedly said on a call, referring to Biden’s pandemic aid package. Winning 50 votes in the Senate could be an issue, however, since some moderate Democrats have expressed concerns about Biden’s proposal.

Bipartisan meeting goes nowhere: A bipartisan group of senators spoke with White House National Economic Council Director Brian Deese on Sunday about Biden’s proposal, but reports indicate that the meeting did little to convince the lawmakers to support the package, dealing a blow to the administration’s effort to reach bipartisan consensus on the issue.

The 16 senators on the call, which also included Biden’s coronavirus coordinator Jeff Zients, reportedly expressed support for the administration’s effort to provide more funding for vaccinations, but there was resistance to the idea that households should receive more direct aid. Among other things, the bill would provide an additional direct payment of $1,400 to millions of Americans. Questioning the need for families earning six-figure incomes to receive aid, Sen. Susan Collins (R-ME) said the program should be more targeted.

Senators also questioned the inclusion of a minimum wage hike and billions of dollars for schools in the bill. And there were concerns about money left unspent from previous relief bills. “There are still a lot of unanswered questions, most notably, how did the administration come up with $1.9 trillion dollars required, given that our figures show that there’s still about $1.8 trillion left to be spent,” Collins said. “We hope to get more data documenting the need from them.”

In an interview on CNN’s “State of the Union” Sunday, Sen. Mitt Romney (R-UT), who was on the call with Deese, said he wanted to focus on fighting the coronavirus. “It’s important that we don’t borrow trillions of dollars from the Chinese for things that may not be absolutely necessary,” Romney said.

Back to the drawing board? Collins made it clear that Biden’s proposal is unlikely to gain her support in its current form. “I’m going to suggest that we get together and talk about what we think would be a reasonable package, and one that could garner bipartisan support,” Collins told Politico. “The administration clearly is very eager to move very quickly. And we want to make sure that there is justification, especially since there's so much money remaining from the previous packages.”

It’s not clear, however, if Biden is willing to shrink the bill to gain Republican support. Democrats in Congress appear to have moved beyond the issue, making preparations to proceed without any Republican input or support.

Quote of the Day

“It has gotten harder and harder to break through the partisan gridlock and make progress on substantive policy, and that has contributed to my decision.”

– Sen. Rob Portman, announcing Monday that he will not run for reelection in 2022. The Ohio Republican, who served as budget director for President George W. Bush, is the third GOP senator choosing to retire next year, joining Sens. Pat Toomey (PA) and Richard Burr (NC).

8 Million More in Poverty Since June: Report

More than 8 million people fell into poverty in the U.S. in the second half of 2020, according to a group of economists who say they have developed a new way to provide “near-real-time” estimates using Census data.

In an analysis released last week, the economists — Jeehoon Han of Zhejiang University, Bruce D. Meyer of the University of Chicago, and James X. Sullivan of the University of Notre Dame — said that the poverty rate fell in the first six months of 2020, dropping from 10.8% in January to 9.3% in June, driven lower by the generous unemployment and relief payments provided by the federal government.

But the expiration of those benefits, along with new waves of Covid-related layoffs, have pushed the poverty rate up again:

“Poverty has risen sharply, however, in recent months as some of the benefits that were part of the government relief package have expired. Poverty rose by 2.4 percentage points (after rounding) from 9.3 percent in June to 11.8 percent in December, adding 8.1 million people to the ranks of the poor. Poverty has risen each month since June, even though the unemployment rate has fallen by 40 percent (from 11.1 percent to 6.7 percent) over this period. This disconnect between poverty and unemployment is not surprising given that some government benefits have expired, unemployment insurance benefits are typically only about half of pre-job loss earnings, and five million people have left the labor force in the past year and therefore are not counted as unemployed. Despite the decline early in the pandemic, poverty is now higher than it was at the start of the year.”

Capital Gains Tax Could Raise Trillions: Larry Summers

In a new paper published by the National Bureau of Economic Research, former Treasury Secretary Lawrence Summers and three co-authors argue that, contrary to conventional economic wisdom, capital gains could be taxed far more heavily than they are currently, and doing so would produce a significant revenue windfall.

“The prevailing wisdom among some in the scorekeeping community (e.g., Tax Policy Center, Tax Foundation, Penn Wharton Budget Model) has been that the revenue-maximizing capital gains rate is around 30 percent, such that setting a rate too far above this level could actually reduce the total amount of revenue collected,” Summers and his co-authors write. “This ‘Laffer rate’ is well below both current top marginal tax rates on other income and top rates currently under debate. The rationale for a low Laffer rate is that the static revenue gains expected from a high rate will fail to materialize because the dynamic response of taxpayers dramatically shrinks the tax base.”

The authors argue that the conventional wisdom, which focuses on the ways wealthy investors will simply evade a higher tax, is wrong.

“Overall, we do not think the prevailing assumption of many in the scorekeeping community—that raising rates to top ordinary income levels would raise little revenue—is warranted. A crude calculation illustrates that raising capital gains rates to ordinary income levels could raise $1 trillion more revenue over a decade than other estimates suggest.”

Review the paper here

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