Dems Ready to Go It Alone on Massive Covid Relief Bill

By Michael Rainey

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
Roney (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.

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