Republicans Make Counteroffer on Covid Relief

Republicans Make Counteroffer on Covid Relief

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Plus - Long recovery ahead for labor market
Monday, February 1, 2021

Republicans Offer $618 Billion Covid Relief Plan

A group of 10 Republican senators released a $618 billion coronavirus relief plan Monday, making a counteroffer to President Joe Biden’s $1.9 trillion American Rescue Plan.

Biden met with the GOP lawmakers — Sens. Susan Collins (ME), Lisa Murkowski (AK), Bill Cassidy (LA), Mitt Romney (UT), Rob Portman (OH), Shelley Moore Capito (WV), Todd Young (IN), Jerry Moran (KS), Mike Rounds (SD) and Thom Tillis (NC) — at the White House late Monday afternoon to discuss the proposal.

Why it matters: Republicans had raised objections to Biden’s plan, but they hadn’t previously offered a proposal of their own in response. Ahead of the meeting, the Republican senators framed their offer as an effort to achieve a bipartisan agreement on the next coronavirus relief bill. "Mr. President, we recognize your calls for unity and want to work in good faith with your Administration to meet the health, economic, and societal challenges of the COVID crisis," the senators said in a joint statement. "In the spirit of bipartisanship and unity, we have developed a COVID-19 relief framework that builds on prior COVID assistance laws, all of which passed with bipartisan support."

But White House Press Secretary Jen Psaki made it clear that while the president was happy to listen to the senators’ ideas, he is still focused on passing his much larger proposed plan. "He’s always open to making this package stronger," she told reporters at a press conference, adding that Biden is more worried about spending too little than spending too much.

Biden emphasized the point before the meeting with a tweet: "Hardworking Americans need help and they need it now," he said. "That’s why I’m calling on Congress to immediately pass my American Rescue Plan that will deliver direct relief, extend unemployment insurance, help folks put food on the table and keep a roof over their heads, and more."

In comments after the meeting, Collins said the senators had a cordial and productive discussion with the president, and the parties agreed to continue to talk. She also expressed confidence that a bipartisan Covid relief package was possible.

What’s in the GOP proposal: The Republican plan is about a third the size of Biden’s and would include:

* Direct relief payments worth as much as $1,000. The payments would begin tapering off at income levels of $40,000 per year for individuals ($80,000 a year for joint filers) and would not go to anyone earning more than $50,000 ($100,000 for couples). Children and adult dependents get $500, and "convicted inmates" are excluded. Total cost: $220 billion.

* $160 billion in pandemic response funding, including $50 billion to expand testing, $35 billion for a provider relief fund, $30 billion for a disaster relief fund and $20 billion for vaccines.

* $300 per week in enhanced unemployment benefits through June 30. Total cost: $132 billion.

* $50 billion for small business aid, including $40 billion for the Paycheck Protection Program.

* $20 billion for K-12 schools.

* $20 billion for childcare.

* $12 billion for nutrition assistance, including $3 billion to extend SNAP benefits through September 30.

What’s not in the GOP proposal: Compared to the Biden plan, the Republican proposal offers less generous relief checks ($1,000 compared to $1,400) that phase out at lower income levels. Unemployment benefits are lower ($300 vs. $400) and expire sooner (June vs. September). And the GOP plan lacks both a provision raising the minimum wage to $15 per hour and, perhaps most importantly, any money for state and local governments, which Biden proposed to fund with $350 billion.

Sen. Portman said Republicans, concerned about the cost of Biden’s plan, wanted to target those most in need. "Let's focus on those who are struggling," he said Sunday on CNN. "We really want to help those who need it the most. And at a time of unprecedented deficits and debts — and a debt, as the percentage of the economy, is as high as it's been in our nation's history since World War II — we need to be sure this is targeted."

Cool reception from Democrats: Sen. Ron Wyden (D-OR), incoming chairman of the Senate Finance Committee, said the GOP proposal is a "non-starter" because of its size. "The package outlined by 10 Senate Republicans is far too small to provide the relief the American people need," he said in a statement.

Senate Majority Leader Chuck Schumer criticized the proposal for missing an essential element: "It doesn't have any state and local money in it," he told the New York Daily News. "Our Republican colleagues, most of them have been very negative, either don’t want to do anything, or want to do something minimal," Schumer said. "President Biden believes, and I agree with him, we need a bold, strong action. Now, we’d like to do that with the Republicans, but if we can’t, we’ll have to go forward on our own using this process, reconciliation."

At least one Republican was critical, as well, raising questions about the GOP effort to reduce the cost of the package. "What we need to understand is that trying to be per se fiscally responsible at this point in time with what we have got going on this country, if we actually throw away some money right now, so what? We have really got to move and get people taken care of," Jim Justice, Republican governor of West Virginia, said on MSNBC.

What’s next: Democrats are still laying the groundwork to pass Biden’s plan without GOP support if necessary, and they continue to stress the urgency of acting quickly. Schumer and House Speaker Nancy Pelosi (D-CA) announced Monday that they were filing a joint budget resolution that could serve as a legislative vehicle to pass Biden’s relief package. "Congress must pursue a bold and robust course of action. It makes no sense to pinch pennies," Schumer said.

Economy Will Return to Pre-Pandemic Size by Midyear, but Job Recovery Will Take Years: CBO

As President Biden and lawmakers discuss the appropriate size of the next coronavirus relief bill, the Congressional Budget Office on Monday upgraded its outlook for the U.S. economy, projecting that gross domestic product would grow faster than it had previously forecast and that the labor market would rebound more quickly.

In a report on the economic outlook over the next decade, CBO forecast that the economy will grow by 4.6% in 2021 (3.7% from fourth quarter 2020 to fourth quarter 2021), reaching its pre-pandemic peak size by the middle of this year. CBO sees growth averaging 1.7% a year from 2020 to 2024, up from 1.0% as of last July.

A longer recovery for labor market:  The nonpartisan budget scorekeeper said the job market will take longer to fully recover. It projected that the unemployment rate, 6.7% as of December, will fall to 5.3% by the end of 2021, down from a projected 7.6% in its forecast from seven months ago. At the same time, CBO said that it will take until 2022 for the labor force to return to its pre-pandemic size — and until 2024 for the number of people employed to again reach its pre-pandemic level.

CBO said it upgraded its economic outlook for the next five years "in large part because the downturn was not as severe as expected and because the first stage of the recovery took place sooner and was stronger than expected." The $900 billion pandemic relief package Congress passed in December was also a factor, as CBO said it would boost GDP by an average of 1.5% over this year and next.

The budget scorekeeper said that the December relief package will add $774 billion to the deficit in fiscal year 2021 and $98 billion in 2022.

But while CBO said the near-term outlook had improved, it downgraded its longer-term forecast, projecting 1.7% annual growth from 2025 to 2030, weaker than the 2.1% annual growth it had projected in July.

Why it matters: The latest forecast does not assume any additional stimulus, but it offers something for everyone in the debate over the next package. Republicans looking to scale back the size of the next bill can point to the rosier economic projections and CBO’s assessment that the downturn wasn’t as bad as feared. Democrats can point to the weaker long-term forecast and the outlook for the labor market as evidence that the economy still needs further support.

How Much Did the $500 Billion Paycheck Protection Program Help?

The New York Times’s Ben Casselman and Jim Tankersley report that — while politicians on both sides of the aisle have backed the Paycheck Protection Program of forgivable loans to small businesses — economists have a decidedly less rosy view of its success:

"Academic economists who have studied the program have concluded that it has saved relatively few jobs and that, at a cost of more than half a trillion dollars, it has been far less efficient than other government efforts to help the economy.

"’A very large chunk of the benefit went to a very small share of the firms, and those were probably the firms least in need,’ said David Autor, an M.I.T. economist who led one study.

The Trump Treasury Department claimed that the program supported more than 50 million jobs and may have saved 1.86 million, but Autor’s study found that the program saved far fewer positions, between 1.4 million and 3.2 million. Other studies have come up with similar numbers.

"Given the program’s cost, saving jobs on that scale doesn’t necessarily qualify as a success," Casselman and Tankersley say. "Unemployment benefits also provide income, at far less expense, and programs like food assistance and aid to state and local governments pack a larger economic punch, according to many assessments."

Other experts say that the program should be judged not by the number of jobs saved, but by the number of businesses it kept alive, and that by that measure it was a success, especially with the smallest of businesses.

"You can’t look at cost per job saved," Glenn Hubbard, who served as chairman of the Council of Economic Advisers under President George W. Bush, told the Times. "It wasn’t the goal. The goal was preserving businesses."

Read the full piece at The New York Times.

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