It looks as if Congress will soon pass a much-needed economic relief (not stimulus) bill — something that will help distressed Americans get through the next few months while we wait for widespread vaccination to set the stage for economic recovery. That’s good news, because something is better than nothing, even though what we know about the legislation says that it’s going to be deeply flawed.
But the way this debate has been playing out is ominous for the future. Even some of the good guys seem a bit confused about what they’re trying to do. And the bad guys — Mitch McConnell and company — are clearly doing some of the right things only under political duress while giving every indication that they’ll systematically undermine the economy once President-elect Joe Biden takes office.
About good guys getting it wrong: Economic relief legislation is largely about providing individuals and families with a financial lifeline during the pandemic. But who should get that lifeline? Should it go to a majority of the population, like those $1,200 checks sent out in the spring? Or should the focus be on enhanced unemployment benefits for the millions of workers who, thanks to the pandemic, have no income at all?
According to The Washington Post, Sens. Bernie Sanders and Joe Manchin had a heated argument about this issue Wednesday during a conference call, with Sanders pushing for broad aid while Manchin argued that enhanced unemployment benefits were more crucial.
Well, on most issues I’m a lot closer to Sanders than to Manchin, the most conservative Democrat in the Senate. But in this case I’m sorry to say that Manchin is right. The economic pain from the coronavirus has been very unevenly distributed: A minority of the workforce has been devastated, while those who have been able to keep working have, by and large, done relatively well. Overall wages and salaries have bounced back quickly.
So if there’s a limit on the amount of aid that can be given, it’s more important to help the unemployed — and, in particular, to sustain that help well beyond the 10 weeks reportedly in the current deal — than to send checks to those who have been able to keep working. The best argument I can see for broader payments is political — people who haven’t lost their jobs to the pandemic may be more willing to support economic relief for those who have if they also get something from the deal.
But why is there a limit on the amount of aid?
Republicans appear willing to make a deal because they fear that complete stonewalling will hurt them in the Georgia Senate runoffs. But they are determined to keep the deal under $1 trillion, hence the reported $900 billion price tag.
That $1 trillion cap, however, makes no sense. The amount we spend on emergency relief should be determined by how much aid is needed, not by the sense that $1 trillion is a scary number.
For affordability isn’t a real issue right now. The U.S. government borrowed more than $3 trillion in the 2020 fiscal year; investors were happy to lend it that money, at remarkably low interest rates. In fact, the real interest rate on U.S. debt — the rate adjusted for inflation — has lately been consistently negative, which means that the additional debt won’t even create a major future burden.
And even economists who worry about deficits normally agree that it’s appropriate to run big deficits in the face of national emergencies. If a pandemic that is still keeping around 10 million workers unemployed isn’t an emergency, I don’t know what is.
Of course, we know what’s going on here. While Republicans have made the political calculation that they must cough up some money while control of the Senate is still in doubt, they’re clearly getting ready to invoke fear of budget deficits as a reason to block anything and everything Biden proposes once he’s finally sworn in.
It should go without saying that the coming GOP pivot to deficit hawkery will be completely insincere. Republicans had no problem with rising deficits during the pre-pandemic Donald Trump years; they cheerfully passed a $1.9 trillion tax cut, mainly for corporations and the wealthy.
But the hypocrisy isn’t the main issue here. More important, shortchanging relief in the name of fiscal prudence would mean vast, unnecessary hardship for millions of Americans. I’m an optimist about prospects for economic recovery once we achieve widespread vaccination. But that won’t happen until well into 2021, and even a rapid recovery will take months after that to bring us back to something like full employment. Making a deal that only provides enhanced benefits for 10 weeks is like building a bridge that goes only a quarter of the way across a chasm.
And the case for more spending won’t end with short-term economic recovery. We’ll still need huge investments in infrastructure, child care, clean energy and more.
Republicans will try to stop all of this, claiming that it’s because they’re worried about debt. They’ll be lying, and we shouldn’t be afraid to say so.
Paul Krugman
Paul Krugman, winner of the Nobel Memorial Prize in Economic Science, is an Op-Ed columnist for The New York Times.
