Senate Democrats have blocked the Republicans' long-delayed plan for additional coronavirus aid, raising the prospect that Congress will provide no added fiscal support for the economy between now and the presidential election in November. The two sides are no longer talking, and at this point, each might think that doing nothing serves its electoral interests.
Settling for this paralysis, however, would be shameful. The economy needs additional relief immediately; delaying it will only compound challenges down the road.
The blame for the current setback lies squarely with Republicans. Democratic leaders are right to call the GOP's latest plan a stunt, not a serious proposal. It's much too small and fails, in particular, to extend adequate support to state and local governments, which are under severe financial stress. Getting to a better result demands that both sides give ground — but it's the Republicans who ought to move most.
Their so-called skinny bill would extend the existing Paycheck Protection Program (for small employers that retain workers despite losing business because of the pandemic), provide new money for health care and schools, and give financial aid to the U.S. Postal Service. It also proposes a weekly unemployment-benefit supplement of $300 through the end of the year, compared with the $600 bonus in the previous relief package, which ran out at the end of July. Republicans had previously supported a new round of $1,200 stimulus checks as well, but following internal dissent dropped the idea. The overall cost of the proposed measure was between $500 billion and $700 billion — less, if you allow for unspent funds from previous plans.
Senate Democrats have been pressing a version of a measure already passed by the House, which would extend the $600 supplement, give states and cities another $1 trillion in aid, send a new round of stimulus checks, and more, at a cost of around $3.5 trillion. They've said they're willing to trim that back to $2.2 trillion.
Under the circumstances, the spending envisaged by Senate Democrats is justified. Granted, the details could be improved. The $600 bonus, for instance, isn't ideal. Even with so many people still out of work, some employers (according to the Federal Reserve's most recent "Beige Book") say they've found it difficult to fill vacant positions. With the weekly supplement in place, many of the unemployed have been better off out of work. It would be better to renew this support in the form of a supplement bringing benefits up to, say, 80% of previous earnings.
The case for another round of flat-rate stimulus checks is also questionable, given that these payments don't depend on the circumstances of the people who benefit. Payments more heavily weighted toward low-income workers would be preferable — for instance, in the form of a more generous earned income tax credit.
But here are the crucial points. States and cities have seen their budgets crunched by higher outlays and lower revenue and need more financial aid. The unemployed need generous well-targeted help. And the economy as a whole requires additional fiscal support, as the Fed continues to emphasize. Also bear in mind that the cost of additional public borrowing is currently close to zero. This shouldn't license fiscal profligacy, to be sure. But under current circumstances, a new relief measure costing between $2 trillion and $3 trillion (depending on the pace of the recovery) can't be called excessive.
The economy badly needs a compromise plan. Ideally, it would be much closer to the Democratic proposal than to the Republicans' plainly inadequate alternative. But the worst outcome would be a tactically motivated stalemate that does nothing at all. Right now, this gross failure of the political process looks all too plausible.