Republican Party lawmakers are trying to raise public concern about the extraordinary levels of federal support: $ 4 trillion in aid enacted last year, almost $ 2 trillion more in the pipeline, and another multi-trillion dollar proposal planned for the United States. coming months. It is a strategy that worked a decade ago, when the fear of deficit spawned the Tea Party movement, which ended up paralyzing much of President Barack Obama’s agenda.
But Democratic congressmen, the White House and many economic experts argue that even if the money continues to reach the unemployed in America, small businesses, cities and schools, it is clear that they and the economy in general demand more.
“Just because there is money not spent doesn’t mean there’s still no need,” said Marc Goldwein, senior vice president and senior policy director for the Responsible Federal Budget Committee, a non-partisan group that created the COVID Money Tracker to follow help as it comes out.
At this point, most of that unspent money – comprehensive estimates put the value at $ 1 trillion – was allocated to several programs that were designed to distribute it over a long period of time.
The benefits of improved unemployment insurance are sent out weekly. The Pay Check Protection Program and other small business aid is provided as employers request it. Reinforced federal Medicaid funds are provided to states on a regular basis, as long as the public health emergency remains in effect. And tax rebates and incentives will be granted after Americans declare their taxes.
Focusing on the money left over for these and other programs, then, “is mostly a false clue,” said Jason Furman, who was Obama’s chief economist.
Lawmakers could have a real discussion about substantive aspects of the plan, such as the size of stimulus checks or who should receive them, said Furman, now a professor of economics at Harvard. But the $ 1 trillion not spent is simply a reflection of how aid packages are designed – that is, to spend money over a long period of time.
“Congress does not legislate once a month for next month’s bills,” he said. “It is much better to spend the money three months in advance, rather than three months late, especially when you are in the middle of a war.”
Congressional Republicans made a risky but calculated bets on unification against Biden’s bailout plan, as it is popular with Democrats and Republicans across the country. Four out of five adults said last month that another economic assistance package was needed, the Pew Research Center found out. And a Morning Consultation poll this week showed that three out of four voters support Biden’s plan.
But focusing on unspent money helps to emphasize the Republican Party’s argument that Democrats are the party that “spends money like there is no tomorrow,” as Senator Lindsey Graham (RS.C.) said this week. Republicans also considered the legislation to be overly generous, a “liberal wish list for Democrats” that addresses much more than just the coronavirus and its economic consequences – and spends a lot even in these key areas.
The broader concern, too, among some critics of the plan is that, even as Democratic policymakers explain where the rest of the $ 1 trillion is going, the money is not being sufficiently taken into account as Congress debates the size of the next package.
Goldwein, whose organization advocates deficit reduction, said that while some additional aid is still needed, he feels that “this package is almost written as if December hadn’t happened” – when Congress approved a $ 900 billion aid package and two vaccines against the coronavirus started to become accessible.
“I think Congress should be nervous about adding another $ 2 trillion to the mix,” said Michael Strain, director of economic policy studies at the conservative American Enterprise Institute.
Concern over the size of the package has become a critical point in the debate even among some Democrats, especially amid new economic projections that suggest significant growth this year.
THE last forecast of the non-partisan Congressional Budget Office shows the economy returning to pre-pandemic levels this year and achieving growth levels of 4.6% without significant new relief measures. When accounting for an expected $ 1.5 trillion tax relief, Goldman Sachs economists predicted a staggering 6.8 percent growth rate for 2021, which would be the highest since the Reagan era.
Many economists argue, however, that despite these predictions, there is still more work to do. Federal Reserve President Jerome Powell warned lawmakers in two appearances in Congress this week not to declare victory over the economy too soon, warning that “the job is not done”.
“We are far from a return to normal,” said Kathy Bostjancic, chief economist at Oxford Economics for the United States. “When you have this hole, a deficit where you fell from where the economy was on its previous path … you have many ways to compensate to get back there.”
Even taking into account unused federal money, excess personal savings and the launch of coronavirus vaccines, another $ 2 trillion in fiscal stimulus is the appropriate amount to get the US economy back into full employment by the middle. next year, said Mark Zandi, the chief economist at Moody’s Analytics.
“In terms of arithmetic,” he said, “it’s almost right.”
One area of particular concern for some Republican lawmakers and other critics of the plan is the funding of state and local governments. Biden’s plan would send an additional $ 350 billion to states, cities and localities, adding to the $ 150 billion approved at the beginning of last year. Republican members of the House Forms and Resources Committee published this week a report saying that almost a third of that original money remains unspent and some states are facing a significant budget surplus – as high as $ 15 billion in California.
The risk of sending too much money to states that don’t need it is if governors or local officials use it as an opportunity to cut taxes, for example – and there is no easy formula for allocating aid only to states that are suffering the most. But those who follow this area closely argue that while states are doing better than they initially expected, they are still not doing well.
The National Association of State Budget Officials also claims that states, on average, have allocated 97 percent of their initial round of financing and spent 77 percent, contradicting the figures for Forms and Means. Other experts note that federal restrictions have made it difficult for state officials to spend money more quickly than before.
And more broadly, as Biden government officials say, many economists feel that the risk of doing too little to help the economy is now much greater than the risk of spending too much, even when $ 1 trillion in aid is still about to end.
“It’s like your garden needs water, but you only have one hose that can draw water. That’s the problem here – we just can’t get the water out quickly enough, ”said Zandi. “But that doesn’t mean you need less water.”