Congress went back to work this week with a crucial task on its plate: crafting another big-money rescue package for a pandemic-battered US economy.
It would be the latest effort to keep consumers and businesses afloat amid record unemployment and shore up strained public health systems across the country. But after authorizing $2.8 trillion in spending since March, lawmakers are confronting two crises (coronavirus and economic) that are inexorably intertwined and have only gotten worse.
While leaders in both chambers hope to hammer out a deal before the scheduled August recess, a compromise that doesn’t adequately bolster social welfare could cause more harm than good — especially if a Democratic proposal to send $1 trillion to state and local governments to preserve essential services is left out or dramatically downsized.
“The economy is in a very precarious situation. Any idea of a V-shaped recovery has dissipated,” said Michael Klein, a professor at the Fletcher School at Tufts University, referring to a rapid rebound that some economists said was possible after economy tanked in April. “What we really need is a strong safety net.”
More than two months ago, the House passed legislation that would extend some of the social welfare protections contained in the $2.2 trillion CARES Act signed by President Trump in March, as well as add new ones. The Senate stalled the bill, known as the Heroes Act.
Democrats are again pushing provisions of that bill, including an extension of the $600 a week in extra jobless pay (which expires at the end of this week); a second round of stimulus checks ($1,200 per family member, up to $6,000 per household); a 15 percent increase to the maximum benefit under the SNAP program (previously known as food stamps); $175 billion in housing assistance (for rent, mortgage, and utility payments); and $200 billion in hazard pay for essential workers.
The good news is that GOP senators seem to be lining up behind the stimulus checks and bonus unemployment pay, though they want to significantly cut the weekly amount of the latter. Both measures would help prop up consumer spending, which powers about two-thirds of the economy, and encourage businesses to bring back more workers to meet demand.
It’s too early to say what will happen to the Democrats’ other proposals or GOP measures such as coronavirus liability protection for businesses and tying funding for schools to their reopening, one of the president’s priorities. Expect a lot of horse-trading.
But one provision where the Democrats should not back down is the aid for state and local governments. Municipalities are seeing sharp declines in tax revenue due to the pandemic, and their public health care costs are soaring. Since they must balance their budgets — unlike Washington, which can just keep borrowing — local governments have few options: raise taxes, cut spending, or, more likely, both.
In a letter to Congress, more than 130 economic policy experts Monday urged them not to leave their local counterparts dangling.
“Facing dramatically reduced tax revenues, states and localities will be forced to cut budgets for essential programs that support health, education, public safety, and public transportation, and that reduce poverty and hardship — unless federal support is provided,” they wrote.
Cutting state budgets “removes spending from the economy at a time when private sector demand is already reduced, making a robust recovery more difficult.”
In other words, Congress’s failure to act would not only weaken the safety net, it would deepen the recession.
“If you wanted to get aid to where it’s needed most, then you should be providing it to state governments and letting them make the decisions,” said Alicia Sasser Modestino, an associate professor at Northeastern University, who, along with Klein from the Fletcher School, was one the letter’s seven initial signers.
Trump has shown nothing but disdain for the states — at least those run by Democratic governors and mayors who have criticized his botched response to the coronavirus pandemic. He seems more interested in playing strongman by sending federal law enforcement agents to cities such as Portland, Ore., and Chicago to arrest protesters.
Republicans in Congress are more sympathetic, with some proposing to free up restrictions on the $150 billion sent to states earlier for coronavirus-related costs. But that’s far less than what’s needed. Massachusetts alone is facing a tax revenue shortfall of as much as $6 billion for the year ended June 30, according to the Massachusetts Taxpayers Foundation.
A trillion dollars in local aid is a lot of money — but far more would be lost if states have to slash and burn.