In other words, don’t plan on more aid to states, which are already so strapped for cash that they’re cutting Medicaid during a pandemic. Don’t expect extensions of financial lifelines for jobless workers.
Maybe Republicans have suddenly become alarmed by deficits, despite recently spilling $2 trillion in red ink on tax cuts. More likely this is a negotiating ploy to extract concessions from Democrats — even though red states would suffer from delaying federal aid, too.
Whatever the reason, GOP dawdling is the latest reminder that Congress should stop leaving the fate of the economy to the whims of callous, dithering, dilettantish, hostage-taking charlatans, who see every crisis as an opportunity for a shakedown. Instead, build a stimulus system that triggers on (and off) automatically — based on whatever the economy actually needs, using metrics agreed to in advance.
Economists are generally fans of policies known as “automatic stabilizers,” or programs that ramp up automatically when the economy tanks. For example, as people lose jobs, they become eligible for food stamps or unemployment benefits.
These forms of stimulus kick in without politicians having to debate, and they have huge bang for their buck. Both are useful features in a dysfunctional political system, especially when the country is struck by an unusually bad shock in which a speedy fiscal response is critical.
Unfortunately, our automatic stabilizers were never robust enough. Worse, the Trump administration and state governments have made automatic stabilizers much less automatic and stabilizing by adding red tape and reducing programs’ generosity in recent years.
This has left the country unusually reliant on Washington to devise a rescue program ad hoc during the worst economic crisis in nearly a century.
Congress has passed several rounds of relief, but more is undoubtedly necessary. The Congressional Budget Office predicts that without further stimulus, unemployment will be 9.5 percent at the end of 2021. Goldman Sachs estimates that even with another half-trillion dollars in yet-to-be-proposed fiscal stimulus, unemployment will average “only” 7.2 percent next year.
For now, most of Congress's existing measures are poised to sunset based on somewhat arbitrary deadlines unrelated to economic conditions. Enhanced unemployment benefits, for example, are set to expire July 31, even though the CBO expects the unemployment rate to average 16 percent that quarter.
Of course, nothing would stop Congress from renewing these emergency programs — except, that is, Congress.
Each time measures come up for renewal, prolonged negotiation is more likely, with politicians exploiting “must-pass” legislation to make crazy, controversial demands. This already happens during debt-ceiling showdowns, the more common congressionally created opportunity for unnecessary crises.
If Trump’s “no rush” comments weren’t sufficient evidence of this risk now, recall that in the aftermath of the Great Recession, authorization for extended unemployment benefits lapsed five times. More recently, the small-business loan program ran out of funds for more than a week. And that was for a program virtually everyone supports, almost immediately after it began.
The next round of stimulus negotiations will be difficult and high-stakes. But it must include relief measures automatically linking stimulus to economic conditions, so that further rounds of negotiations can have lower stakes. Some Democratic lawmakers have proposed plans that would do this. Rep. Don Beyer (Va.) and Sens. Michael F. Bennet (Colo.) and Jack Reed (R.I.) recently offered a framework for linking enhanced jobless benefits to (duh) the joblessness rate. So did Sen. Ron Wyden (Ore.).
In these proposals, benefit extensions would automatically turn on while the economy is bad, and — perhaps as important, at least to budget hawks — automatically trigger “off” as the economy heals. Lawmakers, of course, can override their “autopilot” settings if they later change their minds.
Fair warning: Trigger-based programs are likely to have big up-front price tags. But they are no more expensive than the cumulative cost of multiple program extensions, such as those enacted after the Great Recession.
They could actually be less expensive, because they’d prevent costly program lapses and restarts. And they’d give states greater certainty around budgeting, and households greater confidence in their ability to pay bills. (Remember when Republicans used to complain about policy uncertainty?)
Most important, we need to minimize the number of desperate American families either party might take hostage. Especially when at least one party appears more than willing to destroy those hostages.