Congress is set to pass the biggest stimulus in history. It's not completely terrible.
In the wee hours of Wednesday morning, Democrats and Republicans in the Senate, along with the White House, all struck a deal on $2 trillion in economic aid to battle the spreading coronavirus pandemic. Things are moving incredibly fast, and final language is still in flux, even if the policy parameters have been agreed to. The Senate intended to vote on it Wednesday, and it sounds like House leadership would like to pass the bill as well as quickly as possible.
I find myself caught between two warring impulses: The bill is both woefully inadequate, yet considerably more than I thought the Democrats could wrest from the GOP. So let's go through this thing and see what's in it.
Direct Cash Aid: Every individual making $75,000 a year or less will get $1,200, or $2,400 for every married couple making up to $150,000. The aid gradually phases out for Americans making above those thresholds, until individuals making $99,000 more more — and married households making $198,000 or more — get nothing. That said, parents will also receive $500 per child, and it doesn't appear that part phases out.
The means-testing aspect of this is foolish and unnecessary, and the thresholds for the phase-out are much too low. That said, the original Republican proposal had the aid phasing in with income, such that the poorest Americans would get little-to-nothing. This at least gets help to people who need it most. The bigger problem is that it's a one-time payment, and we'll almost certainly need to do this several times over. In which case, we're in for more Congressional fights.
Unemployment Insurance: This might be the single biggest win, from an improvement standpoint. The original Senate GOP bill had nothing for unemployment insurance at all. Now, jobless benefits will last an extra 13 weeks on top of their baseline before the coronavirus crisis commenced, and an extra $600 a week will be added to all benefit payouts for four months. In many cases, that will bring workers' wage replacement compensation close to 100 percent. Reportedly, these increases will not count as income when qualifying for programs like Medicaid and the Children's Health Insurance Program. That's important, otherwise the jump in unemployment benefits could kick people off their health coverage and other benefits. Equally remarkable, these benefits will cover Americans in the gig economy and independent contractors and other workers who aren't normally included in the unemployment insurance system.
However, it turns out that extra $600 a week will in some cases exceed the pay workers are getting now, possibly encouraging layoffs. The unemployment system is administered by the states, who each have different benefit levels, so coming up with a coordinated federal boost that would cap all benefits at people's previous wage level would be overly complex and slow. Nonetheless, as of this writing, three Republican senators were demanding the deal be put on hold until a fix can be written. And Sen Bernie Sanders (I-Vt.) was threatening to blow the whole deal up if those three got their way. It seems most likely this standoff will result in the unemployment benefit changes passing as is, but who knows.
Aid to States, Localities, Hospitals, Etc: This is another big improvement. State and local governments are on the front lines of the coronavirus fight, providing crucial funding for health care and public services. Their budgets are also far more vulnerable to downturns than federal finances. But (you guessed it) the initial GOP bill did nothing for them.
Thanks to the deal, $150 billion will be available to shore up state and local budgets, while another $130 billion will go to bolster hospital systems specifically. Whether that's enough is another matter entirely. States and localities spend a little over $3 trillion a year, and the idea that the coronavirus will only blow a five-percent-sized hole in those finances is absurdly optimistic.
On that note: Democrats managed to strong-arm Republicans into providing $400 million to assist vote-by-mail efforts across the country, so that as many Americans as possible can continue participating in the primaries and the general election this November while staying home to contain the coronavirus pandemic. But initial analysis suggested a sum closer to $2 billion was needed, and House Democrats originally proposed $4 billion.
Help for Small Business: The deal provides $367 billion through the end of June to finance loans from community banks to help out businesses with less than 500 employees. The idea here is to give smaller main street firms cheap credit with which they can pay rent, utilities, and — most importantly — keep people on payroll while social distancing measures to contain the coronavirus stay in effect.
Again, everything is evolving fast, so details aren't clear. But it sounds like any loans used to keep people employed will be forgiven, effectively turning most of the loans into one-way grants rather than debt that needs to be repaid. That's crucial, as lots of small companies can't afford to borrow much, even at extremely cheap rates. It's also not clear if $367 billion will be the limit for the lending itself, or the capital base upon which a much larger amount of lending can be scaled up. Given the sheer size of the American economy, if it's the former, you have to ask again if it's nearly enough.
Finally, the loans will reportedly be administered by the Small Business Administration, which is not exactly known for its speed or bureaucratic efficiency.
Help for Big Business: This is the contentious core of the Senate deal. It's the part Republicans wanted the most badly, with the fewest restrictions, and the thing Democrats were most incensed about. The grand total looks to be roughly $500 billion, with $75 billion of that going to straight-up bailouts for specific industries, such as airlines and hotels. But the remaining $425 billion will be used to capitalize a far larger amount of lending from the Federal Reserve — sounds like it could be north of $4 trillion — to all of America's major industries and corporate powerhouses that don't qualify for the small business aid.
Now, it looks like Democrats managed to get some strings attached to this: There will be an inspector general and a five-member panel assigned to do oversight of the program. Any company that receives a loan can't do stock buybacks or pay out dividends as long as they're getting help, plus an extra year. Nor are they allowed to lay off more than 10 percent of their employees. There are also restrictions on executive compensation, though they're oddly designed: Anyone making over $425,000 can't get a raise for two years, unless they make $3 million or more — in which case they're capped at $3 million plus half of whatever they make above that threshold. It's also not obvious these loans can be forgiven the same way the small business loans can.
Unfortunately, it appears Treasury Secretary Steven Mnuchin will have extremely broad powers to waive those restrictions as he sees fit. And did I mention the Fed has already hired the Wall Street behemoth BlackRock to help it administer this program?
The overarching question is whether the aid to regular Americans, households, and mom and pop shops is worth agreeing to such a massive benefit to big businesses. Obviously, not even the largest corporate titan can be blamed for the hit they'll take from the coronavirus. And we need industries big and small to still be around and functioning after the pandemic has passed. I'm not sure this deal is as bad as the 2008 bank bailouts: It's more like if Democrats forced Republicans to combine the bank bailouts with the stimulus that passed later in 2009, as the price of getting the whole package done. In that sense, this is an improvement on what's come before.
But it remains the case that our political system could not fall over itself fast enough to throw gobs of financial largesse at the heights of American business power, with the Republican Party eagerly leading the giveaway. Everyone else had to fight tooth and nail for an aid package that will maybe be barely adequate — if we are very, very lucky in how far and fast the coronavirus spreads. "Temporary survival money for workers, trillions in permanent economic inequality saving a bunch of executives and elites," as one House Democratic aide put it to The Prospect.
The deal still has to make it past the House of Representatives. And as much as I realize speed is of the essence, a big part of me hopes the Democrats who control that chamber pin the GOP to the wall, and demand far more aid for the common people before they let this thing through.
Want more essential commentary and analysis like this delivered straight to your inbox? Sign up for The Week's "Today's best articles" newsletter here.