Less than two weeks ago, it seemed like a bipartisan deal for a second round of aid to America's coronavirus-ravaged economy would come pretty easily. Fast forward to the last few days, and that optimism has been proven naive. A bill will be passed alright, but it will be woefully inadequate. And the cause seems to be a combination of Democratic cowardice and Republican blinkeredness — if not outright mendacity.
The big headline concern here is more money for the Payroll Protection Program (PPP) — a forgivable loan program created in Congress' first big rescue bill to help businesses with fewer than 500 employees stay afloat and keep people on payroll. The program burned through the $350 billion Congress allocated in a matter of weeks, and now legislators and the White House are closing in on an agreement to give the PPP another $310 billion.
The sticking point is that Republicans wanted to pass the PPP boost as a standalone measure, while Democrats had additional demands. It sounds like they'll get $75 billion to help out hospitals, and $25 billion to invest in building up coronavirus testing capacity. And $60 billion of that $310 billion for the PPP will be set aside for more marginalized small businesses that got left out of the first round of funding. As of this writing, negotiations were ongoing, but lawmakers expect votes within a day or two.
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What stands out are the things Democrats asked for and apparently aren't getting: There will be no increased hazard pay for the essential workers on the frontline of the battle against the virus, for instance. More shockingly, there will be no aid for state and local governments, either. It's hardly surprising that the relentlessly-oligarchic GOP didn't want to boost pay for the workers risking their necks everyday to keep society functioning for the rest of us. Their refusal to include aid for state and local budgets, however, is genuinely insane.
States and localities do not have the same monetary powers as the federal government, and cannot deficit spend with the same freedom. The municipal debt markets from which they borrow are often irrational and underdeveloped, and most state constitutions require balanced budgets anyway. When the economy craters, tax revenues for state and local governments crater with it, and those governments have no choice but to cut back spending proportionally. After the Great Recession, state cutbacks counteracted the impact of federal stimulus spending and drug the economy back into negative growth by the end of 2009. Failing to help this time would repeat the same dynamic all over again, except likely worse. Thanks to the coronavirus pandemic, the shortfall just for state governments looks likely to reach or exceed $500 billion this year alone.
Admittedly, the Democrats reportedly only asked for another $150 billion for states and localities, on top of the $150 billion Congress included in its last coronavirus bill. That amount would still be grossly inadequate, but at least less grossly inadequate than the initial $150 billion alone.
Even on pure political self-interest grounds, the Republicans refusal to consider state and local aid is bizarre: It invites a deeper economic recession just as we're coming into an election in which their incumbent holds the White House. So why are they doing it?
A lot of the reporting suggests the usual: it's a lot of money, Republicans want more time to consider, the initial $150 billion hasn't technically run out yet, they don't think it’s the U.S. government's job to plug holes in state and local budgets, and they don't want to be strong-armed into spending more. The Trump administration said the president was "willing to consider" state and local aid in another bill, and Democrats' refusal to pass the PPP infusion on its own initially "infuriated" Senate Majority Leader Mitch McConnell (R-Ky.), according to reports. That's all standard fair for the GOP, though it doesn't deserve to be taken terribly seriously: That states and localities will need more money is as certain as the PPP's need, and it's no more the government's job to help private businesses than it is to help the states — though the GOP was happy to shove another $310 billion out the door for the former on rapid notice. Nor were the Republicans reluctant to take urgently-needed policies hostage when crises hit under a Democratic administration.
But some reporting also suggests a much darker motive than mere ideological blinkeredness and hypocrisy. It's abundantly clear that President Trump and many of his Republican allies are weary of the social shutdowns meant to contain the coronavirus, and want to open the economy back up for business before November — regardless of the ramifications for public health. Trump can't order an end to the stay-at-home orders himself: that's up to individual governors and mayors. But he can try to use the states' dire financial circumstances as leverage to force them to reopen. The Trump administration believes "if Congress keeps cutting checks for state and local governments, they will be disincentivized to open up their economies," Politico reported over the weekend. "The thinking among some Trump administration officials is that many states should be reopening their governments soon and that additional funding could deter them from doing so," Axios added. Basically, if Congress helps the states, that holds off the budgetary reckoning of the economic shutdown, allowing governors more leeway to continue the stay-at-home orders if they so choose.
It's hardly a brilliant plan, and could very likely backfire either way: If governors follow public health guidance and continue lockdowns for weeks or months to come, Trump risks driving the recession deeper (by denying the states and localities aid), but if they give in (by reopening the economy sooner), it would invite a second round of coronavirus infections which would also hurt Trump's re-election chances and likely delay any economic recovery. But given the reporting, that seems to be where the GOP's thinking is heading, regardless of the White House's assurances that they’re happy to save state and local aid for later.
The other question, though, is why aren't Democrats hopping mad about this?
Their leadership sounds more or less resigned to not getting any state and local aid in this bill. Democrats also apparently anticipate even this $310 billion won't be enough for the PPP to do its job (they're almost certainly right about that), so the GOP will have to come ask for more aid later — which will give Democrats another chance to make more demands. But if Democratic leadership is willing to play hardball and take the next round of PPP funding hostage, why aren't they willing to do so this go round? Furthermore, what makes them think that Republicans' reluctance to discuss more state and local aid this time around will abate at all with the next bill? This doesn't even get into all the other things Democrats can and ought to demand: the hazard pay, more money for safety net programs, some kind of public option for banking services, or a national freeze on rent payments, to name a few. This seems less like prudent strategy on Democrats' part, and more like a desire to avoid facing up to the political reality of the situation.
Congress is deliberately flirting with making the coronavirus' economic crisis much worse. Partially, that's because Trump and the Republicans are who they are and aren't going to change. But it's also because Democrats apparently prefer kicking the can down the road over doing the hard thing that must be done.
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