Why aren't Republicans trying to juice the economy?
President Trump is losing his bid for re-election. Opinion polls, forecasting models, betting markets, and superforecaster predictions are all telling the same story. And it's not even close. Trump might even suffer such a devastating defeat to former Vice President Joe Biden that Democrats retake the Senate and extend their House majority. It's rapidly becoming a historically dire situation for the GOP.
So, a political mystery: Why aren't his fellow Republicans in Washington doing whatever it takes to help their president, not to mention save their own jobs?
Of course, Congress can only do so much. It can't pass a bill that immediately creates a raft of new COVID therapeutics or a one-shot-and-you're-immune vaccine. But it can support and stimulate the economy through aid to individuals, business, and state and local governments. So far lawmakers have passed some $3 trillion in assistance through three different fiscal packages.
But while Democrats want to spend another $3 trillion on a "phase four" package, Republicans are trying to keep the price tag around $1 trillion. For instance, they don't want to fully extend the weekly $600 jobless benefit bonus or give huge new grants to states and cities. And it's not just that they are reflexively opposed to any and all Democratic ideas. Senate Republicans are also showing little interest in Trump's idea for a payroll tax cut.
That relative stinginess is confusing to many Washington watchers. If you believe more spending this summer likely means a stronger economy than otherwise on Election Day, then it would seem to be in the political self-interest of Republicans to spend whatever it takes to juice GDP and job growth over the next few months. It's hard to imagine that Trump would veto even a $3 trillion spending bill if it contained a payroll tax cut and he thought it would help win him the election. At this point, what's a few more percentage points in the federal debt-to-GDP ratio? That's some future president's problem, not his.
But Republicans in Congress aren't going to send Trump a $3 trillion package. Maybe even not half that amount. And here's why: First, many Republicans, as well as conservative economists, genuinely think some kinds of new spending could actually hurt the economy in the short-run. So supporting those measures would actually harm the party's electoral chances. Particularly problematic, in their view, is that $600 jobless bonus. In a recent analysis, Douglas Holtz-Eakin, an economist at the right-leaning American Action Forum and a former director of the Congressional Budget Office, calculated that extending the bonus means 63 percent of workers would make more on unemployment insurance than at their previous job. "There is good reason to fear that unemployment will stay high because of the bonus," he concluded. Lots of Republicans agree.
Second, it's clear the GOP thinks portraying Democrats as belonging to a party lurching toward socialism is a winning message. But it's sure harder for Republicans to make that case if they want government to spend as much as the Democrats do. Monthly stimulus checks might make lots of voters happy right now, but it muddies the message that Joe Biden is a stalking horse for radical leftists who would, you know, send everybody checks. And a big infusion of cash to poorly managed blue states? No way.
Third, many analysts overestimate just how much Trump has changed the GOP on economic policy. The Trump tax cut represented traditional GOP economics. So, too, have the Trump administration's efforts at deregulation. Even though Trump keeps talking about it, there's been no massive infrastructure spending bill. And Trump didn't need the help of congressional Republicans to launch his various trade wars.
What's more, plenty of GOPers really are worried about debt and deficits, at least if they are generated by spending increases rather than tax cuts. Here's what Sen. Pat Toomey of Pennsylvania had to say recently about another big stimulus package: "Let's remember, there's no free lunch. All of this is either borrowed money or created money and, either way, Americans are going to pay a price for this." That is classic conservative thinking. Fiscal support during a pandemic is one thing, stimulus another. Don't forget that many regular Republicans still think they belong to the party of fiscal responsibility, even though deficits were rocketing higher under Trump before the coronavirus outbreak. And as many GOPers see it, the economy is already bouncing back, as evidenced by the recent strong jobs reports for May and June.
Republicans are running a risk, however. The economy was rebounding, but maybe not so much anymore as the pandemic has worsened since mid-June. "The economy is sputtering again," writes Moody's Analytics economist Mark Zandi in a recent note. And the only reason he isn't forecasting a double-dip recession is that he expects Congress to pass a large fiscal package of at least $1.4 trillion. But don't expect anything like a boom. Even with that additional federal aid, Zandi sees a "largely sideways" economy between now and a COVID vaccine. If Trump loses by a little rather than a lot, Republicans may wish they had spent more like Democrats.
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