With the End in Sight, Congress Finally Figures Out COVID Relief

By Robert VerBruggen

Thursday, December 17, 2020

 

Vaccines are shipping out, frontline workers are getting stuck in the arm, and the unemployment rate has fallen by about half since its April peak — to around 7 percent, roughly where it was at the end of 2013.

 

Naturally, Congress is only just getting around to hammering out another economic-relief package.

 

Lawmakers are still finishing the $900 billion bill, but they expect to vote on it as soon as tomorrow. Based on the details available thus far, they seem to be getting things mostly right. I am not a fan of deficit spending or of big government programs, but the case for spending large during a pandemic is not hard to make. This has been a horrible year, with many businesses shut down and millions of workers put out of their jobs through no fault of their own. Even as we approach the end of the pandemic, we are fighting a third wave of infections, and unemployment claims are on the rise again.

 

We need to keep the economy afloat in an emergency, and that is precisely when you should borrow. It will be much less painful to pay this money back later than it would be to suffer COVID-19’s full wrath all at once. To make the decision even more obvious, interest rates are low and expected to stay low, meaning this debt shouldn’t be too expensive to maintain.

 

Most important, the new bill helps both out-of-work laborers and damaged businesses. The former will get an extra $300 a week in unemployment benefits, and those receiving long-term benefits won’t see them expire later this month, as could have happened for millions. Both these provisions will expire after ten weeks or so, by which point the vaccines, God willing, should have seriously mitigated the pandemic.

 

The new $300 weekly boost will replace an earlier $600-a-week bonus, which was so large it paid most laid-off workers more than they’d made while employed — and which expired at the end of July while Congress dithered. This smaller, more reasonable top-up should help those most in need without overly discouraging them from returning to work if they can find jobs, and it will hopefully reverse the recent rise in poverty. It should also help the economy in general as it’s spent. It’s worth noting, however, that even a $300 boost will make unemployment more remunerative than work for maybe 40 percent of workers, so it shouldn’t be maintained too long.

 

Businesses will also get about $300 billion in aid, including some new money for the Paycheck Protection Program, which, through forgivable loans, picks up some costs for those enterprises hit hard by the pandemic.

 

But it’s not all good news.

 

In a significant misfire, some lawmakers from both parties insisted on doling out roughly $600 checks to most Americans, including many whose finances have not been harmed by the pandemic. Between the previous round of checks, reduced commuting costs, and the lack of options for spending money on weekends, those folks have actually saved up a lot of money this year. Perhaps they’ll spend that money as things pick up, which would be a helpful stimulus for the economy. But further padding their savings accounts is not a good use of taxpayer funds when so many Americans are truly struggling. My advice for those receiving these checks is the same as it was last time: If the pandemic hasn’t hit you in the pocketbook, don’t save the money or use it to pay down debt. Either donate it or spend it at struggling businesses. (Of course, no one listened to me.)

 

The bill also leaves two major priorities unaddressed.

 

Republicans have long wanted to grant businesses some degree of immunity from lawsuits blaming them for COVID-19 transmission, but this didn’t make it in to the new bill. Plenty of COVID-related suits are in the works, and it would be good to lay down some solid ground rules rather than leaving these firms to the whims of state courts and juries. That said, there are reasonable arguments that Congress shouldn’t be overriding state law in this area, especially since these are primarily intrastate disputes and many states have already passed their own COVID-liability laws. (See this testimony for an argument that a federal liability shield would have serious legal problems, and this post for an argument that it wouldn’t.)

 

Democrats, meanwhile, have been fighting to give money to state and local governments, but appear unlikely to get their way, though some lower-cost measures are still being discussed and may make it into the final bill. Lower-level governments have taken a modest hit to their tax revenues thanks to COVID-19 while bearing the added costs of dealing with the virus, and they don’t have the borrowing capacity that the feds do — to the contrary, they typically have balanced-budget rules that make borrowing quite difficult. This could force some sensible budget-trimming, but it could also mean service cuts and layoffs just as the economy is rebounding.

 

The case for some amount of aid is pretty strong, but it’s hard to say just how much money is appropriate and just how it should be divided up. Some states have hardly lost revenue at all, while others have been hit hard. Many Republicans understandably worry that state and local aid could become a bailout for governments that are in trouble thanks to pension-fund mismanagement rather than COVID, or that it could reward the states that locked down most aggressively, refunding them the money that their own decisions cost them. (One recent bill to provide aid, for instance, would have given out some of its money based on concrete revenue losses.) This will remain a big issue into next year.

 

Congress’s compromises will not produce a perfect bill, and this legislation took too long to come together. But it will buoy the economy as we push through the final battle against COVID-19, and that’s a good thing. Better late than never.