President Joe Biden reportedly has agreed to modify the covid-19 relief bill under pressure from moderate Senate Democrats, narrowing the eligibility of some upper-middle-income families to receive the $1,400 per person stimulus checks. He could do a lot more to cut this bloated and wasteful package while still providing relief for those who need it.
Grants to state and local governments is one place to look. The measure allocates $350 billion in aid to states, cities and counties, supposedly to address pandemic-created revenue shortfalls. New data, however, shows that state budgets have been much less affected by the pandemic than had been expected, with some even showing an increase in revenue from the year before. Any aid should be predicated on a showing of fiscal need, not an open-ended subsidy. Hundreds of billions of dollars could be shaved from the package by applying this simple test.
The same approach should govern aid to schools. The bill currently includes $170 billion for K-12 schools and higher education, purportedly to enact measures that would enable distance learning or an earlier return to in-person instruction. Nearly $60 billion in previously enacted aid for schools remains unspent, however. Additional funds should not be given until schools or universities have used their previously allocated money, and they should also be predicated on return to 100% in-person instruction.
Democrats have also included expensive measures that are barely related to pandemic relief. The bill increases federal subsidies for health insurance under Obamacare, for example, and eliminates the income limit needed to qualify for them. It’s one thing to subsidize health insurance coverage for people who have been unemployed for a long time as a result of the pandemic; it’s quite another to simply expand subsidies for everyone. The bill also increases the earned-income tax credit and child tax credits. Neither measure is tied to need as a result of the pandemic, nor are they necessary in light of the massive amounts of aid previously provided.
The fact is that the pandemic has not seriously financially harmed most Americans, and many of those who have been harmed found relief in earlier measures. Savings rates are at a record high, and personal income as a whole is up, not down, since the pandemic struck. This is also true for average and low-income households. A December report from the JPMorgan Chase Institute found that checking account balances were up by as much as 40% for all income groups. This was before the December stimulus checks were sent, so we should expect that cash cushions have increased even more since then. Some people are clearly hurting, but already-approved measures have largely prevented mass poverty.
Independent reporting for Pine Bluff & Jefferson County since 1879.
Moderate Democrats should consider what stories will likely come out in 2022 as they run for reelection. It won’t be hard for reporters to find examples of wealthy people who used government money on lavish expenditures or state governments that used federal money to pay off politically influential interest groups. There’s also the possibility of an inflationary effect from throwing unnecessary cash into the economy. Inflation is always a case of too much money chasing too few goods and services. The U.S. economy is already awash in cash from previous relief measures. A poorly targeted additional $1.9 trillion will simply add to those pressures once the pandemic-related regulations that are artificially suppressing consumer demand are removed.
That’s what happened in 1946. Government-imposed rationing suppressed consumer demand during World War II while incomes went up, resulting in huge savings rates. Consumers splurged when the war ended, creating a sudden economic tsunami that dramatically increased inflation to an annual rate of nearly 15% by Election Day. The ruling Democrats were punished for this, with Republicans gaining 54 seats in the House and 12 seats in the Senate (11 from Democrats and one from the Progressive Party) to regain control of both chambers for the first time since 1930. As a Republican, I wouldn’t mind this outcome. As an American, I’d prefer not to experience similarly high inflation and economic turmoil.
Americans want to be generous to those in need. Many of the covid-19 relief bill provisions do that. But people do not want to bail out the rich or throw money at those who have already been helped. Approving the bill as it is currently written will clearly do the latter, not the former.
Olsen writes for The Washington Post.