POLITICS

The Georgia Runoffs Give Joe Biden The Green Light On The Economy

The economy needs at least $2 trillion from the incoming Biden administration, and fast.
President-elect Joe Biden jokingly thanks Georgia for certifying his victory three times as he campaigns on behalf of Democra
President-elect Joe Biden jokingly thanks Georgia for certifying his victory three times as he campaigns on behalf of Democratic Senate candidates Jon Ossoff and Raphael Warnock in Atlanta on Monday.

The Democratic sweep in Tuesday’s Georgia Senate runoff probably won’t alter much of the incoming Biden administration’s reform agenda. Progressive hopes for everything from action on climate change to judicial reform remain limited, if not nonexistent. Even without the pandemic, the country and the world are marching steadily toward various modes of destruction.

But claiming the Senate majority does offer Democrats some reasonable grounds for optimism, should the clear electoral indications from Tuesday hold. For the next two years, at least, President-elect Joe Biden’s party will be able to control what bills receive votes and when. Most importantly, Democrats will have much greater influence over the federal response to the coronavirus pandemic and the economic support that must go hand-in-hand with national public health efforts.

Given the failed federal response to COVID-19 so far, that can only mean improvement. On public health, the record is one of unmitigated disaster. Where South Korea, Taiwan, New Zealand, Singapore and other places swiftly implemented effective measures to avert both mass death and economic calamity, the United States has been an uncoordinated and morally callous disgrace. 

Some of the trouble has been bipartisan ― plenty of states with Democratic governors pursued premature reopenings over the summer and have struggled with testing and now vaccinations. Some of it is the result of decades of economic non-policy that left the United States uniquely vulnerable to supply chain disruptions. But it is hard to imagine that Biden could do worse than the Trump administration’s raving, dishonest incompetence

That the federal government blew the pandemic response is, outside QAnon fantasy forums, uncontroversial. Less well-understood is the way federal economic mismanagement has contributed to the public health problem. 

Congress badly misjudged the nature and scope of the coronavirus crisis with the CARES Act, and then took six months to assemble a fiscal Band-Aid for its mistakes.

The flagship coronavirus legislation was the CARES Act, passed in late March with a unanimous Senate vote. Conventional wisdom in Washington regards the law as a smashing success. Even the chronically malcontent left has cheered the CARES Act for temporarily boosting unemployment benefits by $600 a week ― a level that put modest upward pressure on wages, since some workers found themselves better off financially after losing their jobs. Generous provisions for big business prevented a financial panic, and though clumsy, the hundreds of billions of dollars allocated to support small businesses did not go to waste.

All of this is true, but the verdict of success is misplaced. Congress badly misjudged the nature and scope of the coronavirus crisis with the CARES Act, and then took six months to assemble a fiscal Band-Aid for its mistakes. By the time Congress finally passed an eleventh-hour re-up on some of the law’s provisions, 1 out of every 6 American families with children were going hungry. And what they passed was a paltry influx of cash ― far short of the $2,000 per person that Democrats, and even Trump, called for. 

Democratic lawmakers recognized the inadequacy of their efforts back in the spring. House Speaker Nancy Pelosi (D-Calif.) began referring to “phases” of the legislative response ― CARES was “Phase Three” (Congress, it turns out, had actually passed two previous phases of relief so negligible as to have already been forgotten). When the next bill merely topped-up an almost instantly exhausted small business relief program, lawmakers changed “Phase Four” to “Phase Three-and-a-Half.” And when no further relief came from Washington for several more months, Pelosi stopped talking about phases.

The more robust unemployment provisions of the CARES Act expired in July. Its $350 billion in small business aid drained in two weeks, and 60% of the $310 billion top-up was gone within two weeks of Phase-Three-and-a-Half’s passage.  

Worst of all, however, was the lack of concern for state and local governments. Back in July, the Center for Budget and Policy Priorities, a liberal-leaning think tank, estimated that the coronavirus crash would create state government budget shortfalls of about $555 billion ― a figure that would increase substantially if local and tribal governments were included in the calculation. The CARES Act included just $150 billion in state and local government relief. 

This guaranteed a large round of unnecessary layoffs for teachers, firefighters and other public servants. But it also encouraged disastrous pandemic policies. In order to boost tax revenue to balance state budgets, governors encouraged reckless “reopening” strategies, hoping to get money to local businesses that would make their way to state coffers. The results for state budgets were disappointing, but more importantly, they encouraged the spread of a deadly virus.  

It is time for a big, multitrillion-dollar economic relief package ― for the sake of American families and public health. The results of the Georgia runoff make that kind of legislation much more plausible.

The fresh $900 billion in relief Congress passed last month includes a welcome $300 per week boost to federal unemployment benefits ― half that of CARES, and set to expire on March 14 ―  along with a $600 per person check for households making less than $75,000 a year.

It isn’t nothing, but once again, it is inadequate given the scope of the crisis. 

The legislation includes no funds for state and local governments, and according to economists Mark Paul and Adam Hersh, is at least $2.1 trillion short of what the economy needs to return to pre-pandemic health. Paul and Hersh assume that government spending is about or a little more efficient at boosting economic growth than its direct outlays ― payments are spent on other activity, which in turn encourages more activity.

But the Congressional Budget Office has been much more conservative about the efficacy of government spending during the pandemic, assuming that only a fraction of every federal dollar will actually result in economic output. Based on the CBO’s more cautious estimates, the latest “stimulus” legislation is a stunning $6.8 trillion short of February 2020.

The CBO is probably wrong; Paul and Hersh are probably right. And in a $21-plus trillion economy, a gap of a couple trillion isn’t really that big. It’s only big in the minds of members of Congress, who feel uncomfortable about spending money, even when every economic indicator says they should spend much, much more. 

Regardless of exactly how much needs to be spent, there is simply no economic indicator that suggests the United States government is anywhere close to overspending or over-indebtedness.

Interest rates remain at or near historic lows and the Federal Reserve has a bevy of actions it can take should they rise. Inflation sits at just 1.2%, well below the Fed’s target rate of above 2%.

In short, it is time for a big, multitrillion-dollar economic relief package ― for the sake of American families and public health. The results of the Georgia runoff make that kind of legislation much more plausible. 

Barring a bizarre-but-not-mathematically-impossible shift in the Georgia vote tallies, These fiscal decisions will be in the hands of Democrats. Key tax and spending decisions are not subject to the filibuster ― a simple majority will do, and Democrats will now have the simplest of majorities to do so.

Zachary D. Carter is the author of the New York Times bestseller “The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes,” named one of the best books of the year by The New York Times, The Economist, TechCrunch, Publishers Weekly and others.