Democrats push stimulus.
The $15 minimum wage was dropped, but the bill moved forward.
I’m Isaac Saul, and this is Tangle: an independent, ad-free, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum — then “my take.” You can read Tangle for free or subscribe for Friday editions. You can reach me anytime by replying to this email. If someone sent you this email, they’re asking you to join the fun.
Today’s read: 13 minutes.
The $1.9 trillion stimulus bill clears a big hurdle. Plus, a question about what Democrats can do with budget reconciliation.
RIP Arthur.
On Friday, I wrote an ode to my betta fish who recently died. It was a bizarre, off-the-cuff newsletter for a Friday edition that had nothing to do with politics. To my surprise (and delight), it also became one of the most popular things I’ve ever written in Tangle. If you want, you read it by clicking here. If you like it, please subscribe.
Quick hits.
Congressional Democrats are using court documents from 185 cases involving people arrested during the Capitol building riots to bolster their case that the president inspired their actions. (The Washington Post, subscription)
Democrats and large corporations are already beginning to battle over how to hold companies accountable for their pledges to address climate change, with big businesses advocating voluntary global standards while Democrats want government enforcement. (Politico)
Families along the border whose land was going to be seized using eminent domain for the border wall are now in limbo, unsure if their properties will still be subject to construction or if their cases have been won. (The Wall Street Journal, subscription)
Pennsylvania’s Democratic Lt. Gov. John Fetterman announced a bid for Pennsylvania’s open Senate seat, setting up an epic battle for what could be the most hotly contested open Senate seat in the 2022 elections. (Politico)
The U.S. Immigration and Customs Enforcement (ICE) is going to issue new guidelines this week to curb arrests and deportations, including guidance to no longer deport immigrants for crimes like driving under the influence or assault. (The Washington Post, subscription)
What D.C. is talking about.
Joe Biden’s stimulus package. On Friday, the Senate took a step toward making President Biden’s $1.9 trillion American Rescue Plan law, voting along party lines to approve a budget proposal that would allow them to pass the bill using the reconciliation process — with no Republican support (for an explanation of reconciliation, see today’s reader question). Vice President Kamala Harris cast her first tie breaking vote, allowing the Senate to adopt the measure by a 51 to 50 vote early Friday morning.
The American Rescue Plan has many components, but the top line is that it would extend six months of enhanced unemployment benefits, send $1,400 checks to individuals, give $350 billion in aid to state and local governments, and dole out $130 billion to schools, as well as ramp up funding for vaccine distribution and personal protective equipment.
In order to move the bill into the next phase of the process, the Senate went through what’s sometimes called a vote-a-rama session. In this case, it lasted 15 hours, through the night, with more than 800 amendments drafted. The full Senate is forced to vote on whether to include each amendment as the legislation moves forward. Nothing from the process is set in stone, but it often serves as a blueprint for what to expect in the final bill.
Democrats seemed to embrace a few measures from across the aisle: they endorsed a proposal to exclude high earners from receiving $1,400 checks, though they did not clarify what constituted high earners. Senators also approved a proposal from Iowa Republican Joni Ernst that would prohibit a minimum wage hike during the pandemic. Sen. Bernie Sanders (I-VT), who has been leading the charge on minimum wage, said he did not fight Ernst’s efforts because he never planned to hike the minimum wage during the pandemic anyway, according to The New York Times.
Several other Republican proposals also caught traction: the Senate unanimously agreed not to raise taxes on businesses during the pandemic and agreed to establish a fund for food and drinking establishments. They also voted 58-42 to prohibit stimulus money from going to undocumented immigrants, The Times noted, something that Biden did not actually propose in his plan.
Some Republican amendments failed to make the bill: a proposal to prohibit funding for schools that don’t reopen once teachers are vaccinated and another to reduce funding for the state of New York. In a sign of how expansive the political moment became, the Senate even approved an amendment to keep the U.S. embassy in Jerusalem during the vote-a-rama.
Below, we’ll take a look at some reactions to the $1.9 trillion bill and where things go from here.
What the left is saying.
The left is mostly supportive of the bill, though there has been a smattering of dissent: the progressive left was dismayed to see the minimum wage hike take a hit in Friday’s vote, while some centrist Democrats have argued the bill is too big given the problem at hand.
In The Washington Post, Catherine Rampell wrote that more COVID-19 relief is urgent — and the January jobs report showed where we need it most.
“Job growth in January — at an anemic 49,000 net payroll jobs — was still much slower than it was pre-pandemic. Which doesn’t do much to help us recover the 22 million jobs lost in early spring,” Rampell said. “The jobs deficit today remains greater than it was at even the worst point of the Great Recession… The headline unemployment rate fell to 6.3 percent, but that’s largely because 400,000 people dropped out of the labor force altogether and so are not officially counted as unemployed. Broader measures of underemployment — counting workers who’ve lost hours, given up looking for new jobs or have been misclassified due to data collection issues during the pandemic — suggest a rate nearly double the headline unemployment number.”
She also made the case for helping states, noting there is a “steep decline in state and local government employment, which is down on net by 1.3 million jobs since last February,” she wrote. “Of those losses, about a million have been in state and local public education. One of the lessons from the Great Recession was that the feds did too little to aid states and localities. These governments continued to hemorrhage jobs (teachers, police, firefighters, administrators, etc.) for years after the financial crisis, losses that weighed on the recovery.”
Noah Smith made the argument that this bill isn’t a fiscal stimulus (“when government spends money in a recession in order to restart the economy”) — and shouldn’t be measured as such. Instead, he wrote, it’s “retroactive social insurance,” more akin to “disaster relief.”
“If you get a check during a pandemic, you’re not going to go out and spend it at restaurants and bars, because…well, there’s a pandemic. Instead, you’re more likely to stick it in the bank, pay down debt, or pay the back rent that you owe,” Smith wrote. “In a normal recession, this is exactly what we don’t want people to do. We want them to take their government checks and go out and spend them, to restart the virtuous cycle of economic activity! But in a pandemic, it’s fine.
“It’s fine because what we’re trying to do with COVID relief isn’t actually pump-priming — it’s retroactive social insurance,”he added. “Some people, through no fault of their own, took a big hit from a risk that only a few people were paying attention to. In order to relieve those people’s suffering, we are giving them money that they can use to pay rent and buy necessities, as well as money to pay down debts so they have a bit more financial security.”
Larry Summers, the economist who served in both the Clinton and Obama administrations, started a buzz over the weekend when he wrote that Joe Biden’s stimulus package brought a lot of risk. While conceding that the Obama administration’s stimulus in early 2009 was “too small,” Summers wrote that “a comparison of the 2009 stimulus and what is now being proposed is instructive.”
“In 2009, the gap between actual and estimated potential output was about $80 billion a month and increasing,” he said. “The 2009 stimulus measures provided an incremental $30 billion to $40 billion a month during 2009 — an amount equal to about half the output shortfall. In contrast, recent Congressional Budget Office estimates suggest that with the already enacted $900 billion package — but without any new stimulus — the gap between actual and potential output will decline from about $50 billion a month at the beginning of the year to $20 billion a month at its end. The proposed stimulus will total in the neighborhood of $150 billion a month, even before consideration of any follow-on measures. That is at least three times the size of the output shortfall.
“In other words, whereas the Obama stimulus was about half as large as the output shortfall, the proposed Biden stimulus is three times as large as the projected shortfall,” he said. “Relative to the size of the gap being addressed, it is six times as large.”
What the right is saying.
The right is almost uniformly opposed to the legislation, arguing that it’s too large and doesn’t fit the needs of the moment.
In The Wall Street Journal, former GOP senator and economist Phil Gramm made one of the most widely-shared arguments to scale down Biden’s bill.
“The most encouraging sign that recovery will be strong as the vaccines take hold is not that real gross domestic product rose 7.5% in the third quarter, offsetting 83% of the economic collapse produced by the shutdown in the preceding quarter,” he wrote. “Nor is it that 16 million of the 22 million jobs lost have been restored. The most encouraging sign is how much the total purchasing power of American families has expanded during the crisis, reaching record highs.
“To be sure, many Americans have taken a serious hit: Commerce Department data show total employee compensation in the second and third quarters of 2020 was down by $215 billion compared with the first quarter,” Gramm added. “Yet government personal transfers were up $893 billion—four times the compensation lost. In the second quarter alone, real per capita disposable income was up 10.5% compared with the first quarter—25 times as fast as the average quarterly income growth in the prior two years. This surge in personal income was driven by government stimulus equal to $2.6 trillion, more than all the private wages and salaries paid in the first quarter of 2020.
“President Biden now wants another $1.9 trillion bill, which would further swell potential purchasing power and impede production by more than doubling the minimum wage and paying more than half of unemployed people more than they make working,” he concluded.
The Wall Street Journal editorial board said that when Larry Summers and Phil Gramm agree, “it’s probably worth paying attention.”
“Democrats compare the current moment to the recession of 2009 and Barack Obama’s $800 billion spending bill,” the board said. “They say this one needs to be larger. But that comparison works in the opposite direction because the current economy is far stronger than it was in February 2009. Then the economy was still in a recession that didn’t end until June 2009. The jobless rate was rising and would peak at 10% in October 2009.
“Today the economy has been growing for two quarters, including 4% in the fourth quarter. The jobless rate is already down to 6.3%, a rate it didn’t hit during the Obama years until spring 2014. The black unemployment rate in January (9.2%) is already lower than it was during the first 79 months of the Obama Presidency. As for spending stimulus, the $3.7 trillion that Congress passed last year in virus relief already far exceeds what Democrats spent during the 2008-2009 recession.
In Congressional testimony, economist Michael Strain said he agreed that “the risk from spending too little is larger than the risk from spending too much,” but said “this is not the same as arguing that the size of an additional stimulus package should be untethered to estimates of the underlying economic need.”
“For example, direct checks to households earning six-figure incomes that have not experienced employment loss are an unnecessary and imprudent use of government spending,” he said. “The proposed $400 federal supplement to standard, state-provided Unemployment Insurance benefits would [prolong] the period of labor market weakness by incentivizing unemployed workers to remain unemployed. Raising the federal minimum wage to $15 per hour would be devastating to low-wage workers in many states. As a moral proposition, a bill that would destroy jobs for low-wage workers while handing out checks to employed, upper-middle-class households is problematic.”
My take.
Politically, the case for Biden’s bill is strong. 68% of Americans supported it in a recent Quinnipiac poll, including 37% of Republicans. Even if you’re skeptical of Quinnipiac after this election (which I am) or skeptical of Americans’ understanding of the bill (which I am), other polls show nearly identical results.
Biden ran on this exact package and won the election by eight million votes. Georgia’s Democratic senators ran on this package and won their elections. 411 mayors have signed a letter urging Biden to pass the stimulus bill. It has the full-throated support of Treasury Secretary Janet Yellen, who enjoyed heaps of praise from the right a few weeks ago, and who said this week if Congress passes the bill we could see full employment next year. Simply put: Democrats need to make good on their promises. Otherwise, what was the point of electing them?
On the compromise front, which I’m obviously interested in, I think Biden is making some headway. Democrats effectively pressed pause on the minimum wage increase and agreed to shelve it until the pandemic is under control, which is precisely what I advocated for last week. It looks like they will also target the stimulus to lower income households, which is a good policy from the right that I also advocated for last week. It also looks like there will be no tax increases on businesses to raise government funding, which clearly aligns with Republican goals. Congress also ensured money would only go to U.S. citizens, which is not something most of the Democratic caucus supports but looks like it will become law too — and has Biden’s backing (I think the efficacy of this proposal is worth debating, but it would be a poison pill in the bill).
And, perhaps most notably, Democrats look primed to adopt a version of Sen. Mitt Romney’s child benefit, which will spend “$3,600 over the course of the year per child under the age of 6, as well as $3,000 per child of ages 6 to 17,” and diminish for individuals making over $75,000 and couples making more than $150,000 a year. This is a proposal that has plenty of support in conservative corners, though it’s sure to face Republican opposition too. Regardless, it’s another piece of good policy I advocated for last month that is critical for low-wage workers with children who continue to bear the brunt of job losses.
Of course, there’s legitimate cause for concern. First, according to a recent House Budget Committee estimate, we still have $1 trillion from last year’s bills that hasn’t even been spent yet. $59 billion of it is for schools, $239 billion for health care and $452 billion in small business loans. State and local governments have lost over a million jobs but continue to gain them back, and the budget shortfalls at the state level are not as bad as economists initially expected. As others have noted, the sheer magnitude of $1.9 trillion is tough to comprehend. Congress will have spent 15% of our GDP in responding to COVID-19 before Biden even gets to his other priorities like infrastructure, health care reform, a minimum wage increase, etc.
There’s also the rather obvious point that Americans and mayors are motivated by their own self-interest to support the bill. Who doesn’t want more money? Or, in the mayors’ case, less responsibility to balance a budget? That support isn’t necessarily proof this is good policy.
And yet, even if we’re to take both sides’ arguments at pure face value, accepting each as fact, the biggest risk the right is identifying is the economy “overheating” to the point of inflation (costs of goods going up) and that in turn causing a recession. But the risk of not doing enough is to worsen the recession we’re already in, leaving millions stuck in food lines, looking for work, and — whenever the eviction moratorium is up — looking for a new place to live. Even Summers, who many on the right were citing this week, offered a follow-up column further fleshing out some of his concerns, which essentially amounted to giving a larger chunk of this bill to future investments. It’s a sound argument, and perhaps the bill will change to address it between now and passage.
Still, the recovery is slowing, as the recent jobs report indicates, and we can see the end of the pandemic down the road. Which, ultimately, is the entire point: get us to the other side of COVID-19, which improving vaccine distribution, supporting hospitals and putting a little more cash in Americans’ pockets should do.
Yellen made a compelling case, too, that even if we do risk inflation, the Federal Reserve has the tools to address it (like increasing interest rates, which are currently at zero) — and we can cross that bridge when we come to it. In other words, it’s a risk priced into her determination that we need this bill. Her word isn’t gospel, but there are few people in Biden’s administration I trust more. If she feels comfortable with the biggest risk being identified by the right, and the other side of the coin is a worsening economic situation from the catastrophe we have now, it’s easy to feel like a vote to pass this legislation is the right call.
Your questions, answered.
Q: Could you explain the reconciliation process for Congress to bypass the filibuster? It is being mentioned as an option for Democrats to get another COVID relief bill, but I'd love to know more about how it works and what the limitations are.
— CJ, Norwalk, CT
Tangle: It’s hard to do quickly, but I’ll try. There are two great, easy-to-read pieces on this, one from Dylan Scott at Vox and one from Sahil Kapur and Frank Thorp V at NBC News. I’ll try and summarize them briefly.
Budget reconciliation is a tool used in the Senate to allow bills to become law with a simple majority vote. It was created in 1974. It’s commonly used whenever the White House and Congress are controlled by the same party, but have slim majorities. It’s called budget reconciliation because the rules of using the tool are supposed to apply only to federal spending and revenue. To work within these boundaries, when drafting a bill, Congress will draw up a resolution that changes the federal deficit by a specific target, and then draft legislation to hit that target. So, hypothetically, if this bill was going to increase the federal deficit by $5 trillion over 10 years, the legislation would have to be drafted in a way to meet that target.
Typically, budget reconciliation covers things like changes in tax law (Republicans passed their 2017 tax bill using reconciliation) or infrastructure projects (i.e. “we’re going to spend X amount of money to build Q, R and T, which will increase the deficit by Y”). It can only be used once a year, because it can only be used for budget resolutions, and because there is only one budget resolution per year.
All of this is constrained by the Byrd Rule, named after Senator Robert Byrd, who drafted the original legislation that passed in the 1980s and laid out what could and could not be passed via reconciliation. Generally speaking, the rules are that a bill falls under reconciliation if its impact on federal spending and revenue is central and not auxiliary. The most famous example is from the Obamacare fight and health insurance: the primary purpose was to change people’s health insurance, so while that impacted federal spending, it was not central to the bill.
Congress also can’t use reconciliation to pass laws that would impact the deficit after 10 years. That’s why, some people think, Democrats didn’t put up a fight on the $15 minimum wage hike. It may have presented a snag in getting Biden’s plan through via reconciliation, so doing battle for it now wasn’t worth it. It’s also part of the reason why Trump’s 2017 tax cuts were temporary (they had to expire in time so they wouldn’t impact the deficit after 10 years). Budget reconciliation also can’t impact social security, generally speaking.
The obvious question in this process is who decides what qualifies? Interestingly, it’s not really the Senate majority. The Congressional Budget Office and Senate parliamentarian decide. This is where things get really wonky, but there is a lot of debate over whether you even have to listen to the CBO or Senate parliamentarian, or if the vice president (who oversees the Senate) gets final say.
In 2017, the Trump administration — when expecting the CBO to slam its tax bill — basically said it was going to come up with its own estimates. They ended up getting what they needed from the CBO to push the bill forward, then criticized it anyway, but it set off a lot of debate about whether those rulings were ironclad. Now that is coming full circle for Republicans, who look short on options to stop Democrats from passing Biden’s bill if they want to.
To summarize: budget reconciliation is, traditionally, used to pass bills that directly and primarily impact federal spending. Independent, bipartisan government oversight groups then announce publicly their view on whether a bill qualifies, and historically speaking it is very, very rare for Congress to ignore those determinations. Anytime a bill’s scope goes well beyond federal spending limits, it creates all sorts of snags and potential for issues. So far, it looks like the Biden administration is successfully clearing the hurdles it needs to in order to get this package through via reconciliation.
A story that matters.
The primary targets of the COVID-19 vaccines are seniors, and the primary way for seniors to get their vaccines is to sign up online. But millions of older Americans “aren't online at all, and many who do have internet access are struggling to find and use the sign-up portals that local health officials have scrambled to set up.” The issue is becoming one of the biggest hurdles in the vaccine rollout, Axios reports. “Americans over the age of 50 are unsure how to make or confirm their appointment and are deeply frustrated and increasingly desperate,” AARP executive vice president Nancy LeaMond said. 22 million seniors, or 42% of the over-65 population, don’t have broadband access at home. (Axios)
Numbers.
27%. The percentage of people with a postgraduate degree who said QAnon claims are either very accurate or somewhat accurate, according to a recent Morning Consult poll.
20%. The percentage of people with a bachelor’s degree who said QAnon claims are either very accurate or somewhat accurate, according to a recent Morning Consult poll.
14%. The percentage of people with less than a college degree who said QAnon claims are either very accurate or somewhat accurate, according to a recent Morning Consult poll.
16%. The drop in weekly new cases of coronavirus in the United States, according to the COVID Tracking Project.
2.17 million. The number of doses of coronavirus vaccine reportedly administered yesterday.
1.3 million. The number of doses of coronavirus vaccine reportedly administered on January 24th, two Sundays ago.
Don’t forget.
If you’re already a subscriber, please share Tangle on Twitter by clicking here. If you’re not, and you want to support Tangle, the best way to do it is become a paying subscriber. You can do that by clicking the button below, or going here: www.readtangle.com/subscribe
Have a nice day.
A new study released today says the BioNTech/Pfizer vaccine should grant protection against both the South African and British variants of coronavirus. While the study did not include the “full set” of spike mutations, it increased confidence amongst scientists that the vaccine would still create a strong immune system defense. Separately, former FDA administrator Scott Gottlieb said vaccines would be “widely available” by April, and Dr. Anthony Fauci said the availability of the vaccine is already looking better for the months ahead.
I've heard a handful of economists suggest that this stimulus should be thought of as an investment and that the investment should be evaluated as any other. Their suggestion being that any money that is borrowed to pay for this will be borrowed at ~1% interest given the historically low rates and therefor, the important thing to consider is whether or not the return can beat 1%. Based on this reasoning, they are not concerned about exploding debt because they expect to the economic growth to far outpace the interest on the debt.
This seems to make sense based on my own dealings with financial planning. However, I think we often get fooled into thinking that home finance is analogous to national economies and what's good for our family budget is good for the nation as a whole.
What do you think of this argument? Is it close to the mark or simply a gross oversimplification designed to gin up support?
Isaac, you wrote, ". . . leaving millions stuck in food lines, looking for work, and — whenever the eviction moratorium is up — looking for a new place to live." Surely you meant to say, ". . . looking to catch up on the 18 months of owed back rent that they have yet to pay, despite bringing home more money while unemployed than when they were working."
If only. Seriously, though, any who fail to pay the back rent that they owe, and seek instead a new place to live, are not likely to find one. Landlords do check prospective tenants' backgrounds, particularly regarding payment of rent. Homelessness will rise as a consequence.