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GOP lawmakers seek to arouse public concern over the extraordinary levels of federal support: $ 4 trillion in aid enacted last year, nearly $ 2 trillion more on the verge of approval, and another multi-billion dollar proposal expected in the coming months. It’s a strategy that worked ten years ago, when deficit fears spawned the Tea Party movement, which ultimately blocked much of President Barack Obama’s agenda.
But Congressional Democrats, the White House, and many economic experts say that while the money continues to flow to unemployed Americans, small businesses, cities and schools, it is clear that they and the economy in general need more.
“Just because there is unspent money doesn’t mean it isn’t needed yet,” said Marc Goldwein, senior vice president and senior political director of the Committee for a Responsible Federal Budget , a non-partisan group that created the COVID Money Tracking follow the aid as it comes out.
At this point, most of that unspent money – detailed estimates put the figure at $ 1 trillion – has been spent on various programs designed to distribute it over a long period of time.
Improved unemployment insurance benefits are sent out every week. The Paycheque Protection Program and other small business aids are provided as and when requested by employers. Enhanced Federal Medicaid matching funds are provided to states on a regular basis as long as the public health emergency remains in place. And the tax rebates and breaks will be given after Americans file their taxes.
Focusing on the money that’s left over to go through these programs and others, then, “is mostly a red herring,” said Jason Furman, who was Obama’s chief economist.
Lawmakers could have a real discussion about the substantive aspects of the plan, such as the size of the stimulus checks or who should receive them, said Furman, now an economics professor at Harvard. But the unspent trillion dollars is simply a reflection of how relief programs are designed – that is, to spend money over a long period of time.
“Congress does not legislate once a month for upcoming bills for the next month,” he said. “It’s so much better to spend money three months in advance rather than three months late, especially when you’re in the middle of a war.”
The Republicans in Congress made a risky but calculated has bet on unification against Biden’s rescue plan, given he’s popular with Democrats and Republicans across the country. Four in five adults said last month that another economic aid program was needed, the Pew Research Center found. And a morning consultation poll this week showed that three in four voters supported Biden’s plan.
But focusing on unspent money helps bring home the GOP’s argument that Democrats are the party that “spends money like there’s no tomorrow,” as has been said. Sen. Lindsey Graham (RS.C.) said this week. Republicans also called the legislation too generous, a “liberal wish list for Democrats” that addresses much more than the coronavirus and its economic fallout – and overspends, even in these key areas.
The broader concern of some critics of the plan is that while Democratic policymakers are explaining where the remaining trillion dollars is going, that money is not being sufficiently considered as Congress debates the size of the next package.
Goldwein, whose organization advocates for deficit reduction, said that while further help is still needed, he believes that “this package is almost written as if December had not happened” – when Congress passed a $ 900 billion relief program and two coronavirus vaccines have started to become available.
“I think Congress should be nervous about adding another $ 2 trillion to the mix,” said Michael Strain, director of economic policy studies at the conservative American Enterprise Institute.
Concern over the size of the package has become a flashpoint in the debate, even among some Democrats, especially amid new economic projections that suggest significant growth this year.
The latest forecast from the non-partisan congressional budget office shows the economy is returning to pre-pandemic levels this year and is reaching growth levels of 4.6 percent without significant further relief measures. Factoring in expected budget relief of $ 1.5 trillion, economists at Goldman Sachs forecast a growth rate of 6.8% for 2021, which would be the highest since the Reagan era.
However, many economists say that despite these predictions, there is still work to be done. Federal Reserve Chairman Jerome Powell has warned lawmakers in a pair of congressional appearances this week not to declare victory over the economy too soon, warning that “work is not made”.
“We are a long way from a return to normal,” said Kathy Bostjancic, chief US financial economist at Oxford Economics. “When you have such a hole, a deficit where you fell from where the economy was on the right track before… you have many ways to compensate to get back there.”
Even taking into account unspent federal money, excess personal savings, and the deployment of coronavirus vaccines, an additional $ 2 trillion in fiscal stimulus is the appropriate amount to bring the U.S. economy back to full employment. here the middle of next year, said Mark Zandi, chief economist at Moody’s Analytics.
“In terms of arithmetic,” he said, “that’s about right.”
An area of particular concern to some GOP lawmakers and other critics of the plan is the funding of state and local governments. Biden’s plan would send an additional $ 350 billion to states, cities and towns, on top of the $ 150 billion passed early last year. Republican members of the House Ways and Means Committee this week released a report saying that almost a third of that original money goes unspent, and some states face a large budget surplus – up to $ 15 billion in California.
The risk of sending too much money to states that don’t need it is that governors or local officials take the opportunity to cut taxes, for example – and there is no easy formula for allocating the money. aid only to states that are suffering the most. But those who follow this area closely argue that while states are doing better than they initially expected, they are still not doing well.
The National Association of State Budget Officers also claims that states on average allocated 97% of their first round of funding and spent 77%, contradicting the Ways and Means numbers. Other experts note that federal restrictions have made it difficult for state officials to spend the money faster than they have.
And more generally, as officials in the Biden administration say, many economists believe that the risk of doing too little to help the economy right now is far greater than the risk of overspending, even if $ 1 trillion. aid dollars is still on the way out.
“It’s like your garden needs water, but you only have a hose that can drain the water. That’s the problem here – we just can’t get the water out as fast as we need to, ”Zandi said. “But that doesn’t mean you need less water.”
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