Republicans Should Be Playing Offense on Economic Relief
Why are they letting Democrats lead the way on the next round of stimulus?
For at least seven more months, Republicans hold the White House and a majority in the Senate. So it’s unclear why the next phase of the coronavirus response is being led by Democrats, in what feels like a political void.
Last week, the Democratic-led House passed the HEROES Act, a $3 trillion economic relief package. The bill largely doubles down on the CARES Act (bless the staffers coming up with these acronyms), including extending the $600 supplementary unemployment payments through the end of 2021 (current provisions expire in July), another round of stimulus checks, an expansion of the paid-leave provisions in eligibility and duration, and nearly $1 trillion to state and local governments, among numerous other provisions.
Republicans roundly dismissed the bill. Mitch McConnell called it a “seasonal catalog of left-wing oddities” and a "totally unserious effort" to address COVID-19. Larry Kudlow, director of the National Economic Council, told reporters that “We’ve kind of paused as far as formal negotiations go. ... Let’s have a look at what the latest round produces, give it a month or so to evaluate that.” President Trump promised to veto the bill, although it’s unlikely to be taken up in the Senate.
To be sure, the bill is highly problematic. We need nimbleness and adaptation to fight an evolving virus, and doubling down on the same set of policies throughout the end of 2021 may make it harder to come out of our economic coma. The expanded unemployment insurance provisions are likely to exacerbate our unemployment crisis unless changes are made to the distribution of the payments. The stimulus checks provide short term relief but fail to make up for lost jobs. There’s a tradeoff for dollars spent, and new needs have emerged as the virus curve has steadied and states have begun reopening.
But the Republicans’ non-response is equally problematic. Since the passage of the CARES Act, it seems that many in the GOP have reverted to their Obama-era strategy of “just say no” to anything Democrats propose. This would be more convincing if Republicans could offer up an alternative plan to debate. Lofty rhetoric about reopening while providing little assistance to workers or small businesses or families to do so feels like urging troops to charge without providing the necessary planning or battle gear.
Polling shows that the vast majority of people are not resuming their previous activities anytime soon. More than one-fifth of workers have had their jobs compromised, nearing Depression-era levels, with minorities and women affected the most. A recent study from the University of Chicago suggests that 40 percent of the temporary layoffs are likely to turn into permanent ones.
There are increasing reports of kids going hungry (one in five households is experiencing food insecurity, according to Brookings) and rising domestic violence. Schools remain closed indefinitely. Jerome Powell, head of the Federal Reserve, stopped just short of calling for greater fiscal response to avoid severe and permanent economic damage. Meanwhile, the administration’s plan seems to be taking its foot off the gas and riding things out for a bit.
Republicans should go on offense with an opportunity agenda as soon as possible. There are any number of policies to endorse that would make the reopening more robust and sustainable, while actively acknowledging and mitigating continued health risks. Make work pay more by cutting payroll taxes and enhancing wage subsidies for low-wage workers, who often serve on the front lines. Modernize the statewide unemployment insurance systems so people can access them easily instead of having to struggle through jammed phone lines, and so that they can continue to collect benefits if they are rehired at a reduced schedule. Invest in massive nationwide testing to increase the confidence and security of people leaving their homes, per Nobel prize winner Paul Romer.
Ensure that businesses (and employees) can secure PPE, such as by providing a central place in each city where small businesses can order and retrieve it at cost. Eliminate regulatory barriers that stymie our economic and health response. Empower cities to share best practices and have coordinated local responses, instead of everyone responding simultaneously in the blind, along the lines of the cross-cutting Opportunity Councils detailed in our recent AEI paper. Continue to ramp up medical supplies in a flag-draped mobilization effort for the fall.
Bundle this into a grand plan. Give Americans a path forward that instills confidence, security, and hope. Put meat on it. Let people know you are in it with them for the long haul. Republican politicians tend to do poorly on surveys about whether they “care about people like me.” Now’s the time to push against the caricature with compassion and urgency and targeted support.
There’s understandably growing exhaustion among fiscal conservatives about the level of government spending in the coronavirus response, but the costs are likely to grow further if the current economic sclerosis continues. This does not mean we should spend more for the sake of spending more. But the gravity of the situation we are in undoubtedly will require strategic investments beyond the status quo.
Unfortunately, the presidential election cycle is likely to exacerbate the impasse. Assuming that Joe Biden makes some “peace pacts” with progressives at the Democratic Convention this summer (whether it’s a real convention or some kind of virtual event), Biden may well use the crisis to advocate for long-held progressive reforms loosely related to COVID-19. President Trump’s re-election agenda remains largely formless at this stage, though it would be unsurprising to see him adopt a reactive posture that makes the election about blocking progressivism instead of a positive governing agenda that gets us out of our biggest crisis since World War II. Reality doesn’t fit neatly into either approach, nor does the necessary COVID-19 response.
What Americans need is a comprehensive plan forward. It’s time the governing majority provides one.
Photograph of Mitch McConnell by Alex Wong/Getty Images.