by Michael R. Strain
The $908 billion bipartisan stimulus that Congress is debating right now would give the economy the support it needs. The House and Senate should pass a bill this week.
Democrats are reluctant to support it in large part because it includes protection for employers against lawsuits related to COVID-19. Republicans are reluctant to support it because it would give federal grants to state and local governments. Each party should accept the elements it opposes. They are politically necessary — and they are sound policies that appropriately address real needs.
With this bipartisan compromise, the odds of the U.S. slipping back into recession this winter are slim. Without it, another recession and increasing unemployment are much more likely.
A group of more than a half-dozen Republican and Democratic senators released the $908 billion plan last week to help the economy weather the surging virus, colder weather and the fading effects of March’s $1.8 trillion Cares Act. The compromise would provide $288 billion for small businesses, including through the Paycheck Protection Program, $180 billion in expanded unemployment benefits, $160 billion to state and local governments, $35 billion for health-care providers, and $16 billion for vaccine distribution and testing. Other provisions include assistance for rent, nutrition and child care.
The Republican opposition to providing grants to states and localities is understandable. Many of these governments practice fiscal mismanagement, and Republicans are particularly concerned about taxpayer dollars being used to bail out public pension funds. The legislation should ensure that any federal grant isn’t used for pensions.
States are both providers of essential services and major employers. When the pandemic hit, and businesses had to scale back operations, demand for states’ services increased at the same time that their tax revenue plunged. Balanced-budget requirements generally mean that states can’t run deficits, so their only choices are to lay off workers and cut essential services. This is the opposite of what businesses and households need.
State and local government employment is down 1.3 million jobs since February. Without assistance from the federal government, these layoffs will act as a drag on the recovery for years to come. We’ve seen this movie before: It took over a decade for state and local employment to recover from the Great Recession, in part due to inadequate federal aid.
Republicans should recognize that states and localities were in the same position as businesses and households when the pandemic hit: unprepared for a once-in-a-century crisis and the economic devastation it wrought. It is unreasonable to withhold aid on the grounds that they should have been prepared; even the best-managed states are in bad shape today. Congress has replaced portions of household income and small-business revenue. To help the recovery and to keep a lid on unemployment, it should do the same for states and localities.
For their part, Democrats are wrong to oppose liability protections for employers. To be as productive as possible — generating revenue and keeping employees on their payrolls — businesses need reasonable assurances that if they make a good-faith effort to follow public-health guidelines and protect their workers, they will be shielded from frivolous, opportunistic lawsuits in the event that their customers or workers get COVID-19. These liability protections should be temporary, expiring once a vaccine has been widely distributed. But they should also be strong enough to give businesses confidence.
Of course, businesses that knowingly expose workers to unsafe conditions or are guilty of gross negligence should be held liable. Congress should not extend them blanket immunity. But many businesses are unsure of what to do in this uncertain and rapidly changing situation, and often hear inconsistent guidance. It is both in their interest and the economy’s to give them leeway and to help keep them running as close to full capacity as possible.
These arguments likely won’t convince Senate Republicans of the wisdom of giving grants to states or House Democrats of the merits of giving businesses liability protection. But what should convince them is that to get what they want, they have to give the other party what it wants. In this case, the smart politics also leads to good policy.
The parties would also be compromising on the size of the stimulus, with House Speaker Nancy Pelosi insisting for months on spending over
$2 trillion and Senate Majority Leader Mitch McConnell focusing on $500 billion. Here again, the political compromise of $908 billion is smart policy. The gap between actual economic output and the amount of goods and services the economy could be producing given its underlying fundamentals suggests that a $900 billion stimulus is economically appropriate.
Leaders in both chambers should ignore members — such as Sen. Josh Hawley and Sen. Bernie Sanders — who seem to want their pursuit of the perfect to be the enemy of the good. With Congress preparing to leave Washington for the holidays later this month, it should pass this good compromise while it has the chance. Otherwise, the recovery from the pandemic recession will stall — or reverse itself.
Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute.
