The new economic data shows a growing slowdown, underscoring the need for another stimulus package. But fights within the party between Republican senators over deficit spending are slowing down legislation and will make the overall bill smaller than it should be.
WASHINGTON, DC – July 20: Senate Majority Leader Mitch McConnell (R-KY) (L) listens to us … [+]
After months of denial and delay by Republicans in the Senate, Congress is now fighting for the next economic stimulus. Three big expenses – supplemental payments on unemployment insurance, another round of family stimulus checks, and significant help for states and cities – are causing big fights, not only between parties, but also within the Republican Party itself. Resolving the party’s internal battle is key to obtaining this help necessary to boost the economy.
Make no mistake, the economy needs help. On Thursday, new weekly unemployment claims data provided more bad news, rising for the first time in nearly four months and indicating a weaker job market. Of course, all the time claims have shown that the economy is in serious trouble. Heidi Shierholz of the Institute for Economic Policy reminds us that this is “the 18th week in a row that jobless claims have been more than double the worst week of the Great Recession.”
Although overall job losses may be stabilizing (albeit at a high level), economists Ernie Tedeschi and Quoctrung Bu find that layoffs for black and Latino workers are increasing, transferring the burden of the labor market even further to these waged workers. lower and more vulnerable.
Other data also point to increasing economic weakness. After three months of steady growth in shift work, Kronos Incorporated, a leading provider of workforce management software, reports a “modest” slowdown in shift work for companies during the week of July 6-12. They note that “this is the first non-holiday week” with a slowdown “since the recovery began in earnest the week ending April 12.”
The slowdown is especially greater in states experiencing an increase in the number of Covid-19 cases, as the increase in cases slows economic activity and leads to new rounds of business closings. Hopefully, these and other data will finally remove the ill-conceived argument that we can completely reopen the economy during a growing pandemic.
As economist Teresa Ghilarducci noted in Forbes, “We can reopen and kill people, but that would be a silly reopening.” And like many other economists, Raj Chetty of Harvard and colleagues at Opportunity Insights argue that “the only way to fuel the economic recovery is to invest in public health efforts that restore consumer confidence and spending.” But many states and the federal government have been foolish so far, and now we are paying the price, both in public health and in an economic slowdown.
In the face of this troubled economy, why hasn’t Congress, more specifically the Senate, moved faster? After all, in May, the House of Representatives passed a new stimulus bill, the HEROES Act. It authorizes nearly $ 1 billion in aid to state and local governments, an extension of the $ 600 weekly supplement to unemployment insurance, and a new round of family stimulus checks, among other provisions.
But the Senate, specifically the Republican majority, has delayed things, hoping that an economic change will avoid the need for increased deficit spending. In May, Republican Senate Majority Leader Mitch McConnell (R-KY) said the HEROES Act was “dead on arrival.” But continued economic weakness (and negative Republican poll numbers) have revived some elements of HEROES.
McConnell now supports another round of family stimulus checks, some unemployment insurance supplements (which can settle at around $ 400 a week, not the $ 600 that expire), helps state and local governments, and other expenses. , including K-12 education. Republicans also want a disclaimer that protects businesses from Covid-19 related lawsuits, especially from employees who get sick on the job. And both sides are rejecting a payroll tax cut, which economists consider ineffective, even though President Trump had insisted on one.
Of course, politics is never absent in Congress, and Senate Republicans are fighting each other over how much spending to authorize. Even though we are still months away from the 2020 elections, reports indicate that senators considering a 2024 presidential nomination are already competing with each other for debt and deficits.
But something will be enacted. Members of Congress for re-election in November want more help to help them campaign against the pandemic and recession. Their previous hope that a strong economic recovery would boost them is fading fast, so concerns about rising debt and deficits are taking a back seat to concerns about reelection.
That will change, of course, after the elections. Initial shots have already been fired on debt and deficits, notably by Senator Mike Enzi (R-WY), chairman of the Senate Budget Committee. And news reports say Senator Ted Cruz (R-TX) is using the mounting debt against potential presidential rivals, exclaiming to his colleagues “what the hell are we doing” when considering significant new deficit spending.
But more money is coming, including stimulus checks, unemployment insurance, aid to governments, and education spending. It should have been enacted earlier to help the economy, but better late than never.
However, until we get better management of public health, rather than the herky-uneven opening and closing states now, the economy cannot return to normal. The new stimulus, while necessary and welcome, will likely be much lower than the depth of the recession should be. And, in any case, stimulus alone cannot solve our economic problem. That requires coherent and intelligent public health policies that we seem unable to implement.
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