The Covid Relief Act Is the Beginning of the Progressive Era – Gary Sasse

Sunday, February 28, 2021

Gary Sasse, Guest MINDSETTER™

In the 1996 State of the Union Address, President Clinton declared that “the era of big government is over."  In March 2021 when President Biden signs the American Rescue Act, it will officially return. When combined with the pandemic stimulus bill passed in December 2020, this $1.9 trillion program will represent the largest macroeconomic stabilization program in American history.

Given the public health crisis and the resulting economic dislocation, this measure is something voters strongly favor. In a recent Politico/Morning Consult poll three-quarters of all voters, including 60 percent of Republicans, said that they supported the $1.9 trillion plan. However, the legislation not only deals with the pandemic, but takes advantage of the opportunity the coronavirus provides to address the progressive’s policy agenda.

The conservative economist Stephen Moore told the Wall Street Journal “The bill would create one of the largest expansions of government welfare benefits since the birth of the modern welfare state.”  A recent Hill-HarrisX poll found that almost six out of ten registered voters believe government spends too little on anti-poverty, healthcare and education.

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The size and scope of relief packages can make a big difference in achieving results. As President Biden learned the Great Recession relief package was too small and slowed the recovery. As the former Treasury Secretary Lawrence Summers wrote “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.” In other words, the American Rescue Plan dwarfs the projected economic shortfall and is roughly three times that provided during the 2008 financial crisis.

Conservatives argue that this is not 2008-2009 when there was concern about prolonged slow growth. They reference the Congressional Budget Office (CBO) projection that the U.S. economy will rebound in 2021. However, Federal Reserve Chairman Jerome Powell says there is a bigger risk doing “too little than too much” on a COVID-19 relief bill. And Moody‘s Analytics estimates that the additional economic support would bring the economy back to near full-employment late in 2022.

While the relief package contains substantial funds for testing, tracing, and vaccine distribution, much of the package focuses on the financial distress of lower-income Americans. For example, the package includes enhanced unemployment insurance benefits, aid for back rent, generous child care tax credits, expanded health care benefits, and expansion of the food stamp program. It can be argued that the American Rescue Act is the most comprehensive safety-net program since President Johnson’s “War on Poverty” over half a century ago. Indeed, with the legislation defraying the cost of Obama Care subsidies, the nation may be taking one step closer to Medicare for all.

Surprisingly, relative to earlier COVID-19 relief programs small business aid is light.  $350 billion is earmarked for state and local governments compared to $50 billion in additional grants and funds for small business opportunities. Mark Zandi, the chief economist at Moody’s Analytics, estimated that the state and local fiscal shortfall is closer to $60 billion than $350 billion. He concludes “There is still a lot of uncertainty in these estimates, but $100 to $150 billion would be appropriate given the circumstances.”

Over one-fifth or $425 billion of the $1.9 trillion relief program funds Economic Impact Payments or stimulus checks. This largess is urgently needed by families that have been economically crushed by the coronavirus. However, money is also being sent to people who do not need it. Taxpayer funds are finite, therefore inefficient transfer payment may have huge opportunity costs because they limit future funding for infrastructure and unanticipated threats to the nation.

In our system of government bipartisanship is the best way to make choices. Bipartisanship requires two responsible political parties that are willing to compromise and find common ground. As Senator Mitt Romney (R-UT) noted, five bipartisan Covid-19 relief bills were recently enacted by Congress. Unfortunately, Democrats and Republicans were unable to break partisan gridlock on President Biden’s COVID-19 proposal. 

Some suggest President Biden had no incentive to work with the GOP because Democrats control both the House and Senate. Certainly, elections have consequences.

Others would argue that too many Republicans are untethered from problem-solving and compromising. Let’s not forget that in 2020 the GOP did not adopt a party platform.

 As the conservative think tank, American Compass opined the Party of Lincoln lacks both an overarching vision and an integrated policy agenda.

Until the GOP develops an empathetic conservative governing agenda the American Rescue Act is a harbinger of the dominance of a progressive policy agenda for the next decade.

 

Gary Sasse is the Founding Director of the Hassenfeld Institute of Public Leadership at Bryant University.

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