Moneybox

The COVID Relief Bill Makes One Big, Risky Bet

It’ll only be enough if the vaccination effort doesn’t blow it.

Pelosi and Schumer walk side by side down a hallway, with other people in suits following. Pelosi is gesturing with her hands as she speaks to Schumer, who leans in to listen.
Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer after a press conference on Capitol Hill on Sunday. Tasos Katopodis/Getty Images

The simplest way to think about the new, roughly $900 billion coronavirus relief package that Democrats and Republicans finally agreed to on Sunday night, after months of frigid stalemate, is that it’s a bridge to the spring.

The legislation will provide desperately needed help to families and small businesses while they ride out the rest of this bleak and increasingly deadly winter. But much of the aid is likely to run dry by Easter. So what happens then?

The answer will probably depend on how many Americans manage to get vaccinated by that juncture. If the vaccine rollout goes smoothly and quickly, the country could be poised for a summer boom. If not, we might find ourselves staring down another period of crisis.

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In other words: Congress has produced a big, helpful piece of legislation that doesn’t leave us a lot of room for error going forward.

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To some extent, we’re probably lucky to have a deal at all. Back before the election, I personally had assumed that if Joe Biden won the presidency, Senate Majority Leader Mitch McConnell would do his best to avoid passing another major relief bill, preferring to let the economy freeze in a snowbank in order to undermine the incoming administration.

But Republicans were pushed toward a compromise by the looming Georgia Senate runoffs, which will decide which party controls the chamber in 2021. The candidates are running neck-and-neck in both races, and Democrats have battered the two GOP incumbents, David Perdue and Kelly Loeffler, over Congress’ inability to pass a new round of aid, as well as their past opposition to relief checks. As McConnell put it to skeptical members of his conference earlier this month as he tried to sell them on a largish deal, “Kelly and David are getting hammered.“ In his eyes, this bill might as well be called the Loeffler-Perdue Protection Act of 2020.

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At the same time, Democrats are aware that if they don’t win both seats in Georgia, this might be their last opportunity for a long while to pass significant legislation to boost the economy under Biden’s presidency. Refusing a reasonable offer would also have risked making them look like the obstructionists in the eyes of Georgia voters. Hence, both sides had good reasons to bargain.

The end result is that Democrats came away with about two-thirds to three-quarters of a loaf—which isn’t terrible, all things considered. It puts cash in the hands of families, with a new round of $600 checks and an extra $300 per week of unemployment benefits—and sets aside $300 billion for small businesses, mostly through a new tranche of the Paycheck Protection Program, though $15 billion will go to aid shuttered music venues and theaters. There’s $82 billion for schools, as well as cash for the U.S. Postal Service and money to bail out financially devastated transit agencies. And of course, it funds vaccine distribution.

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What it lacks, mostly, is aid for state and local governments, many of which have struggled with their budgets during the pandemic. The support for schools and transit will certainly help around the edges—New York’s MTA is getting $4 billion—but Republicans bitterly resisted including a pool of funds to help states cover their massive gaps, which conservatives unconvincingly but stubbornly argued would be tantamount to a blue state bailout. The bipartisan proposal that kicked off talks would have traded about $160 billion in state aid, which Democrats wanted, for a liability shield protecting employers and businesses from coronavirus-related lawsuits, which Republicans sought. But both issues proved so contentious that negotiators chose to drop both.

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One way to look at this deal is that it was the best offer that House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer could extract from Republicans without having to swallow any major poison pills. Democrats and organized labor opposed the liability shield, because they thought it could potentially put workers’ lives in danger and exacerbate the public health crisis (without the threat of a lawsuit dangling over them, employers might be more reckless about their employees’ health). Republicans also sought to wind down some of the emergency lending programs that the Federal Reserve created early in the crisis, and essentially ban it from ever resurrecting them. Though this demand might not have meant much for the economy in the short term, it would have been a permanent rewrite of the central bank’s powers blatantly aimed at stripping the Biden administration of tools that had benefited the Trump administration, and it set up fundamental conflict over whether Democrats should have the same powers to help the economy as Republicans. Ultimately, the two sides settled on a vastly watered-down version of the language that would let the Fed retain more flexibility.

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In short, the bill doesn’t include all the good things Democrats wanted. But it doesn’t include any of the really awful things they opposed.

The fact that this bill is arriving so late as it is will have some serious consequences. Businesses have closed, and people have lost their jobs permanently. Millions of Americans currently on unemployment will see their benefits lapse temporarily while state bureaucracies set up the new programs. Doing things at the last minute has costs.

But the most important question, in the end, is whether we’ve built a long enough bridge. The new unemployment benefits will only extend until March 14. Paycheck protection loans are only designed to last a handful of months (restaurants will be able to borrow forgivable loans up to 3.5 times the size of their payrolls, versus 2.5 times for other businesses). The most optimistic projections suggest we could have widespread vaccine distribution by early summer, in which case the highest-risk populations could be taken care of, and the gears of normal life might begin to turn again, by the end of spring. But Biden’s incoming surgeon general, Vivek Murthy, recently cautioned that all Americans might not have access until midsummer or early fall. The longer the timeline stretches, the less sufficient this new aid bill will seem. A bill that wanted to play it safe would leave some time to account for unanticipated challenges and delays; this one really doesn’t.

Maybe it will all work out. But our inability to plan more than a few months ahead of time has been among the great failings of the country’s coronavirus response. We may be repeating our mistake.

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