ANALYSIS — Call it a symptom of pandemic fatigue. Lawmakers have been locked in a partisan battle for months over the size and shape of the next round of coronavirus relief aid. And as the Senate reconvenes Tuesday from its monthlong August recess, neither party shows signs of giving ground.
Speaker Nancy Pelosi set a bottom line of $2.2 trillion in additional aid as a precondition for resuming bipartisan talks. The Trump administration wants a package little more than half that size, or $1.3 trillion, according to White House Chief of Staff Mark Meadows.
But behind the budget standoff lies an ideological clash over how best to respond to a pandemic that is lasting longer than most anticipated when it first hit in March. And the longer the coronavirus threat endures, the more difficult it becomes to heal the divide.
When the virus first hit, lawmakers rushed to respond, passing more than $2.4 trillion in aid in a flurry of legislation in March and April.
But six months later, with no vaccine yet in sight and no end to the economic misery, conservatives have begun questioning the wisdom of trying to prop up an economy through federal support for an indefinite, extended period of time.
“How long can taxpayers pay people for not working?” asked Paul Kupiec, a resident scholar at the American Enterprise Institute. “I don’t see how long you can keep doing that until something snaps. I don’t know any economics I was taught that says this is sustainable.”
The reason for concern was underscored on Sept. 2, when the Congressional Budget Office forecast a $3.3 trillion deficit for the current fiscal year — more than triple the shortfall of the previous year. The projected surge is mostly the result of pandemic relief spending and a sharp economic contraction that drained revenue.
By next year, debt held by the public will exceed the size of the total U.S. economy, as measured by gross domestic product, the CBO said. And by 2023, the debt as a share of the economy would bust all records — putting the fiscal health of the world’s largest superpower in uncharted territory.
Most economists agree that at least some additional aid is needed now. And they say that a pandemic is the wrong time to address long-term fiscal concerns.
“The risk really comes from doing too little, not in doing too much,” said Joel Friedman, vice president for federal fiscal policy at the liberal-leaning Center on Budget and Policy Priorities. “If you don’t do enough in the near term to help folks, you are going to have long-term damage to the economy that can be significant.”
Even Federal Reserve Board members have weighed in, venturing beyond their role in setting monetary policy to urge an infusion of more federal spending. “As was true in the first phase of the crisis, fiscal support will remain essential to support many families and businesses,” said Lael Brainard, a Federal Reserve governor, at a recent Brookings Institution forum.
Evidence of economic pain is clear enough. More than 29 million Americans claimed unemployment benefits for the week of August 15, according to the Bureau of Labor Statistics. That’s up from 1.6 million who claimed them in the same time period a year ago.
But conservatives are urging a bare-bones approach to additional aid. After Labor Day, Senate Republicans are expected to take up a “skinny” version of a pandemic relief package that is likely well under $1 trillion.
“The best scenario is that Congress does nothing,” said Adam Michel, a senior policy analyst at the conservative Heritage Foundation’s Institute for Economic Freedom. “I don’t think it’s worth passing a monstrosity.”
While Michel said he would support extending unemployment benefits and providing liability protection for employers from pandemic-related lawsuits, he said those measures shouldn’t be used to “motivate additional trillions of dollars of unnecessary spending.”
And even if Congress finally agrees to a new aid package this month, as many expect, it seems unlikely to be the last. The Congressional Budget Office in July forecast an average annual unemployment rate of 8.4 percent in 2021 — down from the double-digit levels of recent months but still in pain-inducing territory. Economic growth won’t recover to its pre-pandemic level until the middle of 2022, the nonpartisan agency said.
On Sept. 1, Treasury Secretary Steven Mnuchin pointed to signs of economic revival, touting a gain of more than 9 million jobs in May, June and July. But that gain hardly offsets the loss of 22 million jobs from March and April — and the optimistic outlook assumes no second wave of the virus this winter that could send the economy into another tailspin. An additional 1.4 million jobs were created in August, the Labor Department reported Friday, but that uptick means the economy still has yet to recover more than half the jobs it lost from the pandemic.
“The true need is going to extend well beyond the start of 2021,” said Sharon Parrott, senior vice president for federal policy at the Center on Budget and Policy Priorities. “I think it really tests the values of the nation, in terms of what we’re willing to do in a recession that hits low- and middle-income workers far more heavily than people at the top.”
All of which means the fight over how much aid the government should provide — and for how long — won’t be ebbing anytime soon.