Democrats Refuse To Slim Down Their Bloated Partisan Spending Bill

Economists And Policy Experts Of Differing Political Opinions Have Repeatedly Suggested Democrats’ Spending Bill Is Not Well Targeted

“For policy experts and even members of Biden’s own party, the improving [economic] picture is raising questions about whether the stimulus bill is mismatched to the needs of the current moment. Some economists say it’s too focused on providing funding to states, cities and schools — some of which, they argue, could be used instead for long-term economic investments or simply reduced altogether. … The changed economic outlook has intensified political opposition to the bill, giving congressional Republicans political cover to vote against the legislation and creating some skittishness among centrist Democrats about the overall price tag.” (“As Senate Rushes $1.9 Trillion Bill Through Congress, Biden Faces Doubts Over Whether It’s Still The Right Package,” The Washington Post, 3/04/2021)

• “Combined with legislation passed by Congress in December, Biden’s stimulus will amount to about $300 billion per month in new economic relief for its first nine months. By comparison, the decline in gross domestic product in November only amounted to $80 billion below precrisis levels…” (“As Senate Rushes $1.9 Trillion Bill Through Congress, Biden Faces Doubts Over Whether It’s Still The Right Package,” The Washington Post, 3/04/2021)

• “Several economists said they would cut down or overhaul several key parts of the bill. … The vast majority of business economists think injecting around $1 trillion more would be sufficient, according to a recent survey by the National Association for Business Economics.” (“As Senate Rushes $1.9 Trillion Bill Through Congress, Biden Faces Doubts Over Whether It’s Still The Right Package,” The Washington Post, 3/04/2021)

BILL HOAGLAND, Senior Vice President at the Bipartisan Policy Center: “The improving economy and improving outlook on the virus has dramatically changed the dynamic on Biden’s spending plans, but the bill has remained largely the same.” (“As Senate Rushes $1.9 Trillion Bill Through Congress, Biden Faces Doubts Over Whether It’s Still The Right Package,” The Washington Post, 3/04/2021)

The Washington Post Editorial Board Points Out That Democrats’ Cash Payments Are STILL Not Tailored To ‘Go Only To The Neediest People’

THE WASHINGTON POST EDITORIAL BOARD: “AS PRESIDENT BIDEN and the Democratic-majority Senate move toward final passage of a COVID relief package, a key question has been how far they would be willing to go to make sure that cash payments go only to the neediest people. The answer began to emerge Wednesday, and unfortunately, it appears to be ‘not very far.’ The White House and Senate Democrats have converged on a plan that would trim a House-approved plan somewhat but still enable stimulus payments to reach millions of upper-middle-class individuals and households. In addition to being unjustifiable as a response to the COVID crisis, showering public money on those who don’t need it would further commit the governing party to a mistaken concept of progressive policy.” (Editorial, “Democrats’ Targeted Stimulus Payments Will Still Shower Money On Those Who Don’t Need It,” The Washington Post, 3/03/2021)

• “In our view, economic policy should be based on economic requirements, not political ones. Even in a cheap-interest world, government resources are not limitless and tradeoffs are still real. Funds Congress spends padding the bank accounts of people who aren’t poor, or even close to poor, are funds that won’t be available for other purposes, whether it’s programs to promote equity — or defense, scientific research and infrastructure. Real progressives accept that reality and set policy priorities accordingly.” (Editorial, “Democrats’ Targeted Stimulus Payments Will Still Shower Money On Those Who Don’t Need It,” The Washington Post, 3/03/2021)

And The Bailout For Big-Spending State And Local Governments Is Orders Of Magnitude Beyond Any Actual Needs

“But at least one important slice of the package -- the nearly $200 billion being earmarked to state governments -- goes beyond a rescue and is almost certain to further stimulate an economy that is already beginning to rapidly recover. That’s because those proposed cash transfers are more than six times greater than the approximately $31 billion of expected tax revenue that disappeared in the current fiscal year, according to pre-pandemic and more recent forecasts compiled by Bloomberg. In other words, that money could make up for that loss and be plowed back into states’ economies, such as their own version of relief checks, infrastructure projects and more, depending on the federal guidelines around the aid.” (“Biden’s State Rescue Dwarfs Tax Hit, Turning It Into Stimulus,” Bloomberg, 3/03/2021)

“Moody’s Analytics found in a report that states and cities only need $61 billion. The American Enterprise Institute, a conservative think tank, pegs that number at closer to $100 billion, although the left-leaning Center on Budget and Policy Priorities found as much as $225 billion was needed. Many states face much better fiscal outlooks than expected at the outset of the pandemic.” (“As Senate Rushes $1.9 Trillion Bill Through Congress, Biden Faces Doubts Over Whether It’s Still The Right Package,” The Washington Post, 3/04/2021)

“Democrats have argued … that states face dire fiscal consequences without aid, and included $350 billion in relief for state and local governments in President Biden’s $1.9 trillion federal stimulus bill, which narrowly passed the House this past weekend…. As it turns out, new data shows that a year after the pandemic wrought economic devastation around the country, forcing states to revise their revenue forecasts and prepare for the worst, for many the worst didn’t come…. By some measures, the states ended up collecting nearly as much revenue in 2020 as they did in 2019. A J.P. Morgan survey called 2020 “virtually flat” with 2019, based on the 47 states that report their tax revenues every month … A researcher at the Urban-Brookings Tax Policy Center, a nonpartisan think tank, found that total state revenues from April through December were down just 1.8 percent from the same period in 2019. Moody’s Analytics used a different method and found that 31 states now had enough cash to fully absorb the economic stress of the pandemic recession on their own.” (“Virus Did Not Bring Financial Rout That Many States Feared,” The New York Times, 3/01/2021)

Former Obama White House Economist Larry Summers Explained The Biden Stimulus Proposal Far Exceeds The Gap In Economic Activity And Dwarfs The 2009 Obama Stimulus Bill

LARRY SUMMERS, Former Clinton Administration Treasury Secretary & Former Obama White House National Economic Council Director: “[W]hereas 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. Relative to the size of the gap being addressed, it is six times as large.” (Larry Summers, Op-Ed, “The Biden Stimulus Is Admirably Ambitious. But It Brings Some Big Risks, Too.,” The Washington Post, 2/04/2021)

• SUMMERS: “[T]his crude calculation actually underestimates the difference between what was done in 2009 and what is proposed now. First, unemployment is falling, rather than skyrocketing as it was in 2009, and the economy is likely before too long to receive a major boost as covid-19 comes under control. Second, monetary conditions are far looser today than in 2009 given extraordinary Federal Reserve policies, the booming stock and corporate bond markets, and the weakness of the dollar. Third, there is likely to be further strengthening of demand as consumers spend down the approximately $1.5 trillion they accumulated last year as the pandemic curtailed their ability to spend and as promised further fiscal measures are undertaken.” (Larry Summers, Op-Ed, “The Biden Stimulus Is Admirably Ambitious. But It Brings Some Big Risks, Too.,” The Washington Post, 2/04/2021)

SUMMERS: “Wage and salary incomes are now running about $30 billion a month below pre-covid-19 forecasts, and this gap will likely decline during 2021. Yet increased benefit payments and tax credits in 2021 with proposed stimulus measures would total about $150 billion — a ratio of 5 to 1. The ratio is likely even greater for low-income individuals and families, given the targeting of stimulus measures. In normal times, a family of four with a pretax income of $1,000 a week would take home about $22,000 over the next six months. Under the Biden proposal, if the breadwinner were laid off, the family’s income over the next six months would likely exceed $30,000 as a result of regular unemployment insurance, the $400-a-week special unemployment insurance benefit and tax credits.” (Larry Summers, Op-Ed, “The Biden Stimulus Is Admirably Ambitious. But It Brings Some Big Risks, Too.,” The Washington Post, 2/04/2021)

Summers Also Warned That This Much Spending Could ‘Set Off Inflationary Pressures Of A Kind We Have Not Seen In A Generation’

LARRY SUMMERS: “[T]here is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability…. [G]iven the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply. Stimulus measures of the magnitude contemplated are steps into the unknown.” (Larry Summers, Op-Ed, “The Biden Stimulus Is Admirably Ambitious. But It Brings Some Big Risks, Too.,” The Washington Post, 2/04/2021)

Our Allies In The United Kingdom Have Expressed Similar Concerns About This Level Of Spending

“[Joe Biden’s] economic agenda is starting to cause real concern in Downing Street. America’s new President is getting ready for the mother of all spending sprees to revive his economy after the pandemic. He plans a $1.9 trillion stimulus package: that is to say, he’s all set to pump more than double as much money into the economy as Barack Obama did after the financial crash. The worry is that when Biden pours all this free vodka into a post--pandemic party, things could get out of control pretty quickly. Larry Summers, who served as Treasury Secretary under Bill Clinton and as an adviser to Barack Obama, is already warning of inflation danger. An ‘enormous risk we are running’, he said recently: even he is worried by the Biden splurge. ‘We’re gonna set ourselves up for inflation. And then we’re gonna either have inflation or we’re gonna have a collision between fiscal and monetary policy to contain inflation of a kind that usually doesn’t end well.’” (“Rishi’s Nightmare: Will Inflation Crush The Recovery?,” The Spectator, 3/06/2021)

• “The fast roll-out of the vaccination program means pent-up spending could emerge quickly into the economy, putting up inflation. There are also concerns in the [UK] Treasury that Joe Biden’s $1.9 trillion (£1.4 trillion) US stimulus package could also have inflationary knock-on effects for the UK. Both could increase interest rates further.” (“Boris Johnson And Rishi Sunak: To Immunity And Beyond,” The Times [of London], 2/27/2021)

“[O]nce inflation is unleashed, it can be hard to control. This was Friedrich Hayek’s warning to the Mont Pelerin Society Conference in 1969. ‘If the tiger (of inflation) is freed he will eat us up; yet if he runs faster and faster while we desperately hold on, we are still finished.’ Last week Andy Haldane, chief economist at the Bank of England, published a speech, ‘Tiger by the Tail’, named after Hayek’s metaphor. The conditions that killed off inflation, he said, are disappearing. Many of the de-flationary forces from decades past have shifted or vanished.” (“Rishi’s Nightmare: Will Inflation Crush The Recovery?,” The Spectator, 3/06/2021)

Another Economic Columnist Reminds That ‘All This Borrowing And Money-Printing Also Risks Triggering A Run On The Dollar And Demands From Foreign Investors For Higher Interest Payments’ And ‘Even A Modest Run-Up In Interest Rates In A Country As Indebted As Ours Would Saddle Taxpayers With Economically And Politically Painful Levels Of Debt Service’

STEVEN PEARLSTEIN, Washington Post Economics & Business Columnist: “To hear it from liberal economists, progressive activists and Democratic politicians, there is no longer any limit to how much money government can borrow and spend and print. In this new economy, we no longer have to worry that stock prices might climb so high, or companies take on so much debt, that a financial crisis might ensue…. So party on, progressive dudes. Worries about debt and inflation are just so 20th-century, the figments of a now-discredited neoliberal imagination. We have entered a magical world where borrowing is costless, spending pays for itself, stocks only rise and the dollar never falls.” (Steven Pearlstein, “In Democrats’ Progressive Paradise, Borrowing Is Free, Spending Pays For Itself, And Interest Rates Never Rise,” The Washington Post, 3/03/2021)

• PEARLSTEIN: “I’ll be the first to admit that because of new technology and structural changes to the global economy, aspects of our economic understanding need to be updated. But those overdue correctives have been hijacked by partisans and ideologues who would have us believe that the laws of economics have been repealed. It is undoubtedly true, for example, that in a globalized economy, the United States is less susceptible to inflation-inducing capacity constraints or a crowding-out of private borrowing by government borrowing. But that doesn’t mean that the government can borrow and spend an extra $10 trillion on COVID relief, infrastructure and climate investments without running a serious risk of overheating the economy. Similarly … it’s also true that even a modest run-up in interest rates in a country as indebted as ours would saddle taxpayers with economically and politically painful levels of debt service.” (Steven Pearlstein, “In Democrats’ Progressive Paradise, Borrowing Is Free, Spending Pays For Itself, And Interest Rates Never Rise,” The Washington Post, 3/03/2021)

• PEARLSTEIN: “Since the financial crisis of 2008, the Federal Reserve has learned that it could avert financial panic and global depression by printing dollars and using them to buy government and corporate bonds. But what we should also have learned is that running the print press at full tilt for years after the initial crisis has passed creates giant credit and investment bubbles that will burst at the first hint that the bond-buying is about to end. All this borrowing and money-printing also risks triggering a run on the dollar and demands from foreign investors for higher interest payments on the $1 trillion they lend us each year just to maintain our current standard of living. Just because these things haven’t happened yet doesn’t mean that they won’t. And when they do, the unwinding will be swift and painful.” (Steven Pearlstein, “In Democrats’ Progressive Paradise, Borrowing Is Free, Spending Pays For Itself, And Interest Rates Never Rise,” The Washington Post, 3/03/2021)