The Daily - The Politics of Pandemic Relief

Episode Date: October 13, 2020

In March, Congress pushed through a relief package that preserved the U.S. economy during the pandemic. It felt like government functioning at its best.But now, that money is running out and bipartisanship has given way to an ideological stalemate.While Republicans balk at plans for further significant government spending — even those coming from the White House — Democrats are holding out for more money and a broader package of measures.The absence of a deal could have dire consequences. One economist estimates that without a stimulus package, there could be four million fewer jobs next year.We talk to Jim Tankersley, who covers the economy for The Times, about what’s getting in the way of an agreement.Guest: Jim Tankersley, who covers economic and tax policy for The New York Times.For more information on today’s episode, visit nytimes.com/thedaily Background reading: After posting on Twitter that he was ending talks, President Trump reversed course, raising the stimulus offer to $1.8 trillion. But his own party may reject that plan, handing Democrats fresh leverage.While Democrats hold out for more concessions, deep divisions among Senate Republicans stand in the way of any relief bill.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today. The economy needs it, and the public wants it. So why can't Congress and the White House reach a deal on a new stimulus package? My colleague, Jim Tankersley, on the politics of pandemic relief.

It's Tuesday, October 13th. Jim, the last time you were on the show, Congress had just passed an enormous economic relief package, the CARES Act, and you walked us through that package. And it was a historic piece of legislation because here was this giant bipartisan package that offered loans to small businesses, bailouts for major industries like the airlines, $600 in weekly federal payments to those who had lost their jobs. There was a moratorium on evictions. It felt like government functioning at its best. And wow, does that feel like a really long time ago. It does. It was a really long time ago. It's an eternity in the scope of this crisis.

And in particular, it's an eternity in the politics of stimulus. But I think it's really important to note that it worked. The stimulus bill that passed in the spring helped the United States recover faster than a lot of other economies that did not do as much spending to try to prop up demand. But that help is running out, and in many cases, has run out. And there is no sign of more help coming on the horizon from Congress. What happened to all that money? Is it actually gone? Yeah, a lot of it is gone. A lot of it was spent, particularly direct aid to people, to workers on unemployment. That money, through July, gave them additional unemployment benefits every week that they were unemployed. Direct checks were sent to individuals

and households. And small businesses burned quickly through the first allocation of money in the Paycheck Protection Program, the lending program. So essentially, the aid to people and small businesses that was in that first package of bills back in the spring is gone. So let's talk about what has happened to the American economy since that CARES Act was passed. You said that it worked, but it is, of course, run out of money and run out of steam. So where has that left the economy? It's left the economy in need of another jolt of help from Congress. What we see now is a recovery that looked really great in May and in June when we were adding back millions of jobs has slowed.

It slowed over the summer and it slowed dramatically in the fall. So fewer small businesses are reopening. In fact, one out of every seven small businesses in the country is closed for good according to one estimate. A bunch of big companies that took aid like like airlines, are now starting to lay people off or announce layoffs if they don't get other support from the government. And meanwhile, state and local governments, which have been totally hammered by the lack of tax revenues because there's just not economic growth happening the way that they had forecast, they're starting to lay off public servants, teachers, firefighters. And the numbers look

grim for that in the future. The possible layoffs that people are warning of is large. And people who were able to sustain their spending with that additional unemployment benefit, the numbers show that they did. They spent that. They saved it. It really kept the economy humming. But now they've run out. And the estimates are that as soon as this month or as late as December, the unemployed people who had those benefits will run through their savings. They still don't have jobs because we are still 10 million jobs shy of where we were before the recession hit. And so in all of this, you have a clamor, really, from the American public. public. Three quarters of Americans in surveys say they want another large stimulus bill to mitigate this economic damage at a time when the federal government can borrow money for almost

nothing. And so how do we arrive at this place, Jim, where economic factors, which you just described, public opinion, and I guess kind of economic common sense, all point to the need for a new CARES Act. And yet months and months and months have passed, and Congress has not taken any action. Well, the divisions start showing up fairly quickly after the initial quick coming together in Congress to pass the first bill and a couple of little follow-ups for small business. In May, bill and a couple of little follow-ups for small business. In May, the House, which is controlled by Democrats, passes a more than $3 trillion stimulus bill, and Republicans immediately pan it and very importantly say that they're not going to pass their own version of a bill right away in the Senate. They're going to wait and see how the economy does given the first round of stimulus and

also the fact that a bunch of state and local governments are lifting restrictions on economic activity. There was this real thought among Republicans and some conservative economists that what was really holding back the economy was these restrictions that put in place. And then what we see over the summer is that that's not really true, that those restrictions are lifted and jobs do keep coming back, but not at the same pace that they were coming back in May and June. And so there starts to be a dawning realization that, hey, a lot of Americans are still unemployed in particular, and there's this deadline at the end of July where they're going to have to basically see a huge cut

in their benefits. Their checks are going to go down enormously if we don't do something. And so sometime in July, negotiations start again, and the Trump administration, led by Treasury Secretary Steven Mnuchin, and Democrats and Republicans in Congress start talking again about, well, what would a possible compromise package look like? And there's some immediate sticking points. And what are those sticking points? Well, there's two big ones in this point of the negotiation.

The real sticking point at this point is the $600 weekly check. First is the unemployment benefit and what size it should be after July. I go to the table with the commitment to the $600. Democrats really want to keep it at $600, and they're getting a lot of pressure from their supporters to hold the line at $600. Republicans are hearing from back home, from small businesses, from mid-sized businesses, from large businesses. Republicans are getting a lot of pressure from business groups and from conservative economists to end the benefit entirely or only do a small one. It's tough sometimes to get people to come back to work, and it's understandable.

They say it's keeping people from going back to work. You're getting paid this extra money, and you're not going to go take a job if it's offered. We don't want someone to have higher benefits than what someone can make working. Right. The argument being that basically people were being paid more than they would get in their actual job before the pandemic. Right. Exactly. Which which is both true that people were making more than that. But also, it turns out from some research that a bunch of economists have done since then was not really a very big impediment to people returning to work. So that's the first thing is the unemployment benefits. The second thing.

We know Democrats are pushing for billions for state and local governments. Democrats want a lot of money to help shore up big budget shortfalls. The state's facing massive deficits all because of the pandemic. States like California and New York, but also Texas and Florida and other places that are experiencing shortfalls. Republicans have labeled this already by this point a, quote, blue state bailout. Blue states that have run their states into the ground because of decades of Democrat policies. And Republican activist groups are warning Republican senators, not one dime for those fat cat Democrats, you know, on the coasts.

But it's also true that even states like South Dakota, with a Republican governor, was asking lawmakers to send more money and relief because South Dakota's economy had taken a hit from the virus. And so there was pressure from red state governors. It just wasn't enough to overcome, for a lot of Senate Republicans in particular, this idea of a blue state bailout. And so those emerge as sort of two of the really big sticking points early on. So the unemployment benefits expire at the end of July, and that expiration comes and goes, and we still don't have a deal. And now we enter early August, and we're staring down what was supposed to be the August

recess for senators. Very important, particularly for some Republicans who are up for reelection in states like Arizona and Colorado. They need to get back in campaign. And the expectation had been that that might force a deal. But it doesn't happen again. And so the next big thing that shakes up these negotiations is that President Trump decides he's going to do something on his own. Ladies and gentlemen, the president of the United States, Donald J. Trump. The president goes to Bedminster, New Jersey. Thank you very much, everybody. Thank you. And makes a big show of announcing some executive orders that he says are going to reinvigorate the economy.

Democrats are obstructing all of it. Therefore, I'm taking executive action. We've had it. And we're going to save American jobs and provide relief to the American workers that I'll be signing these bills in a very short period of time. But he has some problems.

And the big problem is the way that the Constitution divvies up responsibilities between branches of government. Trump wants to cut taxes, and he wants to spend more money, and Congress has to do both those things. First one is I'm providing a payroll tax holiday to Americans earning less than $100,000 per year. He tries to do what he says is a payroll tax cut, but isn't really, and just dissolves into a joke.

No companies actually follow through with the scheme that he has set up. Certainly no large companies follow through with it. The third action I'm taking today will also provide additional support for Americans who are unemployed. And then out of thin air, he tries to create his own supplemental unemployment benefit. For this reason, I'm taking action to provide an additional

or an extra $400 per week in expanded benefits. $400, okay? He repurposes a bunch of money for federal disaster assistance to create a several hundred dollar a week benefit for states that apply. But states have to put up some of their own money to make the benefit full strength. And there's a time limit on it. And it turns out that even the states that apply for it run out of money after only a few weeks. And so it is nowhere close to a permanent solution for the problem of unemployed people not having anywhere close to the benefits that they had had before. So none of that actually ends up stimulating the economy.

And no one really thought at the time that it would. But what it does do is enrage Democrats who feel like Trump is trying to bypass them in the process. And it gives a little more cover to the Republicans who didn't want to spend any more money in the first place and now can say, see, the president has acted. We don't need to. By mid-August, it's really starting to look like maybe there won't be another stimulus bill. And by Labor Day, that looks increasingly likely. And negotiations continue, but the hopes behind them are really starting to fade.

And meanwhile, the political incentives underlying all this are really starting to change for Democrats, Republicans, and Trump. We'll be right back. We'll be right back. Jim, now that we are caught up, I remain genuinely puzzled by what's in it for both sides to not act, to not reach a deal on behalf of this ailing economy. So let's start with the Republicans. What is their motivation for doing nothing in this moment? Well, the first and biggest incentive is ideological. Republicans have a core strain of fiscal conservatism that believes that government spending is rarely, if ever, the answer to economic problems. You saw that sort of set aside in the spring when we were in a true crisis.

But now in the midst of the recovery, that is coming back. And a lot of Republicans are citing that and saying, you know, the House Democrats want a bunch of things we think would hurt the economy. They want to spend too much money. So that's the start. But then you have to layer politics on that. And the politics here are not straightforward. It is not as if every Senate Republican is just trying to do whatever they can right now to stimulate the economy between August and the election when President Trump is up for reelection, which you might normally expect them to do. Presidents do better when the economy is doing better and they're running for reelection. But instead, what you see are that a lot of Senate Republicans are looking past the 2020 election. They're looking to 2022 or 2024 when they're either going to be up for reelection in conservative states

where their biggest concern might be a primary opponent who, and you can almost hear the attack ads in your head, could say, Ted Cruz voted with Nancy Pelosi to bail out blue states. Send a real conservative to the Senate. So the long-term view for a Republican senator is that this is a political nightmare, signing onto a giant spending bill. But I wonder how they weigh that against the needs of their district and voters who are unemployed and waiting for benefits, small businesses that need more loans and are no doubt clamoring for some sort of a spending bill. Well, Republicans are hearing that they're hearing all the time from small business owners and from people in their states and their districts saying we do need help. And the Republican response is often, you know, we want to help you. I'm trying to get you targeted relief. That's how a lot of Republicans talk about it. But the darn Democrats are blocking that because they're

insisting on all this other stuff, all this pork, they call it, in the bill. We're not going to spend all that money. You know how bad it is to waste taxpayer money. But the other thing that's happening is that they're remembering that they have constituents who basically agree with their view in a primary election in particular that government spending on a wide scale is not a good thing to do. And so they are not going to be penalized by primary voters in their states or districts for blocking another big spending bill. If anything, they'll be rewarded for it. So kind of perversely, Senate Republicans have this political incentive to keep doing nothing for their own political survival, even if it may be bad for some of their

constituents and clearly not so great for their president. Well, and I think we can't now talk about the incentives without bringing in what's happening with the president's poll numbers, which are not good in August and moving forward. He still trails Joe Biden by a lot. And Republicans in the Senate and the House are starting to think about he really could lose.

And if he loses, they've got their own political starting to think about, he really could lose. And if he loses, they've got to sort of their own political futures to think about. And what does a post-Trump Republican party look like, which could very much include a return to very strict fiscal conservatism. And so they want to have their fiscal conservative credentials in order in the event that they are running in a crowded 2024 presidential primary. And that suddenly is back in the top of the minds of Republican voters as a thing they want, fiscal purity. So if you're Ted Cruz or Rand Paul or any of the numerous other Republican senators thinking about running for president, you want to have impeccable fiscal credentials

for that potential primary contest. Okay, you have very clearly laid out why Republicans don't have any motivation to act right now. What about the Democrats? This would seem a little more straightforward for Democrats. Their constituents need help, just like Republicans. And stimulus, a giant package of spending, is generally in keeping ideologically with a Democratic view of the government's role. So why not be very willing to do a deal with Republicans? Well, they want a deal and they keep negotiating toward a deal all summer. They also are under pressure to take a deal from parts of their party. Coming down to something like President Trump's number of $400 a week, I think

now, you know, I'd like to see Democrats say, you know, at 8.4% unemployment, and we can do that. From people like Jason Furman, the former chief economist for President Obama, who is saying, rational person would look at this report, say stimulus was working. We still have a problem. We need more of it. We can compromise. You can always come back later and get more money. You should not wait until February. But a lot of Democrats are thinking about waiting till later. They are thinking we might be able to get a better deal from Joe Biden if he wins than what Trump's offering us now. We can get more money for state and local governments.

We can get more money for unemployed workers. We can help businesses more on our terms. And so that is changing their calculus as well. And underpinning all of this is their thought that President Trump needs this more than they do politically. And so they're not being punished by voters for not getting a deal. And so they will wait for Trump to come to them on their terms. So the Democrats calculation is that they're going to get a deal on their terms or closer to their terms. But if they don't, they are willing to deprive the country of this stimulus for months in the hope that Trump loses, Biden wins, and they get exactly the deal that they want.

That's a pretty high stakes gamble. It is a risk. And it's probably not going to work. But it might. And if it does, we are seeing the seeds of it right now in the last few days as President Trump moves toward the Democrats. What do you mean? Consider the events of the last week. This is the important part of this multi-part tweet that the president put out.

The president took to Twitter. He says that I've instructed my representative to stop negotiating until after the election, when immediately after I win, we will pass a major stimulus bill that focuses on hardworking Americans and small businesses. And it looked like everything was done. I just keep coming back to this point. I don't understand the political calculus. Markets are falling. And he got really nervous about that.

I'm telling you something I don't tell anybody else, because maybe it helps or maybe it hurts negotiations. And he told his aides to go back to the table and make an even bigger offer to Democrats. I would like to see a bigger package. Secretary Mnuchin is up to $1.8 trillion, so the bid and the offer is narrowing somewhat between the two sides. And when they didn't take that...

He would actually go beyond what some of the Democratic numbers are. He had aides on the Sunday talk shows this weekend, raised the possibility of an even higher offer to Democrats, spending more money than even the Democrats themselves had proposed. So it looks like he's moving toward their position. And we assume that is because it is 20-something days until the election? Yeah, he really wants a deal. He is, I think, very nervous about looking weak in the eyes of the stock market and looking like a guy who can't make a deal.

But he has this really difficult needle to thread, which is Senate Republicans are not at all on board with this idea of spending even more money to make an agreement. Right. And based on everything that you have said to this point, it's hard to see a Senate controlled by Republicans adopting that generous version of this legislation. So here's the scenario where a deal with Trump and a lot of money and mostly Democrats could pass. What would have to happen is, first the deal is struck, Trump supports it, House Democrats vote and pass the bill. Then Mitch McConnell, the Senate Majority Leader,

would have to free up Senate time, which right now is entirely consumed with the attempt to confirm a new Supreme Court justice. He'd have to free up time to allow a vote on a bill that probably more than half of his caucus opposes. So he would have to let a few Republicans vote with a bunch of Democrats to pass a bill that the president wants, but which most of Mitch McConnell's caucus does not want, at a time when Mitch McConnell wants to be using the Senate floor for other business. So it's a very, very tricky scenario to actually see coming to pass. And one that you don't think will happen?

I'm of the opinion that you cannot buy into the idea that this will happen until you have seen all of the pieces lined up perfectly. If they announce a deal and there's legislative text and there's time set aside for a vote, and then they announce the votes and the president says he'll sign it, then I'll believe there's a deal. Until then, it all feels like political theater like we've seen over the last several months of both sides wanting to look like they are for a deal without actually compromising to make the deal. Thinking back, Jim, to the beginning of our conversation and the CARES Act and what it represented about what the United States government is capable of,

this really does feel like the saddest possible vision of what government can't do. This feels to me like how government tends to work. And unfortunately, it's the rule that proves just how extraordinary the exception was in March. Most of the time, politics is a driving force for how people conduct negotiations. And big ideological differences can keep people apart from solving problems. I think that's the case here. And big ideological differences can keep people apart from solving problems. I think that's the case here. And it only wasn't the case in the spring because it was such an extraordinary moment of crisis.

But if we allow several more months to go without pumping more help into the economy, it is very likely, economists warn, that there's going to be just huge damage that will compound over time and make this recession much worse. And so I think that is the real tragedy here, is that politics have a human toll, and the normal exercise of politics can very much leave real people behind. Jim, I'm curious if in your reporting on all this, you have ever been able to establish the financial cost of the United States Congress having basically done nothing in the past six months or so? Is that measurable? Yeah, I think we can see it in large part by thinking what next year would look like this coming year if they continue to do nothing.

And there's some good research by an economist named Ernie Tedeschi at Evercore, who calculated that we would have 4 million fewer jobs next year without more stimulus than we would with a stimulus package like the compromise one they started talking about back in July. It's a huge number of jobs. Yeah, it's a lot. And it's going to be more people losing their homes. It's going to be more people having to make those horrible choices between food and medicine and rent and other things. And we're not going to see that in real time in big headlines in the stock market, you know, every day the way that we did in March with the spread of the virus. It's just going to be the slow, steady unpleasantness of an economic downturn. And the failure to act on that brings me back to what was almost an implicit contract between Americans and their government at the

start of this crisis. Americans sort of agreed to dramatically change their lives and reduce their economic activity, where they went and how they shopped and even whether they could go to work so that we would have fewer deaths from the virus to try to slow and stop the spread. In exchange, the government said, we're going to help you out. We're going to forward you across that flood of financial difficulty. And that's what that first stimulus bill was. And it had a lot of successes to it. But the government now has sort of dropped its end of the contract. It's not paying people additional money who can't find jobs. It's not offering direct support to small businesses who do not have the customers they used to through no fault of their own. And the risk of the

government's failure to act that way is that you take what should have been a bunch of temporary damage from essentially the flicking off and on of an economy and instead making it permanent. You take an extraordinary recession, extraordinary in its speed, and turn it into something that looks more and more every day, like the type of recession we've experienced in the past, which can lead to a slow recovery, which can leave people out of work for months, if not years, reduce their skills, reduce their ability to find jobs, reduce the actual employers who are out there able to put them to work, and just hurt people and businesses in a permanent way that is scarring to the economy

and did not have to happen if the government had kept up its side of the contract. Right. And if that ends up being the case and there's permanent damage from this pandemic recession, it will be, as you say, that rare and really agonizing case of the government deliberately putting the U.S. economy in recession, creating the problem, and refusing to do its part to fix it and get Americans through it. And that will have been an extraordinary abdication of the rule of government. It will be the government refusing to finish the work that it promised to do,

and people will be the ones left picking up the pieces. Thank you, Jim. Thank you. We'll be right back. Here's what else you need to know today. Good morning, everybody. The hearing to confirm Judge Amy Barrett to the Supreme Court will now begin. On Monday, a bitterly divided Senate Judiciary Committee began four days of confirmation hearings for Judge Amy Coney Barrett,

President Trump's third nominee for the Supreme Court. This is probably not about persuading each other unless something really dramatic happens. All Republicans will vote yes and all Democrats will vote no. In his opening remarks, the committee's chairman, Senator Lindsey Graham, left little doubt whether Barrett would be confirmed by the Republican majority. When asked in October 2018 if Republicans intended to honor their own rule if an opening were to come up in 2020, Chairman Graham promised, quote,

The committee's Democrats, led by Senator Dianne Feinstein of California, called the hearing itself a broken promise by Republicans, including Senator Graham, whom Feinstein quoted in her opening statement. Republicans should honor this word for their promise and let the American people be heard. Simply put, I believe we should not be moving forward on this nomination, not until the election has ended and the next president has taken office. The hearings will continue this morning when senators begin questioning Judge Barry about her views. That's it for The Daily. I'm Michael Barbaro.

See you tomorrow.