Today, Explained - Stimulating America

Episode Date: July 28, 2020

Democrats and Republicans have a $2 trillion disagreement on how to relieve Americans from the economic crisis caused by the coronavirus. Transcript at vox.com/todayexplained. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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The countries in various states have shut down. Kids are at home, and they may be for a while. If you have a job, you're lucky. If you don't, you're living in fear of not making rent or a mortgage payment. It's all pretty obvious, and that's why the government stepped in to help several months ago and supplemented unemployment benefits. But those benefits are set to expire at the end of this week, and Democrats and Republicans have a $2 trillion disagreement on what to do next.

Matthew Iglesias, you dig into these kinds of disagreements for Vox on the Weeds podcast. Republicans unveiled their big coronavirus rescue package on Monday afternoon. What are they calling it? It's called the HEALS Act. It's a great adventure in acronym formation. That's health, economic assistance, liability protection, and schools.

HEALS. Okay. And what's in it? The most important thing to know is it's $1 trillion, which is smaller than the Democratic proposal. And we've allocated that in a way that we think makes the most sense for the country at this particular time. So it contains some of the same stuff as the Democrats do. Another round of sort of checks that will go out to most households,

which is similar to the Democratic proposal, a little bit less generous. They extend unemployment insurance, but they cut it from $600 a week to $200 a week. And we want to have something which pays people about 70% wage replacement, which I think is a very fair level. So it's not a fixed number. It's something that pays you a percentage of your wages that are lost. There's a lot of questions about how that's supposed to work. It contains this big liability protection provision. It was important enough it made it into the acronym. And the idea is to make it hard or impossible for someone to sue a business for saying they're responsible for

you getting COVID-19. That's been a sort of important priority for Mitch McConnell. There have already been 3,500 lawsuits filed. The country cannot stand an epidemic of lawsuits on the heels of the pandemic. We're already working our way through. Then he's got some money for schools, some money for testing, a small sort of business loan program that's a little bit of an interesting idea, some extra money for the PPP business loan program. Also, a little bit of a grab bag of stuff, like there's $2 billion in there to renovate the FBI headquarters. What? Who is clamoring to renovate the FBI headquarters. Well, so the FBI headquarters is across the street from the Trump Hotel. And the FBI, it appeared at one point, wanted to move out of D.C. to a sort of suburban

location that would be easier to have, like, scary security features around. President Trump didn't like that idea for whatever reason. He wanted to renovate the existing FBI facility, which I think is full of asbestos. So that's why it's such a hideously expensive project. Anyway, I mean, this is not that important, but Nancy Pelosi has been talking about it a lot. I think to her, it's a signpost of the level of seriousness with which Republicans are undertaking this, that there's no money to, like, support general state and local government budgets in this plan. But there is money for a real estate project that's related to the President's Hotel. And is there money to protect people who might get evicted or who might fall behind on rent as a result of this ongoing crisis we're in?

Most households will get $1,200 more if you have more than one person in your household. So that will help. I mean, there is financial assistance to people. The $200 a week of bonus unemployment insurance is quite a bit stingier than Democrats' proposal, but is quite a bit more generous than simply doing nothing, the situation we're facing this week. So, you know, it's wrong to say they're not doing anything to help people. They're just doing less. Let's talk about the other plan here.

What are the Democrats calling their version? So Democrats' acronym is the HEROES Act, Health and Economic Recovery Omnibus Emergency Solutions. Named for our heroes, whose provisions are largely based on the four previous bipartisan bills we have passed. Why do they all have to be acronyms now? When did that happen? This is a fascinating story. You know, it wasn't the Patriot Act that did this. The letters stand for uniting and strengthening America by providing appropriate tools required to intercept and obstruct terrorism. No, it sort of predates Patriot Act.

You know, we didn't do these names on every bill until quite recently. But now, you know, people are working the back channels. They're brainstorming names for these things. It's considered, you know, if they do a new edition of how a bill becomes a law, there's going to have to be, that's like a whole step in the process. I think there's no better sign of our government largesse

than the amount of time and effort that's being spent on these acronyms. It's great stuff. It's great stuff. Particularly good when you can work in a term like omnibus, which I think doesn't mean anything to normal people, but is an important congressional procedure concept, which is that this bill contains a lot of different provisions that cut across different appropriations fiefdoms. So it is an omnibus bill and good for them. Okay, well, let's talk about the omnibus. What's in the Democrats' plan? There's a lot of stuff in the Democrats' plan. So the Democrats' plan is $3 trillion.

So triple the size. Triple the size. So it's a lot of money. And so they do a lot of stuff. How much of that money is dedicated to rebuilding the FBI headquarters in Washington, D.C. So none of it, I think, goes to that important purpose. But there's a few big buckets in the Democrats' bill. One is they are extending the $600 a week bonus unemployment insurance with no big modifications. So that costs a lot of money. It's a lot of help. They are doing the $1,200 checks again, except they are changing it so that children will now count as a full person worth the entire $1,200 instead of $500. So there's that pillar. Then they have money for tests, money for virus research, vaccines, things like that. They also have a lot of money for states. They really want to avoid state and local government budget crises. And that's a huge conceptual difference with the Republicans. Then there's some money that's specifically earmarked for schools. Democrats have since passing this bill, they have sort of raised their ask on the school front. And then

they have some money for business loans in there. But I think the most important difference between these bills is $1 trillion versus $3 trillion. And that's what's going to make negotiating hard. Beyond the immense difference in how much each party wants to spend here, there's also sort of an interesting difference in each party's timeline. The Democrats passed their $3 trillion relief package back in May in the House, and Republicans are just presenting their plan this week with benefits set to expire on Friday, yeah? Why did Republicans wait so long? This is extremely odd.

The main thing is there is disagreement in Republican circles as to whether they should do anything. There's been a significant block of Republican members of Congress who say, we've spent enough money on this. Like, we're done. No more spending. And that's not what most Republicans think, but a lot of them think that. Then Mitch McConnell has wanted to craft a proposal that he can get all Republicans to support.

Not because a proposal like that will pass, because he knows he has a deal with Nancy Pelosi and House Democrats, but he wants to strengthen his hand in negotiations by having a unified caucus behind him. And he's been dealing with some very recalcitrant backbench right-wing members who just haven't wanted to agree to anything. And it's really pushed the timeline to a kind of extreme position. They're going to have 10 business days to figure out a plan because on August 7th, that's when Senate goes into recess

and a deal needs to be done. All this time that the Republicans have spent is not on working out what's going to happen. It's been on working out what's their initial bid in the negotiation. So it's a huge slippage. The reason Democrats acted fast is that they were hoping to then spend two months bargaining with Republicans. Republicans have been spending all this time bargaining with themselves.

So now we're like at the end of the beginning, but still have no clear road forward toward legislation that passes. After the break, what took Republicans so long, and how this might reach a resolution without, you know, throwing a bunch of Americans into the streets. I'm Sean Ramos for them. It's Today Explained. Thank you. and put money back in your pocket. Ramp says they give finance teams unprecedented control and insight into company spend. With Ramp, you're able to issue cards to every employee with limits and restrictions and automate expense reporting so you can stop wasting time at the end of every month. And now you can get $250 when you join

Ramp. You can go to ramp.com slash explained, ramp.com slash explained, R-A-M-P.com slash explained. Cards issued by Sutton Bank, member FDIC, terms and conditions apply. Matthew, before the break, we were talking about how Democrats brought a plan to the table back in May. The Republicans offered one up on Monday, a few days before these unemployment benefits are set to expire. What were the Republicans busy disagreeing about? Well, so the unemployment benefits has been a source of concern ever since it happened. And the way this worked was originally Democrats wanted to raise the generosity of unemployment insurance benefits so that people would get their sort of full paycheck replaced by the UI system. And then it turned out that state labor departments were

not able to do that on a technical basis. It's not how they're set up to work. So Democrats came up with this kludge, which was that they would just enhance benefits by $600 a week. And that meant that on average, you would sort of replace 100% of lost wages. But in detail, it doesn't work like that. Some people are getting more money out of UI than they were actually earning as wages, and other people are getting less. So Lindsey Graham, ever since that first became clear, has been raising a big stink about this. Our goal is to give you 70% of the money you lost by being unemployed, not to give you a pay raise in unemployment. We've got to fix that. The argument is, what's the incentive to go back to work if the government's giving you more money to stay at home?

There's an incentive argument. And I also just think, I guess what we technically call a horizontal equity argument, it's like, why should you, the laid off guy, be making more money than your cousin who's back at work, you know, stocking the shelves at a supermarket? So Republicans are really hung up on this. And they are very interested in making the program less generous. Now, Democrats keep saying, look, like, what are the jobs that people are going to get? You can look at a million indicators, right? Whether it's wage levels, job openings, there's just no sign that there's a practical problem of unemployed people refusing to take jobs because the UI is so generous. And Democrats are saying, look, this bonus money, it's incredibly well targeted. It's going to people who are using

the money to pay the rent, make ends meet. It's preventing problems, you know, down the road, homelessness, cascading defaults. And then they're spending the money. Like these are people who, you know, you're unemployed, right? So you get money, you buy groceries, you go out, it keeps the economy going. And Democrats are saying, look, if we pull this rug out from under people, they're not going to have an incentive to do anything. The economy is comatose because of the virus. All we're going to have is people going bankrupt, people unable to pay the bills, people unable to make the rent, and we're going to be is people going bankrupt, people unable to pay the bills, people unable to make the rent. And we're going to be at worst in a humanitarian catastrophe, at best trying to fix the problem on the back end.

But this isn't just Democrats versus Republicans. This is also Republicans versus Republicans? Yeah, I mean, there is one set of Republicans who I think have become true believers on anti-stimulus politics. Like, what did Republicans say in 2009, 2010, 2012 when President Obama kept saying, we need to spend more money to keep the economy going? Republicans were saying back then, like,

no, spending money doesn't help the economy. So today, one block of Republicans is like, ha ha ha, we're hypocrites. Now that there's a Republican in the White House, we do believe in spending money to help the economy. But another block of Republicans are true believers. A number of senators at lunch get up and say, well, well, gosh, we need, we need 20 billion for this, we need a hundred billion for this, and they're just really eager to spend, well, well, gosh, we need we need 20 billion for this. We need 100 billion for this. And they're just really eager to spend.

I'm like, what are you guys doing? And they're saying, look, we didn't want to do this when Obama was president. We don't want to do it when Trump is president. It's just not good to have the federal government spending money. Just to be clear here, is this more about, you know, you shouldn't be getting paid more to stay at home than your cousin who's going to work every day at Whole Foods? And or you shouldn't be getting paid this much money not to do anything because you'll never want to go back to work? Or is it about we just shouldn't be spending this much money and adding trillions and trillions

and trillions of dollars to the deficit? Well, it's about both of those things, right? Because if you just had this worry about the incentives, if that was the only thing you cared about, you could come up with a workaround. You know, you could say, OK, we're going to give less money in unemployment insurance, but we're going to spend trillions of dollars on stimulating the economy through some other means. But Republicans don't want to do that, right? They want a small bill. but we're going to spend trillions of dollars on stimulating the economy through some other means. But Republicans don't want to do that, right?

They want a small bill. So with a small bill, you would say, OK, then we have to target everything hyper-effectively. And that means being very generous to the worst-off people. But Republicans don't like that idea because they think it damages incentives. So they're caught between the pressure to keep the overall cost down, but also to avoid being too generous to the poorest. And they've come out with a bill that's like a little bit neither fish nor fowl. And it just reflects those internal caucus dynamics rather than, I would say, an economic analysis of the situation. So who holds the upper hand in this fight? Is it Democrats? Is it Republicans?

So by the oddball rules of Congress, who holds the upper hand depends on what Republicans do next. If McConnell can get all his people together behind this and get a majority for it, then he has a strong hand because Democrats are saying unemployment expiration is so terrible, but it will have already expired. So $200 is better than $0. So really, why are Democrats holding off? Why are they stonewalling? Blah, blah, blah, blah, blah, blah. And supposedly Democrats will be under pressure to come down closer to McConnell's number. On the other hand, if three or four Republicans break from the party on this because they say we should spend zero dollars, then that weakens McConnell's hand because now House Democrats have passed a bill and Senate

Republicans have done nothing. And at that point, more vulnerable Senate Republicans like Cory Gardner, Susan Collins, they need to start saying, hey, Democrats, can we work a deal? This is like weird Capitol Hill stuff that it should all hinge on exactly how nutty does Rand Paul want to be. So we're going to have to see like how much does the GOP caucus come together around this and say like, here we stand. This is what we're going to have to see, like, how much does the GOP caucus come together around this and say, like, here we stand, this is what we're going to do? Or how much does this kind of effort to duct tape over divisions in the caucus start to break down and change the dynamic again? From everything we've covered, it seems deeply unlikely that they'll figure it all out by Friday. What does that mean for, I'm guessing, what,

tens of millions of Americans who are depending on these benefits? So one thing they could do is quickly, you know, Wednesday or Thursday, put on the floor an unemployment extension for like three or four weeks, right? And say, okay, well, we're going to just keep this going in the short term while we keep negotiating. That's a kind of classic Congress move, you know, kick the can a little bit down the road rather than resolve issues. Nobody thinks that would be a good idea, but it would be the most humane solution at this point because clearly they're not going to reach an agreement in the next three days. All told, it just feels like the government

abdicated its responsibility to handle this pandemic particularly well. And now it feels like the government's on the cusp of abdicating its responsibility to take care of people who are terrified or can't even go back to work. I wonder, I mean, as the rest of the world seems to be inching towards reopening and returning to whatever version of normal they can muster, is the United States at risk of really falling behind here as cases continue to climb, states continue to re-shut down, and the government fights over how to take care of people who are caught in the balance? I mean, it's really embarrassing. I think if you look at the two parties, one thing you see here is that actual members of Congress who are Democrats are really into the nuts and bolts of governance. They have like a lot of feelings and thoughts about Medicaid matching

rates and food stamp funding and state and local grant programs. And like, this is what they actually live for. Congressional Republicans really don't. They are really jazzed up about like fighting about the 1619 Project or talking about whether there's too much violence happening in the Portland protests. You know, like those kinds of things animate them. And people in the media industry often also like to engage with those kinds of topics and just like sort of assume

that like somebody is governing the country. But when Republicans have the majority, the fact that it took them 10 weeks to bother coming up with this bill, it's just a signpost that a lot of their members are not that engaged with this kind of thing. They weren't like, let's drop everything and figure out what we're going to do here. They kept kind of fighting or having vague positions. Some members worked very earnestly on this, but a lot of them didn't. And unfortunately, like millions of people's lives are impacted in a very direct way by the kind of bordering minutiae of how the welfare state operates. And it's a big problem that the governing party in the United States is not that interested in this question. Okay, Matthew, thank you so much for your time. Appreciate it. Okay, thank you so much for your time. I appreciate it.

Okay. Thank you.