IDP lawmakers want to raise public concern about extraordinary federal support: $ 4 trillion in aid introduced last year, nearly $ 2 trillion more in the process of being approved, and another multi-trillion dollar proposal being made in the coming months expected. This is a strategy that worked a decade ago, when the fear of shortages spawned the Tea Party movement, which ultimately thwarted much of President Barack Obama’s agenda.
But congressional Democrats, the White House and many economic experts argue that while money is still getting unemployed Americans, small businesses, cities and schools, it is clear that they and the wider economy need more.
“Just because no money is spent does not mean there are no needs yet,” said Marc Goldwein, senior vice president and senior policy director of the Committee for a Responsible Federal Budget, a non-party group. the COVID Money Tracker to follow the help as it goes out.
At this point, most of the unspent money – comprehensive estimates put the amount at $ 1 billion – has been allocated to various programs designed to spread it over a long period of time.
Improved unemployment insurance benefits are sent out weekly. Salary protection and other assistance programs for small businesses are provided while employers apply for them. Enhanced federal Medicaid compliance funds are regularly provided to states as long as the public health emergency is in place. And rebates and tax breaks will be paid out after Americans file their taxes.
Focusing on the money left over to go through these and other programs is “mostly a red herring,” said Jason Furman, who was Obama’s chief economist.
Legislators can have a real discussion about substantive aspects of the plan, such as the size of the stimulus checks or who should receive them, said Furman, now a professor of economics at Harvard. But the unspent $ 1 billion is merely a reflection of how the emergency relief packages were designed, namely to spend money over a long period of time.
“Congress does not legislate once a month for next month,” he said. “It’s so much better to spend money three months in advance rather than three months late, especially if you’re fighting a war.”
Republican Congress has a risky but calculated bet in uniting Biden’s aid plan, as it is popular with both Democrats and Republicans across the country. Four out of five adults said last month that another package of economic aid was needed, the Pew Research Center found. And a morning consultant poll this week showed three out of four voters Biden’s plan.
But to exploit the unspent money helps the GOP’s argument that Democrats are the party that ‘spends money as if there is no tomorrow’, as Senator Lindsey Graham (RS.C.) put it this week. Republicans have also drafted the legislation as too generous, a ‘liberal wish list for Democrats’ that addresses much more than just the coronavirus and its economic consequences – and even spends too much in key areas.
The bigger concern among some critics of the plan is also that, although Democratic policymakers explain where the remaining $ 1 trillion is going, money is not being adequately considered as Congress debates how big the next package should be.
Goldwein, whose organization is working to reduce the deficit, said that while help was still needed, he felt that “this package was written almost as if December had not happened” – when Congress introduced an emergency relief package of $ 900 billion accepted and two coronavirus vaccines launched. available.
“I think Congress needs to be nervous about adding another $ 2 trillion,” said Michael Strain, director of economic policy studies at the conservative American Enterprise Institute.
Concerns about the size of the package have become a hotbed of debate even among some Democrats, especially amid new economic forecasts that point to significant growth this year.
The latest forecast from the non-partisan Congress budget office shows that the economy is returning to pre-pandemic levels this year and reaching growth levels of 4.6 percent without significant new relief. In calculating the expected fiscal easing of $ 1.5 billion, Goldman Sachs economists predict a growing rate of 6.8 percent for 2021, which would be the highest since the Reagan era.
However, many economists argue that despite these forecasts, there is still more work to be done. Federal Reserve Chairman Jerome Powell warned lawmakers in a number of congressional actions this week not to declare victory over the economy too early, warning that “the work has not been done”.
“We are far from returning to normalcy,” said Kathy Bostjancic, chief financial officer at Oxford Economics. “If you have such a hole, a deficit where you ‘ve fallen before where the economy used to be … you have a lot of ways to make up for it.’
Even taking into account unspent federal money, excessive personal savings and the introduction of coronavirus vaccines, another $ 2 billion in fiscal stimulus is the appropriate amount to get the U.S. economy back into full service by the middle of next year, chief said. economist at Moody’s Analytics.
“As for accounting,” he said, “it’s about right.”
Some lawmakers and other critics of the plan are particularly concerned about the funding of state and local governments. According to Biden’s plan, an additional $ 350 billion would be sent to states, cities and communities, which would contribute to $ 150 billion passed early last year. Republican members of the House Ways and Means Committee this week reported that this is almost a third of the original money remains unspent, and some states face a significant budget surplus – up to $ 15 billion in California.
The risk of sending too much money to countries that do not need it is, for example, if governors or local officials use it as a tax to reduce taxes – and there is no easy formula to grant aid only to states that most do not suffer damage. But those who are watching this area closely argue that while things are going better with states than they originally expected, they are still not doing well.
The National Association of State Budget Officers also says that states have allocated an average of 97 percent of their initial funding round and spent 77 percent of it, which is contrary to the ways and means. Other experts note that federal restrictions have made it difficult for government officials to spend the money faster than they have.
And by and large, as Biden administration officials say, many economists feel that the risk of doing too little at the moment to help the economy far outweighs the risk of spending too much, even if there is still $ 1 trillion in aid.
‘It seems like your garden needs water, but you only have as much hose as the water can take out. This is the problem here: we just can not get the water out as quickly as possible, ”said Zandi. “But that does not mean you need less water.”