More than seven months after the House first passed the HEROES Act, last week both chambers of Congress finally got around to actually legislating a new COVID-19 relief bill. For a New York minute, it looked as if the millions of Americans whose unemployment benefits stand to run out this weekend would see at least a temporary reprieve.
And then, seemingly out of nowhere, just before Christmas, Trump threatened to scuttle the whole bill unless stimulus payments to Americans — a central part of the legislative package — were increased from $600 to $2,000 for an individual and $4,000 for couples.
In the abstract, the idea of an increased stimulus payment isn’t a bad idea – and immediately after Trump’s intervention, Democrats in the House did push for the increase. The problem, which Trump’s White House team know all too well, is that the bulk of the Congressional GOP won’t play ball with such a large stimulus. Trump’s intervention, at the back end of months of painstaking congressional negotiations, can only either delay or torpedo a relief package that, for all its flaws, is essential to protect the economy over the coming months. Absent it, Biden will inherit not only a cascading public health emergency but also a growing economic crisis and a deepening double-dip recession.
The $900 billion compromise passed by large majorities in both the House and the Senate is less than a third of what the Democrats, at their most optimistic, were hoping for this year; and, barring a public health and economic miracle, if it is signed into law (or passed again, early in the new year, with enough votes to override a presidential veto), it will almost certainly need to be revisited and expanded months into the Biden presidency.
That said, it’s not all doom and gloom. While the bill is by no means a panacea, if and when it eventually becomes law, it will bring much-needed relief to large parts of the economy and to millions of struggling individuals and families.
Let’s start with the bad news. By far the most glaring failing of the new legislation is a dearth of aid to struggling cities and states, both of which are hemorrhaging sales and income tax revenue at the same time as they are staring down vastly increased unemployment payments, public health bills and other related costs due to the pandemic’s impact. This fiscal crisis has already led to huge jobs and service cuts, and will, absent federal intervention, lead to far worse in the months and years to come, corroding key parts of the public infrastructure in ways that will harm low-income Americans.
In the aftermath of the 2008 financial crisis, the financial holes faced by local and state governments led to years of job losses, cuts to public schools and universities, and under-investments in public health, leaving America even more vulnerable to an airborne respiratory pandemic down the line. Thirty-four states reduced spending on K-12 education, and 31 lowered their healthcare spending, according to a 2012 study by the Brookings Institute; hundreds of thousands of local and state jobs disappeared. And that was with huge federal interventions, under the aegis of the American Recovery and Reinvestment Act, intended to help cities and states weather the financial storm.
In 2020, Congress has repeatedly struggled to find a path forward to prop up cities and states as they careen into crisis. True, $150 billion was sent to local and state government as a part of the first COVID-relief package, the CARES Act, back in March. It was vital in stopping the initial hemorrhaging, but it was far short of the roughly $1 trillion that analysts have argued, since the spring, is needed to fully back-stop local and state governments as the pandemic plays out.
Since May, Democrats have pushed for additional large-scale assistance to localities and states. For a while, it looked like the bipartisan cadre of Senators moving the legislation forward would be able to include significant relief of this kind. But as the negotiations dragged on these past weeks, it became ever-clearer that McConnell’s leadership team was drawing a line in the sand over additional assistance — at least in the short term, in the run-up to the Georgia Senate elections, where McConnell fears that additional relief to cities and states will be viewed by his base as a sell-out to big-spending Democrats. As a result, the eleventh-hour legislation passed just before Christmas includes no money specifically ear-marked for this purpose.
That’s the downside of the legislation. But there are also plenty of good provisions worth our attention in this $900 billion package.
In addition to the hundreds of billions in assistance for small businesses, and the $166 billion being set aside for direct stimulus payments to individuals and families, tens of billions of dollars have been allotted to assisting struggling schools and to extend enhanced unemployment benefits through March — though Trump’s last minute intervention, preventing the bill from becoming law before Christmas, makes it inevitable there will be at least a weeks’ long pause in vital unemployment benefit payments to millions of Americans as 2020 ends and 2021 begins.
Even if Congress overrides Trump’s veto, the break in payments could prove financially calamitous to large numbers of Americans who have been pushed to the brink of economic catastrophe during the pandemic.
But it’s not only unemployment benefits that are at risk because of Trump’s ongoing efforts at political and economic sabotage, and his seemingly unquenchable desire to leave Biden with as much chaos and economic dislocation as possible. There is $25 billion earmarked for rental assistance and $20 billion for vaccine distribution. If the bill becomes law, tens of billions of dollars will be used to increase nutritional assistance programs, including SNAP — a key part of the safety net, and one that has long been in the Trump administration’s crosshairs. There are also $45 billion allotted to the transit sector — most of it to be used to keep airline employees employed and also to shore up public transport systems that have, in the absence of relief, been contemplating cuts so deep they would, in effect, destroy many urban bus and train networks.
In the final negotiations, Democrats even managed to include $15 billion in assistance for arts institutions — a vital addition, given the dire straits so many museums, theaters and other cultural centers find themselves in after nearly a year in which they have been forced to navigate the pandemic with far too little federal assistance. Some of that money will go to create two new Smithsonian museums: a Women’s History museum and a National Museum of the American Latino.
As with all packages of this scale — the legislation is 5,000 pages in length — individual senators managed to include provisions that don’t really have much to do with the crisis at hand. There’s a strong provision, pushed by outgoing Sen. Lamar Alexander (R-Tennessee), to outlaw “surprise billing” tactics by medical providers. And there’s another provision, pushed by Sen, Thom Tillis (R-North Carolina), significantly toughening up the criminal penalties for people breaking copyright laws through illegally streaming materials to make a commercial profit.
This is the sausage-making process in action. Enough senators felt, at the end of the day, that they had buy-in, and that their pet issues were being addressed. Given how sclerotic Congress has been in recent years, that in itself was an achievement.
Now, the entire package has been put at risk. If Trump continues to stonewall, and if Congress doesn’t pass the bill again by a veto-proof majority, Biden and his economic team will face a five-alarm economic and poverty emergency as soon as they take office. They will have to find ways to cajole Congress into passing new relief legislation; and, at the same time, they will have to convince legislators to revisit the ideas of broad financial assistance for city and state governments. Absent these actions, the job losses and the economic pain will mount even after the broader public health crisis begins to wane.