Covid Political Relief – WSJ
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Congressional leaders reached agreement on a $900 billion Covid-19 relief bill Sunday evening, but please don’t call this economic stimulus. With some exceptions, the main relief here is for the politicians who want to take credit for doling out more cash to constituents.
The best provision in the bill is the limit on potential abuse by the Biden Treasury and Federal Reserve. Credit here to
Pennsylvania Sen. Pat Toomey,
who held firm on limiting the Fed’s maneuvering room without a new act of Congress. Democrats are claiming victory, but that’s face-saving spin.
The bill will repurpose the $429 billion in Cares Act emergency funding that the Fed hasn’t had to use. It also includes language barring the Fed from restarting the facilities that are set to expire on Dec. 31 or creating clones. That’s important because the wailing over this language proves that Democrats want to use the Fed to bail out state and local governments. They said so in the House Heroes Act by demanding 10-year, 25-basis-point Fed loans.
Minority Leader
Chuck Schumer
and his media echoes targeted Mr. Toomey as their villain du jour, as if financial markets are still in a crisis. They also claimed Mr. Toomey wanted to rewrite the law governing 13(3) Fed facilities, but that is false. His aim is to make sure that emergency facilities don’t become open-ended fiscal programs. Bigger companies now have ample access to private credit, and small businesses are getting more direct aid.
Readers may recall that last March Democrats were calling the money for Fed pandemic facilities a “slush fund” for
Donald Trump.
“Trump wants our response to be a half-trillion dollar slush fund to boost favored companies and corporate executives,”
Elizabeth Warren
tweeted.
Joe Biden
slammed the Fed programs as a “$500 billion slush fund for corporations with almost no conditions.” The Trump Treasury used the money responsibly.
Yet now
Brian Deese,
Mr. Biden’s choice to run the White House National Economic Council, says “the Fed’s ability to respond quickly and forcefully” is still needed. But the Fed can still do that in an emergency if it gets Congress’s assent. By the way, Mr. Deese has been working for
BlackRock,
the Wall Street firm the Fed tapped to buy corporate bond exchange-traded funds on its behalf.
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The rest of the relief bill is a mix of good to awful. Another $330 billion or so for the Paycheck Protection Program is warranted to aid small businesses until the pandemic eases. The National Restaurant Association reported this month that 500,000 restaurants are in free fall and 110,000 have permanently closed this year. Many are victims of ham-handed government diktats like
California Gov. Gavin Newsom’s
closure of outdoor dining.
Eventually new businesses will replace those that fail, but the human and economic cost will be smaller if Congress helps them and their workers ride out the months until vaccines are widely available. The labor market will also spring back faster if workers have employers to return to.
The deal includes several billion more dollars for vaccine distribution, which may be more than necessary but will temper kvetching by governors like New York’s
Andrew Cuomo
who complain they can’t afford to inoculate their populations. The feds are doing most of the administrative work and have paid for the vaccines. HHS secretary
Alex Azar
says states merely need to operate as “air traffic controllers,” coordinate logistics and clear the runway.
Although direct state and local government aid was left out of the deal, governors will still get tens of billions for schools, child-care providers, broadband, food stamps and public transit. Much of this is pork.
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The biggest fiasco is another round of checks—this time $600—to most Americans who earn up to $100,000. This will have little or no economic impact since it won’t change incentives; it also isn’t focused on the neediest. The personal savings rate in October was 13.6%, about twice as high as before the pandemic, with $2.4 trillion on the sidelines.
Another blunder is three more months of $300 in federal enhanced weekly unemployment benefits. This plus-up will allow half or so of workers to earn more by not working and slow the labor market recovery once the vaccine rollout gets underway since they will have less incentive to find work.
Many businesses, especially in construction and warehousing, are desperate to hire, and there were 6.7 million job openings in October, according to the Bureau of Labor Statistics. States like New York and California, whose governors have imposed excessive business restrictions, will benefit most from the income transfers.
GOP leaders are hoping this spending blowout will help their two incumbents in the Georgia Senate runoffs on Jan. 5. It had better, because this is merely for three months and Democrats are viewing it merely as a down payment on trillions more next year. The country will be paying for the pandemic for decades, and Congress is adding ever more to the bill for future generations.
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