On COVID-19 aid, Congress should follow the numbers
For 11 months, experts and commentators from all corners of the political world have urged anyone who will listen to “follow the science” when discussing lock-downs, vaccines, reopening schools and all the other facets of the COVID-19 pandemic. But when it comes to the massive coronavirus aid and economic stimulus package wending its way through Congress, it’s equally important for lawmakers to follow the numbers. When you do the math, a bleak fiscal outlook and improving economic conditions in the near term do not add up $1.9 trillion in new spending.
On one side of the equation, last week’s Budget and Economic Outlook from the Congressional Budget Office (CBO) paints a dire picture of rising debt growing to a historic high of 107 percent of GDP by 2031. An underreported caveat, however, is that this estimate is based on current law, which means it doesn’t include the latest $1.9 trillion relief package. Nor does it include any other costly changes that Congress is also entertaining, including a $15 federal minimum wage, tens of thousands of dollars per borrower in federal student loan forgiveness, and the ever-perilous fiscal state of entitlements like Social Security and Medicare. While a pandemic rebound could forestall a fiscal crisis for a few years, by 2026, the CBO expects GDP growth to start sputtering. Likewise, we can’t count on low interest rates to fuel our debt binge forever.
On the other side, some of the numbers are starting to look up. Coronavirus cases are falling, as are hospitalizations, and nearly 10 percent of the population has received at least one vaccination shot. The CBO expects GDP to return to pre-pandemic levels as these numbers improve, though not for long. Despite dire predictions last spring about state and local balance sheets, on average they actually look better than expected, with some states enjoying a surplus after increased revenue, in part due to generous federal aid earlier in the crisis. Of course, that good news isn’t evenly spread across the country, across socio-economic and racial groups, or across age-groups and industries. Though the labor market is improving, jobless claims are still high. And millions of Americans have suffered a severe, sometimes long-lasting illness, along with profound personal losses.
These factors indicate that the current, nearly $2 trillion, aid package could be a big miscalculation. The Committee for a Responsible Federal Budget notes, for example, that more than one-half trillion dollars for state and local governments in the current aid package far outstrips the current need:
However, there appears to be little justification for issuing more than half a trillion of aid, on top of the $360 billion already offered. These excessive funds will unnecessarily add to the federal debt or crowd out other priorities (such as continuing emergency unemployment benefits beyond August). They could also lead many states to enact damaging tax cuts or spending programs that ultimately undermine their long-term finances.
On top of that, an additional $58 billion is pegged for a sweeping bailout of the troubled multi-employer pension system, unencumbered by any reforms or protections for taxpayers. Massive increases in spending for the Federal Emergency Management Agency (FEMA) and education are not tied to the urgent needs an aid package should focus on, with billions being spent years from now. And there have even been calls for more of the spending to be spread out over a longer window, say for new infrastructure or a rainy day fund.
These things, particularly smart fiscal safety nets like rainy day funds, might have merit on their own. But they don’t belong in a reconciliation package ostensibly aimed at meeting the real and immediate needs of suffering families.
The goal of aid should be to provide relief, and specifically, relief that addresses current hardship tied to the pandemic. Then, as has been done multiple times already, the need for further relief can be revisited in the future as conditions continue to evolve. The numbers are clear: there isn’t room in the budget for a spending spree on policies unrelated to the crisis at hand as we work to help those who truly need it.
