House HEROES Act Gets The Trade-Offs Wrong
The U.S. House of Representatives is moving ahead with plans to vote today on the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act: the fifth – and potentially final – piece of major legislation addressing the coronavirus pandemic and its economic effects. The 1800-page bill is estimated to cost roughly $3 trillion and contains a mix of both good policies and bad, but is perhaps most notable for what it leaves out: automatic stabilizers.
The biggest flaw with previous relief bills was that aid was limited by the availability of funds appropriated by Congress or arbitrary calendar dates it chose instead of being based on the real needs of our economy. As a result, measures like the Paycheck Protection Program (PPP) were exhausted within three weeks and many eligible businesses couldn’t get needed financial relief until Congress took additional action. The best way to prevent this problem in the future is by adopting “automatic stabilizers” — policies that cause spending to rise or taxes to fall automatically as predetermined economic or public-health benchmarks are met. For example, a proposal by Congressman Don Beyer and Senators Jack Reed and Michael Bennet would change the expansion of unemployment benefits included in the CARES Act to gradually phase out as the economy recovers instead of expiring arbitrarily on July 31st. The centrist New Democrat Coalition has also been vocal in calling on leadership to adopt automatic stabilizers in future relief bills.
Unfortunately, the HEROES Act doesn’t include any new automatic stabilizers – reportedly because House Speaker Nancy Pelosi is concerned about the bill’s $3 trillion price tag. On the one hand, Speaker Pelosi is right to be concerned about wasting taxpayer money on unnecessary expenses given our nation’s serious long-term fiscal challenges. But the unfortunate reality is that supporting our economy during the worst public health crisis of our lifetimes is a large and necessary expense. It is no less fiscally responsible to pass one $3 trillion bill than three $1 trillion bills if the money is efficiently targeted to support our economy throughout this pandemic. Moreover, there are a number of costly provisions included in the HEROES Act that are a poor trade-off for sacrificing automatic stabilizers.