Statement: The Senate Flubs the Stimulus Package
STATEMENT: Confirmed coronavirus cases roughly doubled over the weekend, doctors and hospitals are running out of personal protective equipment and supplies, and unemployment cases are expected to increase eightfold this week. The nation’s governors are issuing urgent pleas to the federal government to use its powers to ramp up production of protective gear and tests.
Yet Senate Republicans and Majority Leader Mitch McConnell apparently haven’t been listening. Over the weekend they produced a partisan stimulus package that fails to achieve the nation’s overriding priority: Giving America’s health care professionals and workers the resources they need to contain the pandemic so that we can better target social distancing and keep it from tanking our economy.
Instead, the Senate bill authorized only $75 billion for health care providers while giving the Trump administration a $500 billion blank check to bail out businesses with no public disclosure for up to six months.
Democrats were right to reject the Senate bill. The action now shifts to the House, where Speaker Nancy Pelosi has pledged to dramatically boost spending to fuel a surge of protection equipment and tests, and to screen everyone.
The key to ending a period of prolonged and general social distancing, which could plunge the country into a depression, is to dramatically expand our capacity to screen people for the virus. That will enable us to prescribe social distancing only to those infected and those at greatest risk — older Americans and people with severe medical conditions — while allowing people who test negative to start returning to work. Protective equipment will also help reduce transmissions. It should go first to health and emergency workers, then to people working in grocery stores, the police, and other essential public services. Eventually, everyone should get protective gear.
House Democrats should direct at least $500 billion to personal protective equipment, ventilators, expanded testing, and ensuring everyone is covered for both testing and treatment of COVID symptoms and related complications. That’s the right order of magnitude for now, though policymakers should not hesitate to spend even more on these critical functions should it become necessary. Without supporting the health care workforce, soon too many physicians and nurses will get the virus and the health care system will be unable to adequately address the greatest public health challenge in modern history.
The second priority for a stimulus package must be direct payments and a big increase in social insurance programs to protect the most economically vulnerable Americans. Increasing funding for and reversing Trump administration efforts to limit eligibility for SNAP benefits, unemployment insurance, and low-income support programs will help millions of Americans put food on their tables and ride out the recession. Although the Senate’s proposal to send $500 billion in direct cash assistance to low- and middle-income Americans would help ensure that no one falls through the cracks, it should abandon a front-end means test that could delay payments and instead “claw back” payments in next year’s tax returns from households lucky enough to skate through the inevitable recession financially unscathed. This framework would allow even more resources to be redirected to those most in need.
The third priority should be helping private companies stay afloat until more targeted social distancing allows more Americans to return to work. For small and medium-sized businesses, Congress should offer at least $500 billion in emergency loans —- with proper accountability and oversight —- to enable businesses to maintain payrolls and other fixed expenses, such as rent and health care for workers. If necessary, debts for businesses that can’t repay them should be forgiven so long as their workers continue to be paid throughout the crisis. All businesses should be incentivized to keep their workers on payroll (and off taxpayers’ dime) knowing that they will make it to the other side of this crisis in a financially viable state.
In addition, we also need a Core Protection Fund of $500 billion specially targeted to keep afloat core systems that are essential to the national economy. That includes power, transportation, communications, and key manufacturing operations in areas from food production to aerospace manufacturing, which is essential for the national defense in an increasingly unstable world.
For the Core Protection Fund, the government would be a funder of last resort for financially pressed companies in core sectors and take stock or stock warrants in exchange, which would pay off big if the economy rebounds. If more was needed, the model would be the GM rescue plan during the 2008-09 financial crisis, which was highly successful. Most workers should be kept on payroll, buybacks should be banned, and executive compensation should be limited. These funds should be monitored by an oversight board. If these core companies are not kept in operation, then Americans will suffer even more and restarting the economy will become immensely harder.
PPI recognizes that speed is of the essence. But the right approach should align our efforts to slow the spread of coronavirus to our need to avoid long-term structural damage to our economy. Though this will likely be an unprecedented amount of money, every dollar must go where it will make the most difference – health care, unemployment insurance, and to American businesses – big and small. We may only have one chance to get this right.