A Halfway-Sane Stimulus Proposal

Last month, I had a piece about Joe Biden’s stimulus plan, under which the federal government would fling $1.9 trillion at pretty much everyone in sight. Now ten moderate Republican senators have a $618 billion counteroffer and are meeting with Biden today. The number ten is significant because these senators could combine with the 50 Democrats to override a filibuster. (The 50 Democrats by themselves would have to rely on the filibuster-proof “reconciliation” process and a tie-breaking vote from the vice president.)

The proposal basically downgrades the Biden plan from “holy cow is that insane” to “I guess it wouldn’t be the end of the world.”

The plans have one good thing in common: They’d direct $160 billion to directly fighting the virus, for example by speeding up vaccination. Beyond that they’re quite different. The Republican plan strips out measures that have nothing to do with the pandemic (including a $15 minimum wage) and scales back the COVID relief to a more defensible level.

For example, I’ve made two arguments against past stimulus-check proposals: One, they weren’t targeted to people who actually lost income from the pandemic, and two, they weren’t even targeted to people with low incomes, as they extended well into the upper-middle class. The new proposal at least ameliorates the second issue, as individuals making more than $50,000 (and couples making twice that) wouldn’t receive anything. It also reduces the maximum amount from $1,400 per person in Biden’s proposal to $1,000 for adults and $500 for kids and other dependents.

Then there’s unemployment. Current policy gives the unemployed an extra $300 a week (beyond what they’d have received from the normal unemployment system) until mid March, which pays some people more than they made while working but is justifiable in these circumstances. Biden would make it an extra $400 and continue it through September. The Republicans would leave it at $300 but keep it through June. I’d prefer to see how the vaccines and the economy play out a bit longer before extending benefits, but this is not a laugh-out-loud ridiculous idea like Biden’s.

The proposal also leaves off help for state and local governments, which has long been a sticking point in the stimulus debate, because it runs the risk of bailing out states that are in trouble not because of the pandemic, but because of their own bad spending and pension-fund decisions.

I can’t say I’d vote for this package if I were in Congress, but at least it’s not crazy.

Relatedly, the New York Times had a good piece recently about the bigger picture here — not the merits of specific stimulus measures, but the broader question of how much money you can dump into the economy before you start running into unintended consequences, with effects on “inflation, financial bubbles and the sustainability of the national debt.” That’s an important discussion to have too, seeing as Biden’s proposal is about twice the size of this year’s expected “output gap” (i.e., economic shortfall).