The Corner

Politics & Policy

Is the Fourth Coronavirus Spending Bill on Its Way?

Speaker of the House Nancy Pelosi speaks during a news conference, following a Senate vote on the coronavirus relief bill on Capitol Hill in Washington, March 26, 2020. (Tom Brenner/Reuters)

The ink isn’t dry yet on “phase three” of the coronavirus relief package that speaker of the House Nancy Pelosi and President Trump are already talking another stimulus package. They aren’t wasting anytime.

Phase three was remarkable in that it was the largest economic relief package in U.S. history. The process that led to it was also remarkable as an example of the bad incentives that exist because our politicians are using other people’s money. Many politicians’ aspirations to grow the size of government dramatically were on display too during this process. Just check the House Democrats’ proposal. Thankfully, much of it didn’t make it into the final bill.

But phase three is done; now comes phase four. So far, all we know is that the White House has a list of $600 billion in requests from federal agencies, and the Democrats are coming up with their own list. But I am not sure how to reconcile these two statements from Nancy Pelosi as reported by Bloomberg:

In an interview Tuesday with MSNBC, Pelosi said negotiators had already agreed that “everything will be specific to the coronavirus” in the next round of legislation and that it wouldn’t become a “wish list.”

And:

Many of the priorities she and other senior Democrats listed had been previously outlined and were part of their alternative stimulus legislation but were rejected by Senate leaders in negotiations with President Donald Trump’s administration. Pelosi gave no details on how much the plan would cost.

Most of these demands were rejected precisely because they have nothing to do with COVID-19 relief. So if they are thinking of bringing them up again, Democrats aren’t serious about sticking to pandemic-related items.

Check out in particular Pelosi’s hope to use phase four to remove the limit on SALT:

In an interview with the New York Times published on Monday, Pelosi indicated that another possible move was getting rid of the limit on state and local tax deductions, or SALT, that was part of the 2017 tax overhaul and affects California, Pelosi’s home state, and New York.

And she wants the change retroactive, too.

The New York Times explains:

A full rollback of the limit on the state and local tax deduction, or SALT, would provide a quick cash infusion in the form of increased tax rebates to an estimated 13 million American households — nearly all of which earn at least $100,000 a year. . . .

The congressional Joint Committee on Taxation estimated last year that a full repeal of the SALT limit for 2019 alone would reduce federal revenues by about $77 billion. Americans earning $1 million a year or more would collectively reap $40 billion of those benefits. Most of the rest would go to households earning $200,000 or more…

The Tax Policy Center estimates that only 3 percent of households in the middle quintile of American taxpayers would receive any benefit at all from the SALT cap repeal.

The political opportunism on display here is pretty impressive. Removing SALT is a way to serve the interests of both higher taxpayers and politicians in higher-tax states, who can deflect the cost of their high spending onto all of us. Democrats have tried before and failed. Many liberals and progressives oppose the move, too, owing to its regressiveness.

But then again, this is not surprising. Democrats aren’t hiding their intention. A few weeks ago, majority whip James Clyburn (D., S.C.) told his colleagues, “This is a tremendous opportunity to restructure things to fit our vision.” And they are not letting this crisis go to waste.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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