STRF/STAR MAX/IPx
Unsanitized-122120
It's Christmas on Wall Street as a COVID relief deal is reached.
First Response
After a weekend full of impasses and breakthroughs, today a COVID relief bill will pass, nearly nine months after the last one, nearly five months after the boosted unemployment from the last one expired, a little over eight months after the first people got government checks to deal with the economic pain. The final sticking point, on the extent of cancellation of Fed lending programs, was handled over the weekend.
The relief package is paired with an omnibus spending bill that includes a fix on surprise billing (our coverage, with the addition that Medicare and Medicaid rates have been thrown out of the assessment of the median network rate, making this friendlier to private equity-backed providers), an energy bill, a water bill (our coverage), a 25-years-in-the-making fix that restores Medicaid for Marshall Islands natives living in the U.S., $1.4 billion in border wall money, the entire tax extenders bill (which yields annual chuckles about tax breaks for Puerto Rican rum and thoroughbred horses), loan forgiveness for HBCUs, technical corrections to the trade agreement with Mexico and Canada, and an intelligence authorization bill.
Obviously, this was the last train leaving the station this Congress. But with federal spending now set until September 2021, there’s no obvious must-pass moment for the next nine months, and with tight margins in Congress making this a “starter home,” with additional relief down the road, will be very difficult. That makes the scope of the bill rather important.
Read all of our Unsanitized reports
There’s nothing objectionable in this bill. (OK, one thing, which I’ll explain later.) It takes as its framework something I suggested on November 12: “Slice the money cannon into money for the people.” This was kind of an accounting gimmick, as the money cannon didn’t technically have a CBO score (it’s complicated). But that’s what helped sell Republicans, the idea that they weren’t spending much “new” money because they were canceling out the corporate credit facilities. Whatever myth they told themselves, it got this deal done. (That and the threat of losing their Senate majority in the Georgia runoffs. The nation thanks David Perdue for coming 0.3 percent short of a simple majority in November!)
So roughly $430 billion in corporate trickle-down money was converted into $600 means-tested checks for adults and children; mixed-status families will get the money and the checks could roll out as soon as next week. It was converted into 11 weeks of extended unemployment programs for gig workers and freelancers, as well as extended benefits, and a $300/week increase for all UI programs. Those two pieces have a value of $286 billion, less than the money cannon reserve. Add $25 billion in rental assistance, $20 billion for businesses in low-income communities, $14 billion to maintain mass transit systems, $13 billion for expanded nutrition assistance, $10 billion to sustain child care facilities, and $7 billion for broadband assistance for mostly poor families, and you’re still not there. There’s another $525 billion in the bill besides all that, mostly for another round of PPP for small business (with bigger grants for restaurants), another $15 billion airline bailout, $82 billion for schools, $69 billion for hospitals, vaccines, testing and tracing (will elaborate later), and a ridiculous meals deduction to satisfy Trump.
So again: nothing objectionable. OK, here’s the one thing: the PPP tax “double dip.” PPP grants are already tax-free, but small business owners want to be able to deduct expenses like payroll, as they would normally do, that was paid out with those tax-free grants. Progressives call this a “double dip” while a bipartisan group of lawmakers, pushed by affected industries, wanted this badly. Steve Mnuchin sided with the progressives, actually, but Republicans complained on a call yesterday and he reversed himself. What’s odd is that no Democrats come up in the conversation at all. This deductibility issue, while not scored, could be worth up to $200 billion to the affected businesses. Did Democrats ask for something in exchange for business relief? Looks like they didn’t.
The only issue with this bill is, simply, it’s not enough. An artificial cap placed on the total cost limited the spending: the checks and the unemployment boost is half of its equivalent in the CARES Act. About 13.5 million adult dependents are ineligible for checks—this includes people with disabilities—for no articulable reason. Five weeks were slashed from the unemployment extension. State and local government aid doesn’t exist (there are individual grants for things state and local government provides, but it doesn’t amount to very much). Hazard pay and lots of other provisions were excised from Democratic wish lists for the sake of fiscal probity. This popular tweet about America spending twice as much as its industrialized counterparts is really about the paucity of our safety net; other countries do this stuff automatically.
How “not enough” is it? That entirely depends on the vaccine rollout. The unemployment provisions start to fade in mid-March and are gone by April. The one-time check is one time. PPP grants cover two and a half months of salary (three and a half for restaurants). Are we going to be back to normal by April? Incoming surgeon general Vivek Murthy told Meet the Press yesterday that widespread distribution may not come until “early fall.”
That would be the biggest failing of this bill. Negotiators did increase funds for vaccine procurement (up to $20 billion) and distribution (around $9 billion). They also extended the deadline for states to use CARES Act funds for COVID-related costs, which could go to vaccines. But far greater amounts would have to be expended to really shift the timeline of immunization. Put it this way: in the first week of the Pfizer vaccine, 556,000 Americans got a dose. Joe Biden’s vision is for twice as many to get doses per day in his first 100 days. And if you say that 150 million people have to be immunized to reach herd immunity, and each need two shots (at least of the vaccines approved now), that gets you to herd immunity in… about 300 days. Nearly a year.
Now, there are now two vaccines approved for use, and maybe more coming. This will accelerate, and it’s the most significant logistical project in history, not one that will begin perfectly smoothly. But any expenditures that accelerates takeup will immediately pay off for the economy. That should have been the biggest item in this bill, not a $29 billion afterthought. In fact, eight months ago we should have been spending significantly to build and retool factories, hire logistical personnel, etc. Right now we can spend to re-orient vaccine production for non-approved makers to produce this vaccine. We did Operation Warp Speed for vaccine development and not distribution.
If things work out and we start rolling out the vaccine widely in spring, this will have been a successful effort, for which we can thank Republican fears about Georgia. There will still be the nettlesome problem of state and local austerity to take care of, and a whole bunch of economic disruption. But the longer vaccine distribution takes, the worse this ends up looking.
Days Without a Bailout Oversight Chair
269. And I will have to retire this feature soon. As noted, part of the COVID relief bill is the elimination of these bailout facilities on December 31, slicing up the money cannon for money for the people. That means the end of the Congressional Oversight Commission monitoring these facilities. One of the four commissioners, Bharat Ramamurti, already got a new job in the Biden White House, and another, Donna Shalala, lost her seat in Congress and has no reason to return to Washington.
So this commission will end, either December 31 or shortly thereafter (maybe there’s a final report), without Nancy Pelosi and Mitch McConnell ever picking a chair. And never forget, oversight was the key “get” for Democrats in the final negotiations of the CARES Act.
Today I Learned
- I was on Alternet’s podcast with Joshua Holland discussing various issues. Listen here. (Alternet)
- A mutation of the virus is shutting down Great Britain. Or was “mutation” the excuse Boris Johnson gave for a lockdown, and now it has isolated itself from the world? (Financial Times)
- The country is now in total crisis mode. (Axios)
- The CDC recommends that frontline workers and people over the age of 74 get the virus after the healthcare workers and nursing home residents. (New York Times)
- For hospitals, cutting staff and supplies was a profit center, and now it signals a tragic lack of preparedness. (The Intercept)
- It’s all contractors making the doses for the vaccine companies. (Wall Street Journal)
- “Extensive” political interference from the Trump White House regarding the CDC, House Democrats allege. (The Hill)
- Deborah Birx the latest to have a pandemic getaway, contra her public stance. (Associated Press)
