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Unsanitized-072320
At least Mitt’s happy; Social Security and Medicare recipients may not be.
First Response
Treasury Secretary Steven Mnuchin went on CNBC this morning to describe the agreement between Senate Republicans and the White House on a coronavirus response bill. This is one half of the Republican caucus, with no Democratic or House Republican input, and it took three and a half days. The boosted unemployment runs out in two or three days for most of the 25 million recipients with a July deadline. Another 1.4 million signed up last week, and millions more are joining them as the economy sags. The lack of urgency is as cruel as the details in the bill.
Quickly, here are the elements in a bill that’s less than one-third the size of the House Democrats’ opening bid, the Heroes Act. There’s $105 billion for helping schools, with $35 billion of that only for schools that reopen on time; second Payroll Protection Program checks for businesses that lost more than 50 percent of their revenue; $16 billion for testing; a vague promise of direct payments to individuals (no amount or eligibility requirement given); some hiring tax credit; and unemployment benefits with a “70 percent wage replacement.” Corporate liability immunity wasn’t mentioned but you can assume it’s in there.
The extra $600 a week in unemployment right now, at least in theory, was supposed to provide 100 percent replacement for workers at the median income. It was given as a flat benefit to everyone because state unemployment systems were said to be unable to alter it for individual applicants. So that’s at least a 30 percent cut to unemployment benefits, pushing them down to at least $420 a week, and maybe more depending on how they define the wage replacement and what they plan to do. There was talk yesterday of an extension as low as $100 a week. (UPDATE: many reporters are presuming that the "70 percent wage replacement" translates to $200 a week, down from $600.)
Missing here is the payroll tax cut Trump wanted, but also missing is any money for state and local government; the $150 billion from the CARES Act could now be used for budgetary purposes rather than just coronavirus-related uses, but that’s it. This is arguably worse than the UI cut; the lack of state fiscal aid in the last bill induced premature reopenings, and will just keep us on a perpetual yo-yo until there’s a vaccine, with millions of state and local workers thrown off the job. The bill is a nightmare and it puts the two parties miles apart as the cliff looms.
But this may not be the worst of it. To placate angry conservatives who think you can only break budgets with trillion-dollar tax cuts and unlimited military spending, not help for unemployed or sick people, a measure facilitating future cuts to Social Security and Medicare could find its way into the bill. And the prime mover behind that is every Democrat’s favorite 2012 presidential candidate, Mitt Romney.
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Romney has been pushing publicly for including a bill of his in the relief package called the TRUST Act. Written with Sen. Joe Manchin (D-WV), Romney’s TRUST Act would create bipartisan “rescue committees” to come up with plans to make each federal trust fund—Social Security and Medicare primarily, but also the Highway Trust Fund and others—solvent for the next 75 years. It’s modeled after the “Catfood Commission” in the Bowles-Simpson process. Like with that, once the plans are approved, they get a fast-track delivery to the House and Senate floor, with no ability for amendment. The plans would still need to reach a 60-vote final threshold to pass the Senate.
Rising host Saagar Enjeti was the first to report that the TRUST Act could be folded into the relief bill. The New York Times included it in their roundup last night. (UPDATE: Majority Leader Mitch McConnell has confirmed that the TRUST Act will be part of the base bill he introduces.)
This would be appalling. No federal trust fund, by definition, can reach bankruptcy; Congress can always replenish it. What Romney wants to do here is create a process to force a resolution to earned benefit programs on his terms. While it doesn’t fully eliminate the filibuster for Social Security cuts, it builds a process to invite those cuts to be made. Just a decade ago, Barack Obama favored some cuts, remember.
Moreover, it’s designed to trap Democrats. Mitch McConnell wants nothing more than to kill social insurance spending while keeping his fingerprints off it. Passing the TRUST Act would set in motion a runaway train that has to move inexorably toward chipping away at Social Security and Medicare. It would restart the fiscal mania in Washington, and pressure Democrats to be “serious” by degrading the most popular programs the party ever created. Fierce grassroots pushback stopped this cold during Bowles-Simpson, but the deficit hawks only have to be right once. It would also conveniently be an enormous distraction during what’s expected to be an extended economic downturn.
There are a few decent ways to achieve solvency (eliminating the payroll tax cap for Social Security, for one), but that’s not what this process is meant to do. By design, it brings together everyone in D.C. to cut your grandmother’s Social Security check, so no one can be fully blamed.
Let’s at least blame Romney, the great hero of the resistance, the GOP dissident who dares to question his party. This man of principle who rejects the evil Trump wants to increase senior poverty. That’s his great project. He was a severely conservative presidential nominee on economics and he remains severely conservative today. With friends like these, who needs enemies?
Odds and Sods
Monopolized news: I was on the Nicole Sandler Show yesterday talking about the book. Watch here.
Tomorrow at 1pm ET, we’re doing a Prospect Zoom event where I’ll talk to Zach Carter, HuffPost writer and author of The Price of Peace, the New York Times bestseller about the life of John Maynard Keynes. We’re going to ask each other questions about our books. This should be really fun. You can register here to participate in the event live. We’re also going to stream it at prospect.org tomorrow.
Days Without a Bailout Oversight Chair
118.
Today I Learned
- There was a “Mitch Better Have My Money” rally for unemployment benefits in Kentucky yesterday. (WJLA)
- Richie Neal successfully kept surprise billing fixes out of the next bill. (Politico)
- Only 1 in 10 Americans want schools to reopen in person. (Washington Post)
- Under cover of the pandemic, the asylum system, even for small children, has been eliminated. (Associated Press)
- The government pays Pfizer nearly $2 billion for 100 million hypothetical vaccine doses. (HHS.gov)
- The notion of reinfection is complicated by original false positives so it’s hard to show real evidence of it. (New York Times)
- Another retail bankruptcy, this one the parent company of Ann Taylor and Lane Bryant. Expect many closures. (CNBC)
- Wells Fargo put people into forbearance without their knowledge. Shades of the foreclosure crisis. (NBC News)
