Lev Radin/Sipa USA via AP Images
First100-030321
A mobile testing site in New York City, one of many COVID-related programs states have borne the expense of during the pandemic.
It’s March 3, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.
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The Chief
The Senate has until the end of next week to meet the deadline for when unemployment benefits for about 11 million people, extended in the last COVID relief package, begin to phase out. That has become the deadline for the American Rescue Plan. Senate Democrats are gradually piecing together their version of the ARP that the House sent over. The first votes could come today, and the bill is going to pass, Chuck Schumer promised.
I wouldn’t expect too many changes from the House bill (which, in the interest of keeping this at top of mind, will give a fully eligible family of four between $7,600 and $8,800 in cash benefits over the course of 1 year, with $5,600 up front), with the glaring exception of the minimum wage increase. It’s completely in the hands of the presiding officer of the Senate to decide what’s germane for a budget reconciliation bill, so this reflects Democrats stopping that wage hike themselves, though they want to put it on the Senate parliamentarian doing their work for them.
Beyond that, there were three areas of interest for moderate Democrats: eligibility thresholds for the direct payments, the federal boost to unemployment insurance, and the $350 billion fund for state and local governments.
The first two negate each other. The whole point of tightening the eligibility on the checks, which is based on a faulty economic analysis, is to better “target” relief at those who need it. So you’re also going to reduce weekly unemployment payments from $400 to $300? That’s the most targeted relief in the bill! This is clearly just purple and red-state Democrats being stupidly contrarian for the folks back home, in a deeply damaging way. But it was so contradictory that nothing much came of it. A report out this morning suggests no change to the unemployment boost and a minimal change to the phase-out of the checks, saving little money (but screwing over some people who got partial check money in previous bills).
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There’s one requirement in the bill, that it come in under the $1.9 trillion threshold, and more progressive Democrats want to extend unemployment benefits to the original place Biden had them, at the end of September. The House chopped off a month to make room for a multi-employer pension fix. This could have been resolved by simply making the threshold larger to account for Congressional prerogatives but instead we’re playing priorities against one another. Sigh.
Anyway, let’s talk about that third piece, the state and local government fund.
This New York Times chart is getting a lot of attention. It’s the latest in a series of pieces of evidence showing that revenues were not as bad as forecast for states in 2020. I should note that this chart as written reflects changes to “tax revenue,” which is not the only revenue that state governments take in (there are user fees and licenses and what-not). But I’ve seen broader studies of total state revenues that are similar.
First off, there’s a lot of variance here. Generally speaking, states with heavy oil production or large tourism industries got hammered, while others persevered. States reliant on sales rather than income taxes are also doing badly. Furthermore, these are state revenues; local revenues, which are more reliant on sales taxes and business fees, are not shown here. Nearly half of the $350 billion allocation is intended for local governments. (I’m thinking about more untaxed grocery sales than taxed restaurant sales, and waivers of fees for struggling businesses; those local revenues could be in worse shape.)
But the bigger issue is that, while I’ve seen plenty of estimations of state revenues, but none referring to state costs.
Keep in mind that states have had to fund large-scale testing campaigns since last March, and large-scale vaccination campaigns since December. They have had to manage social distancing and sanitation in all government buildings and facilities. They’ve paid for hazard pay in some cases. They have occasionally borne costs of setting up mobile hospital units or other means to increase capacity in the health care network. To the extent that education facilities have been upgraded and online learning systems set up at a moment’s notice, that too was a public cost (though probably at the local level).
There was some dedicated money for this purpose in the CARES Act, $150 billion for increased COVID-related costs. But that may not have necessarily reflected everything that states have had to bear during this emergency. Granted, there have also been reductions in cost: school bus drivers haven’t been needed, for example, or state park rangers in some cases, or other social distancing-related jobs. (As we return to in-person instruction and get back to normal, these costs come back, by the way.)
But I haven’t come to the greatest cost center during the crisis: social services. The federal government is picking up some costs for increased utilization of Medicaid, but there are a wide array of social programs, at least in the states that try to assist their poorest residents, that have skyrocketed in cost over the past year.
So in other words, revenues were flat, but costs were likely to be a fair bit higher, and will continue to be as long as vaccination campaigns and special procedures to prevent spread are in place. I don’t think there’s much of an argument to cut this money, given those circumstances.
That said, there are tweaks that could be made. Some Senate Democrats are talking about devoting some of the $350 billion to public investment, on broadband or hospitals. There is some investment in this package and there should be more—I think all of the $130 billion school fund should go toward top-notch ventilation in every school in America—and with money fungible it would save states from having to do the upgrades. In addition, you could see the money dribbled out on a longer time frame, so states would have to certify the ongoing need. I wouldn’t necessarily want to see that, but it could happen.
What absolutely needs to happen is a “maintenance of effort” clause so red states don’t take this money and pour it into tax cuts. Kansas is already thinking about this. That should absolutely be disallowed. If the state of Kansas can’t find a worthwhile project to spend on, they can give the money back. In fact, I have an idea for them: Kansas is 42nd among states in vaccinations of at least one dose to their population, an 39th in percentage of supply used. Maybe spend on that!
What Day of Biden’s Presidency Is It?
Day 43.
Today I Learned
- Neera Tanden is out as OMB director, here’s her letter. Biden’s vowing to place her somewhere in the White House. (via Twitter)
- Shalanda Young is the leading replacement candidate if you only listen to Senate Republicans. Shouldn’t Democrats weigh in on this? (Politico)
- The new baseline: the U.S. will have enough vaccine to inoculate every adult by the end of May. (CNN)
- Asylum seekers that have been staying in Mexico are finally emptying out to process claims in the United States. (Bloomberg)
- It will take 20,000 beds to deal with the child migrant surge; or they can just be sent to families already in the U.S. (Axios)
- Rohit Chopra and Gary Gensler had confirmation hearings yesterday; Chopra vowed strong enforcement, while Gensler promised a review of market structure. (Bloomberg Law; Financial Times)
- Biden is prodding to get schools to reopen. (Politico)
- The current CFPB finds over 11 million at risk of losing their housing. (CFPB)
- Terrible lawyering gave a little hope in Voting Rights Act Cases yesterday but I doubt much will come of it. (Vox)
