יום שלישי, 17 במרץ 2020

Washington Learns to Love ‘Money for Everyone’

Why a partisan city tends to unite over the idea of just writing a check in a crisis.

Suddenly, it seems like everyone wants Uncle Sam to send Americans checks.

In just the last two days, the idea that the federal government should simply give people money to help them through the coronavirus pandemic has been endorsed throughout the political spectrum—by Democratic senators like Sherrod Brown and Michael Bennet, Republican senators like Mitt Romney and Tom Cotton, just about every economist who worked for President Barack Obama, and finally, this afternoon, by President Donald Trump. There’s a #ChecksChecksChecks hashtag on Twitter. The concept of Money For All has gone, well, viral, and legislation is surely coming soon.

At a time when Washington is bitterly polarized over almost everything—including other stimulus proposals that would target beleaguered industries or low-income workers—airlifting cash into American households is one of those rare concepts that almost every politician can embrace, even though it smacks of the big government liberalism that Republicans mock, even though every dollar gets added to the deficit.

In under 48 hours, the debate has shifted from whether to do it to how big to make it, with $1000 now looking like a baseline, and some proposing to give some Americans as much as $4500.

After all, a checks-in-the-mail stimulus is easy to explain, easy to execute and, for obvious reasons, popular with the public. It can pump money into the economic bloodstream faster than infrastructure projects or most other government programs. And unlike a payroll tax cut, which Trump had been pushing until Tuesday, it can provide help for vulnerable people who aren’t on a payroll. House Speaker Nancy Pelosi once helped get it done for another Republican president, George W. Bush. Obama’s economists once persuaded him to do it in a more complicated way, a political mistake that most of them still regret.

“It makes sense on so many levels,” said Arshi Siddiqui, who was Pelosi’s senior policy adviser when she negotiated the Bush stimulus in January 2008. “It can get money to people quickly, especially people living paycheck to paycheck, and it has real bipartisan appeal.”

That $168 billion Bush stimulus, crafted after the Great Recession started but before Lehman Brothers and the global financial system collapsed, happened in a much less turbulent economic moment but a similar election-year political context, pitting a newly Democratic House led by Pelosi against a scarred Republican president. The speaker is a San Francisco liberal, but she’s the daughter of a Baltimore machine pol, and as she showed last week when she negotiated an emergency coronavirus bill with Trump treasury secretary Steven Mnuchin, she likes to make deals.

In 2008, her negotiating partner was Bush treasury secretary Henry Paulson Jr., a former Goldman Sachs CEO who also liked to make deals. House Minority Leader John Boehner of Ohio, a conservative Republican who was also at the table, was yet another dealmaker.

The climate did not necessarily seem conducive to compromise. Bush had unilaterally announced a plan to send out checks to most Americans, but not to the working poor. Boehner wanted to stuff the plan with tax breaks for businesses, while Pelosi wanted spending programs for the needy. As the talks began in the House’s “Board of Education” room, the tiny hideaway where Speaker Sam Rayburn used to “educate” members unwise enough to cross him, Boehner groused that the goal was supposed to be economic stimulus, not income redistribution. Pelosi shot back that the actual goal was preventing “your potential recession.”

But it took just two days to unite the room around a simple middle ground: Send out checks of up to $1200 per family plus $300 per child, like Bush wanted, and include the working poor, like Pelosi wanted. She insisted that top earners couldn’t be eligible, and Boehner insisted on a tax break encouraging businesses to buy equipment, but Congress overwhelmingly approved the deal in February, and the checks started going out in May. And Paulson says the bipartisan trust built over those two days was vital to passing the bipartisan $700 billion bank bailout that helped rescue the financial system in the fall.

“That was such a smooth negotiation,” Paulson said in an interview. “We knew we were doing the right thing—to get the money out quickly, and also to build some bipartisan momentum.”

Of course, the mild boost from the Bush stimulus checks was soon overshadowed by the financial crisis, and by the time Obama took office the economy was shedding 750,000 jobs a month. His advisers agreed: The economy needed a lot more stimulus to stop the death spiral. They also agreed: Part of the stimulus should get people cash as quickly as possible, so they could pay bills, buy groceries, and patronize businesses that might otherwise lay off more workers and accelerate the death spiral. But they did not agree how to get people cash.

Obama’s political advisers favored the politically attractive solution of sending every American a big check. His chief of staff, Rahm Emanuel, couldn’t wait for the “Ed McMahon moments” when voters would find Publishers Clearinghouse-style lottery winnings in their mailboxes. But Obama’s economic advisers warned that the recipients of one-time windfalls were more likely to save the money, and less likely to stimulate the economy by spending the money. Instead, they recommended dribbling out the cash a few dollars a week by reducing government withholding from paychecks, so the workers would be less likely to notice and more likely to spend.

The president sided with his economists. He told his team that the politics didn’t matter; all that mattered was stopping the freefall. The $116 billion Making Work Pay tax credit ended up providing up to $400 to about 95 percent of American workers, but polls showed that less than 10 percent of the American public even knew about it. That was the whole point; the credit was designed not to be noticed. Politically, though, it felt like sending flowers to a romantic interest without signing the note. Some Democrats had mocked the Bush stimulus checks as a cheesy PR stunt, but after the 2009 rise of a new Tea Party that accused Obama of raising taxes like King George, followed by the 2010 Republican takeover of the House, many of his aides wished they had gone ahead with a cheesy PR stunt of their own.

“The political theory was if you do the right thing, and you get results, that’s good politics,” Obama aide Ron Klain told me years later. “In retrospect, it just seems stupid.”

It is no coincidence that in early March, Jason Furman, Obama’s former top economist and a key architect of the Obama stimulus, was one of the first voices calling for a coronavirus stimulus that simply sent $1000 checks to all Americans—and he now thinks the checks should be even bigger, with additional checks to follow if the economy fails to revive. When I asked Jared Bernstein, another former Obama White House economist, why simply giving people money is such a popular idea, he asked me if that was supposed to be a trick question.

“Because their income is, as we speak, taking a huge hit, and they still have to survive,” Bernstein said. “This is probably the best way to get substantial help to people quickly.”

Not even proponents of universal stimulus checks think that sending people money and putting the tab on the government’s credit card is ideal public policy. There are questions about whether rich Americans should get checks at all, and whether poorer Americans who are more likely to spend the money should get bigger checks. Dramatically expanding government benefits like unemployment aid and food stamps might be faster and better stimulus; the same is true of providing aid to states so that they don’t lay off workers or cut benefits.

But the one argument that isn’t being made against giving people money in the Trump era is the argument that Republicans made relentlessly against stimulus handouts in the Obama era: They will increase the budget deficit. Deficits have exploded to over $1 trillion under Trump despite a strong economy, and are now poised to soar well over $2 trillion. But the Republican Party that mocked Keynesian economics in 2009 is now eager to pour tax dollars into the faltering economy—perhaps accompanied by a Publishers Clearinghouse-style letter from Donald J. Trump—and worry about the fiscal consequences later.

“This is not the time to worry about the deficit,” Mnuchin said Tuesday.

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