Wednesday, July 15, 2020

Brinksmanship in Free-Fall

David Super

     The whole point of brinksmanship in the federal government is to threaten to take the nation careening into the abyss if the other side does not accede to one’s demands.  With the number of COVID-19 cases, hospitalizations, and deaths now rising exponentially in much of the country and the “damn the torpedoes” theory of economic recovery in ruins, it would seem a bit late for brinksmanship.  And yet that may very well be what awaits us when Congress returns next week to address coronavirus relief. 
     To review, Congress has enacted four substantial pieces of coronavirus relief legislation to date.  The first was a comparatively small supplemental appropriations bill for the federal agencies most involved in the response, such as the Centers for Disease Control and Prevention. 
     The second was the much more significant Families First Coronavirus Relief Act.  It made COVID-19 testing, although not treatment, free.  It slightly improved the unemployment insurance system.  It authorized larger allotments for some recipients of the Supplemental Nutrition Assistance Program (SNAP, the successor to food stamps), suspended the rule denying SNAP to unemployed childless adults, and allowed states to distribute nutrition assistance to replace school meals when in-person classes no longer meet.  And it modestly increased the share of Medicaid costs borne by the federal government on the condition that states not terminate anyone’s Medicaid coverage in the midst of the pandemic. 
     Next came the CARES Act, which secured much more comprehensive – but sharply time-limited – improvements to the unemployment insurance system as well as direct aid to states, large local governments, tribes, and institutions of higher education.  It also provided for relief checks of $1,200 per adult and $500 per child to low- and moderate-income households through the Internal Revenue Service.  To secure these provisions, Democrats agreed to several large funds that the Administration could distribute with minimal oversight to businesses as well as targeted subsidies for particular industries. 
     The implementation of the Families First and CARES Acts have been uninspiring, to say the least.  The Administration’s interpretations of the CARES Act’s unemployment insurance provisions denied aid to many workers in need.  The chaos and delays in implementing the new, broader unemployment insurance system owe much to systematic under-investment in that program over the decades, but the federal Administration has done little to help.  It also interpreted the fiscal relief provisions to prevent states and localities from using the money to fill the massive holes in their finances left by the economic downturn and the postponement of tax filing.  Perhaps most spectacularly, it issued an edict purporting to prevent universities from aiding many immigrant students. 
     The relief checks also fell far short of their potential.  The IRS initially interpreted the CARES Act very conservatively to impose onerous paperwork burdens on all those too impoverished to have filed tax returns.  Under massive congressional pressure, it eventually relented and implemented provisions of the legislation allowing return-less checks to recipients of some federal benefit programs such as Social Security and certain veterans’ programs.  Even there, its approach was strikingly grudging:  once it reversed itself, it gave low-income elderly and disabled recipients of the Supplemental Security Income (SSI) benefits only a few days to go on a brand-new web portal to register any dependents they had or forego receiving the $500-per-child benefit. 
     The result was that 12 million eligible low-income people did not receive checks.  Nine million of these receive Medicaid, SNAP, or both, but IRS made no real effort to coordinate with the state agencies administering these programs to get the word out about how to file for checks.  It is difficult to assess how much of this resulted from the ideological predispositions of the Trump Administration and how much reflected a severely underfunded IRS seeking to minimize the staff hours devoted to new responsibilities when it was already falling short on its core activities and trying to adapt to pandemic conditions. 
     As widely predicted, the business bail-outs have operated opaquely.  Those criticizing congressional Democrats for agreeing to these provisions miss the point that they were part of a trade:  had the business relief provisions constrained the Administration more, the President and Senator McConnell would not have agreed to anything approaching the dramatic structural improvements for unemployment compensation that the CARES Act provided during the pandemic. 
     Less commendable was the fourth major COVID-19 relief legislation.  It poured more money into business bailouts without any corresponding extension or improvement to unemployment compensation, food assistance, Medicaid coverage, or aid to hard-pressed state and local governments.  As soon as it passed in late April, Republicans began questioning the need, and particularly the urgency, of further relief legislation.  Several opined that state and local budget crises could be positive things if they forced cuts in public employees’ pensions and other “wasteful” spending.  Many also insisted that the unemployment compensation reforms were preventing an economic recovery by reducing workers’ incentives to return to work. 
     With Republican senators and the White House largely unwilling even to talk about further relief legislation, the House moved on its own and passed the HEROES Act on May 15.  At the time the Congressional Budget Office predicted it would cost just under $3.5 trillion, although the passage of time and changing conditions surely would yield a different estimate now.  This includes $915 billion in state and local aid; economic uncertainty makes uncertain if this is enough to prevent cuts in human services programs.  The legislation would spend $436 billion to extend expiring unemployment compensation provisions into January but make no substantive reforms to help those denied benefits under the Administration’s narrow readings of the CARES Act – and it does nothing to tie the duration of the reforms to the unemployment rate.  Another $536 billion goes to another round of $1,200 relief payments to low- and moderate-income people.  Almost $400 billion goes to hazard pay for exposed workers, and somewhat less then $100 billion goes to means-tested programs such as Medicaid and SNAP.  Most of the remainder is for various public health initiatives and support to assorted industries (including higher education).  It feels odd to call a bill with that large a cost estimate modest, but relative to the scope of the crisis it actually is. 
     Senator McConnell has told his caucus that further relief legislation may be unavoidable but he wants something dramatically smaller than the HEROES Act.  He also has insisted that the price of even opening negotiations is Democrats’ acceptance of legislation absolving employers of liability to employees who contract COVID-19 in unsafe working conditions.  In a remarkable departure from other lawsuit-avoidance statutes, he has said nothing about alternative arrangement for compensating disabled or dead workers nor has he explained what alternative incentives he would give employers to maintain workplace safety. 
     Senator McConnell –one of the few people in Washington who can draft complex legislation without leaks – apparently plans to sketch out his ideas to Republican senators on July 21.  A full proposal may not emerge until the end of the week.  Many suspect it may be less than a quarter the size of the HEROES Act.  By all accounts, even staff-level technical discussions on new legislation between the parties have not begun.
     Meanwhile, the extra $600 per week that the CARES Act added to unemployment checks will largely disappear beginning July 26.  (Most CARES Act’s eligibility expansions last until December, but the $600 is vital to the lowest-paid workers and to those in the “gig economy” that have difficulty documenting what they earned before the crisis.)  Most families’ economic relief checks were spent long ago. 
     Senator McConnell’s choice to wait until the very last minute – perhaps as little as two days before enhanced unemployment compensation ends – suggests at a minimum that he wants to play “chicken” with the Democrats. 
     With desperate unemployed workers seeing precipitous drops in their incomes even as jobs disappear again after failed re-openings, Democrats will be under enormous pressure to accede even to a very disadvantageous bill.  Moreover, this debate could be deeply divisive for Democrats.  If Senator McConnell imposes a low ceiling on the cost of any deal, Democratic priorities will be pitted against one another.  Democratic governors and state legislators desperate to avoid savage budget cuts could be lobbying against advocates for unemployed workers, with both squaring off against those seeking child care subsidies, aid to schools trying to prepare for an uncertain fall, another round of relief checks, or further business subsidies.  Democrats running in marginal districts may press their leadership to reach a deal while progressives, already prone to criticize Speaker Pelosi, demand that the party hold out. 
     The likely result is the same kind of brinksmanship we have seen repeatedly over government shutdowns:  no deal is reached, enhanced unemployment ends, a discouraging but not devastating July unemployment report arrives August 7, and both parties’ pollsters furiously try to determine which party swing voters will blame. 
     In this battle, Senator McConnell will benefit greatly from the innumeracy of the public and many or most journalists.  “Ten billion dollars” for state and local fiscal relief might sound like a lot to many people yet it is scarcely one percent of what is needed.  Any sum offered for education or personal protective equipment will sound huge even if, when spread across all the schools or health care facilities in the country, it is purely tokenistic.  And even many experts have difficulty projecting how many people might lose out under this or that complicated change in unemployment insurance eligibility. 
     The showdown might be resolved by the pollsters.  It also might come down to the relative levels of discomfort felt by endangered Senate Republicans, on the one hand, and unemployed Democratic constituents, on the other. 
     Another possibility remains.  Senator McConnell actually may not want a deal if he can stick Democrats with much of the blame for the impasse.  Any deal would surely extend the increased unemployment compensation (although perhaps at a reduced level).  Some of the President’s advisors insist that without the loss of unemployment assistance to drive workers back to their jobs, the economy will not rebound enough to allow his re-election.  A failed negotiation would allow Senator McConnell to avoid splitting his own party on that issue while leaving Democrats to rancorous recriminations.

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