Unparalleled crisis leads to unprecedented federal spending
The $2.2 trillion coronavirus relief bill signed into law by President Trump increasingly looks like it will only be a starting point when it comes to the money Congress will pour into the battle against the pandemic.
The sweeping legislation approved by Congress in March was the largest rescue package in U.S. history, but lawmakers already are wrangling over new legislation to add to a small-business loan program created by the bill.
Democrats also want to add money for cash-strapped hospitals and state governments to that package, and Speaker Nancy Pelosi (D-Calif.) says a relief package after that should top $1 trillion.
Congress and the administration are borrowing the money to pay for the aid, something economists on the right and the left say is the right course of action to fight off a potentially devastating recession.
But as the battles heat up, there are warnings that Congress should avoid splurging on things that won’t help fight the coronavirus pandemic and its economic fallout.
“I think we’ve probably done about $3 trillion of borrowing from 2020-2021 already,” said Marc Goldwein, the head of policy for the Committee for a Responsible Federal Budget, a fiscal watchdog group.
It’s impossible to pinpoint just how much might be spent to fight the coronavirus and the economic meltdown it has caused. It will depend on the virus and the government’s ability to implement a testing and contact tracing system. Questions about a second wave and the timeline for a vaccine are among the other factors.
Whatever the cost, it’s likely to be astronomical.
“I don’t think it’s totally unrealistic to think we’ll end up with $3 trillion more in fiscal support,” Goldwein said.
The original package Trump signed last month, the CARES Act, included $349 billion for the Paycheck Protection Program, which offers small businesses forgivable loans to keep employees on the books through the crisis. But experts say that may be just a fraction of what’s needed.
“Clearly $350 billion is way too small,” Michael Strain, director of economic policy studies at the American Enterprise Institute, said at a Brookings Institution event on Tuesday.
The program is set to run out of money as soon as Thursday, less than two weeks after applications opened. Congressional leaders are wrangling over a plan to top it up with an additional $250 billion, but that may not go far enough either.
“I think we should be looking at a $1 trillion program,” said Strain, who called the program the most important part of the emergency rescue package.
States say they need a significant infusion of cash, something experts say will be key to preventing a drawn-out recovery. On Saturday, the National Governors Association called on Congress to approve $500 billion in direct aid to states, in a joint statement from Maryland Gov. Larry Hogan, a Republican and the organization’s chairman, and New York Gov. Andrew Cuomo, a Democrat and vice chairman.
That figure, too, may understate what’s really needed.
“The aid that Washington has provided to date is far too little to avoid mass layoffs,” said Michael Leachman, director of state fiscal research at the Center for Budget and Policy Priorities.
With lockdowns in place across the country, states are taking a double hit as they fork over money to prevent the virus’s spread while taking in little in state sales taxes. Income and capital gains tax revenue will also fall dramatically, and states will face months of high unemployment.
Layoffs of public employees such as teachers seem inevitable without more federal support. Add that to the slew of tribes, territories and local governments that will need a fiscal boost, and the figure could be significantly higher.
Other causes may need additional funds as well.
Some Democrats say health insurance for laid-off workers should be subsidized and that additional payments should be made to front-line workers risking their lives to battle the virus.
Others want to provide additional, larger stimulus checks sent to American taxpayers as the crisis continues. The Economic Injury Disaster Loan program, another effort to relieve businesses, may be running out of cash.
Once the crisis dies down, Congress may attempt to pivot from emergency rescue toward more economic stimulus, which could include a significant infrastructure package.
Partisans are accusing each other of fattening up rescue efforts with wasteful spending and pork projects.
Republicans excoriated Democrats for adding funds for the National Endowment for the Arts and Kennedy Center in the CARES Act. Democrats say the GOP inserted tax loopholes that will primarily help the wealthy.
Already, some conservative groups are calling for Congress to pump the brakes on new spending.
“Now is the time to assess whether relief is getting to the people who need it and fix what’s broken – not rush through another massive bill that could prove less effective than what those Americans in need deserve,” Tim Phillips, president of Americans for Prosperity, a group backed by billionaire conservative donor Charles Koch, said last week.
Already the new spending, added to the precipitous rise in the deficit already in place under Trump, has put the national debt on track to exceed 100 percent of gross domestic product (GDP) this year for the first time since World War II.
Goldwein notes that any additional packages are likely to put America on the path to break the debt record of 106 percent of GDP next year.
Once the crisis ends, the government will need a plan to keep the debt sustainable, making sure that it’s not growing as fast as the economy.
“This is a once-in-a-century crisis, and it’s the kind of thing that it makes sense to borrow for, even if we have to pay that back over the next hundred years,” Goldwein said.
But in the process, Congress should make sure to focus on fixing the crisis at hand.
“The first principle should be: Don’t use it for things that don’t have anything to do with the current crisis and won’t help,” Goldwein said. “Don’t throw money in the toilet.”
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