The Economist - USA (2020-07-25)

24 TheEconomistJuly 25th 2020

1

T

he senate’s status as “the world’s

greatest deliberative body”, as President

James Buchanan allegedly described it, has

been exaggerated for a while. Legislation is

accomplished not through considered de-

bate, but rushed, secretive crafting of law

by senior party leaders on the eve of some

cataclysmic deadline. In the past decade

this brinkmanship has led to one struggle

over “sequestration”, two debt-ceiling cri-

ses and three shutdowns of the federal gov-

ernment, but little in the way of substan-

tive lawmaking. The same dynamic will

shape the latest gargantuan stimulus pack-

age needed to cushion the fallout from the

epidemic of covid-19. But this time, the

consequences of brinkmanship and delay

could be even more severe.

When Congress passed the caresAct, a

fiscal-stimulus package costing $2.2trn, in

March, it included important stabilisers

for an economy placed in a medical coma.

Among these were much-increased unem-

ployment benefits—boosted from $370 a

week on average to $970—and a suspen-

sion of evictions and foreclosures in feder-

ally backed housing until the end of July.

These measures were set to expire after

four months, by which time the epidemic

was expected to be under control.

That is not the case. New confirmed in-

fections are surpassing their previous

peaks in mid-April, sometimes exceeding

70,000 per day. The unemployment rate in

June was 11.1%, and the Congressional Bud-

get Office (cbo) expects it to decline only

modestly to 8.4% in 2021. The “v-shaped re-

covery” that America had hoped for seems

out of reach. About 18m are still unem-

ployed, compared with 6m before the re-

cession. Surveys from the Census Bureau

show that 16% of adults who owe rent or

mortgage payments missed them last

month, and 11% report that they do not have

enough to eat at least some of the time

(compared with 8.8% in early March). Evic-

tion notices, many filed by landlords who

are also struggling, have begun to pile up.

Hence the need for another stimulus

package. Democrats released their propos-

al, a $3.4trn behemoth called the Heroes

Act, two months ago. Republicans have

gone from suggesting a “pause” on future

stimulus, as Mitch McConnell, the Senate

majority leader, said in May, to agreeing

that something more is needed. The Re-

publican counterproposal, which is yet to

be fully unveiled, will be more modestly

priced, perhaps at $1trn or so. Neither side

expects the bill to be negotiated by the end

of the month, when the provisions on un-

employment and evictions in the cares

Act expire. The resulting gap could up-end

the lives of millions of American families

and set the economy back.

Researchers from Columbia University

calculate that without the enhanced safe-

ty-net benefits, the poverty rate would have

risen by four percentage points, represent-

ing 12m people. Instead it has remained

flat. Some of the more sophisticated pro-

posals, such as indexing benefits to previ-

ous earnings up to a maximum level, are

conceptually elegant but might delay

cheques for weeks. State unemployment

offices, reliant on antiquated computer

software and few staff, have struggled to

implement something as simple as adding

$600 to every cheque. First, though Con-

Congress and covid-19

Spot trades

WASHINGTON, DC

An extended partisan showdown over another stimulus package will hurt

millions of Americans

United States

25 Workandincentives

26 Easinglockdownsandcovid-19

27 Minneapolisanditspolice

28 Lexington: Trouble in Trumplandia

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