The New York Times - USA (2020-11-15)

THE NEW YORK TIMES NATIONALSUNDAY, NOVEMBER 15, 2020 0 N 23

Last spring, economists were
nearly unanimous in urging Con-
gress to provide as much money
as possible, as quickly as it could.
Now, many conservative econo-
mists say a much smaller follow-
up package would suffice. Even as
progressives point to slowing job
creation and soaring long-term
unemployment rates to argue for
trillions of dollars in aid, a growing
number of liberal economists are
urging Democrats to compromise
and accept a smaller package to
get money flowing quickly.
“A meaningful something is a
lot better than nothing,” said Ja-
son Furman, who was a top eco-
nomic adviser to former Presi-
dent Barack Obama. “Preventing
damage to the economy today
puts it in a better position a year
from now.”
But others with ties to Mr. Bi-
den’s team see the economic and
political trade-offs differently.
William E. Spriggs, a Labor De-
partment official under Mr.
Obama, agreed that it was vital for
Congress to act quickly. But he

urged Democrats not to accept too
small a deal because it might
prove insufficient and make it
harder to win support for more aid
later on.
“You will get people saying it
didn’t work, so we don’t need to do
it again,” said Mr. Spriggs, whom
prominent Democrats have
pushed for a role in the Biden ad-
ministration. “You make it harder
to go to the well again.”
Polls continue to show strong
bipartisan support for more
spending, including another
round of direct payments to
households. But it appears in-
creasingly likely that if Congress
reaches a deal by the end of the
year, it will be for a package that is
far smaller than the deal that
Democrats and the White House
were discussing before the elec-
tion, which called for an outlay of
more than $1.5 trillion.
Senator Mitch McConnell of
Kentucky, the majority leader,
said relatively strong employ-
ment numbers for October
showed that the economy was “re-
ally moving to get back on its feet”
without much government aid.
Mr. Biden will almost certainly
propose a broader stimulus effort,
but unless Democrats take control
of the Senate — which would re-
quire them to win two runoff elec-
tions in Georgia in January — his
ability to push a deal through Con-
gress will be limited. Republicans
have cited concerns about the
record budget deficit in opposing
another large round of govern-
ment spending.
Prospects for a new relief bill
have been further clouded by am-
biguous economic readings that
can support seemingly any policy
preferences.
To those pushing for a smaller
package, recent data suggests the
economy is on firmer footing. The
trillions of dollars that Congress
provided in the spring largely suc-
ceeded in buoying the economy,
and while progress has slowed, it
has not stopped: Employers have

added almost three million jobs in

the last three months, and the un-

employment rate — nearly 15 per-

cent in April — has fallen by more

than half.

“We have an unemployment

rate below 7 percent right now,”

said Michael R. Strain, an econo-

mist at the conservative Ameri-

can Enterprise Institute. “That

calls for a very different amount of

stimulus than if the unemploy-

ment rate were in the range of 10

percent, which is where we all

thought it would be.”

Many progressives, however,

argue those aggregate figures ob-

scure more severe harm beneath

the surface. White-collar profes-

sionals, many of whom can work

from home and have benefited

from the strong stock market,

have done relatively well during

the pandemic, and some indus-

tries, like construction and au-

tomaking, have bounced back.

But service businesses, like

restaurants and hotels, are still

suffering, with little chance of re-

vival before a vaccine is widely

available.

“Things have improved more

quickly than I expected, but we

still have an enormous gap,” said

Heidi Shierholz, a Labor Depart-

ment economist in the Obama ad-

ministration who is the policy di-

rector for the liberal Economic

Policy Institute in Washington.

She said the economy still needed

trillions of dollars of support over

the next two years.

The need is particularly acute

among historically disadvantaged

groups that have been hit hardest

by the recession. The unemploy-

ment rate for Black Americans re-

mains in the double digits, and

hundreds of thousands of women

are no longer working or seeking

work, often because they must

care for children who are home

from school. More than 3.5 million

Americans have been unem-

ployed for more than six months.

“To say we don’t need as much

aid is ridiculous,” said Olugbenga

Ajilore, an economist at the Cen-

ter for American Progress, a liber-

al group. “What that signals is all

we care about is white men and no

one else matters.”

Then, there is the pandemic it-

self. Many epidemiologists warn

that infection rates are likely to

keep rising as people gather in-

doors and travel for the holidays.

That could bring a wave of new

layoffs as consumers pull back on

activity and businesses face new

restrictions.

“We do see the economy con-

tinuing on a solid path of recovery,

but the main risk we see to that is

clearly the further spread of the

disease here in the United States,”

Jerome H. Powell, the Federal Re-

serve chair, said Thursday. “Peo-

ple may lose confidence that it is

safe to go out.”

Some forecasters are skeptical

that the latest rise in cases will be

as damaging, at least economi-

cally, as earlier waves. Businesses

and consumers have learned to

adapt to the virus — or, in some

cases, have chosen to ignore the

risks — and states have generally

resisted reimposing the strict

lockdown policies that were com-

mon last spring.

“I had really not appreciated

how much economic activity we

would keep doing in the face of a

pandemic,” said Wendy Edelberg,

director of the Hamilton Project,

an economic policy arm of the

Brookings Institution. “It could

well be that the economy can con-

tinue to muddle along despite a

surge in the virus this winter.”

But muddling along could have

long-term consequences. After

the last recession, the federal gov-

ernment pulled back on aid before

the economy had fully recovered,

leading to a slog that was particu-

larly hard on Black and Hispanic

households.

And without aid, the virus may

push more businesses over the

edge, setting off ripples through

the entire economy.

“You’re never quite sure if

you’re near to some kind of tipping

point where the stimulus might be

just enough to keep you from tip-

ping,” said Chris Varvares, co-

head of U.S. economics at IHS

Markit, a forecasting firm. “Espe-

cially for those affected families

that are about to be evicted or

about to have foreclosure pro-

ceedings brought against them, or

for small-business owners that

are about to throw in the towel, the

stimulus could provide that life-

line.”

Economists broadly agree that

Congress should focus on aid to

state and local governments, sup-

port for small businesses and an

extension of the expanded unem-

ployment benefit programs that

are set to expire at the end of the

year. Mr. Biden discussed a simi-

lar list of priorities on Thursday

with the top congressional Demo-

crats, Representative Nancy

Pelosi of California and Senator

Chuck Schumer of New York, ac-

cording to a summary from the

participants.

On Friday, a transition adviser

to Mr. Biden, Jen Psaki, brushed

aside several questions from re-

porters about the president-

elect’s views on the size and tim-

ing of a stimulus package, other

than to say that on Capitol Hill

“there have been conversations

started that he’s engaged with.”

“You should expect that he will

continue to be engaged in those

discussions,” Ms. Psaki said, “and

certainly wants to see the Ameri-

can people receive the relief they

need.”

The most important thing,

many economists agree, is speed.

Karen Dynan, a Harvard econo-

mist and a Treasury Department

official in the Obama administra-

tion, said the better-than-ex-

pected economic data was no ex-

cuse to delay assistance. Rather,

she said, it is evidence that the aid

so far has been effective — and

that as it fades, Congress needs to

do more.

“We need to recognize that the

economy has only done as well as

it has because we had such ag-

gressive fiscal stimulus early on,”

she said.

Before Biden Takes Office, He Faces Quandary on Stimulus

From Page 1

Thomas Kaplan contributed re-
porting.

YAREK WASZUL

Surging pandemic

and slowing recovery

complicate debate.

Transition in WashingtonThe Recession

KENNY HOLSTON FOR THE NEW YORK TIMES

Supporters of President Trump greeting his motorcade at Freedom Plaza in Washington, where a Make America Great Again rally was held on Saturday to protest the results of the election.

Right, President-elect Joseph R. Biden Jr., center, taking a bike ride in Cape Henlopen State Park near Rehoboth Beach, Del., with two Secret Service agents and his wife, Jill Biden, far right.

Different Views

RUTH FREMSON/THE NEW YORK TIMES