(Bloomberg Opinion) -- Last week, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin finally got around to talking about a new round of coronavirus aid, and yesterday the Democrats released a new plan. Not before time. The prolonged failure to extend fiscal relief poses a grave threat to the economy. Differences remain between the two sides, but these disagreements cannot justify doing nothing at all — which, even now, remains a distinct possibility. A compromise should be struck without further delay.
Undoubtedly, Republicans bear most of the blame for the impasse. To replace the expiring provisions of the previous fiscal package, they proposed roughly $650 billion of additional spending. That’s far too little. Their so-called “skinny bill” fails, in particular, to deliver the help that state and local governments — which have already laid off or furloughed more than 1 million workers, and are facing budget shortfalls exceeding $550 billion over the next two years — badly need. It also fails to provide adequate further support for people who’ve lost their jobs because of the pandemic.
Democrats rightly called that offer a stunt, not a serious plan. They first proposed a measure costing about $3.5 trillion, with help for states and cities and a renewed $600 weekly supplement for the unemployed. Although they were correct about the scale of the problem and the need for generous new support, that plan was capable of improvement. The extension of the jobless supplement, for instance, wasn’t well targeted. It would leave many of the newly unemployed better off not working, making it harder for some businesses to hire. Continued support for the unemployed is essential as a matter of fairness and to maintain demand, but capping the benefit so that income out of work is no more than, say, 80% of prior earnings would make more sense.
The Democrats’ new proposal pares the total cost to $2.2 trillion, but continues to insist on the $600 unemployment supplement through January. Another round of direct relief payments — $1,200 per individual plus $500 per dependent — is also included. This aid too could be better targeted toward low-wage workers. The overall size of the plan, though, is amply justified. And the proposal meets a vital need in providing more than $400 billion for a year’s additional aid to state and local authorities.
Recently Trump has suggested he’d be willing to back a measure costing as much as $1.5 trillion. It would be better if he simply agreed to the Democrats’ new proposal. If the Republicans refuse, however, the Democrats should settle for the smaller package rather than dig in their heels. Having moved this far, they’ll be understandably inclined to say enough and no further. But if that meant no additional support at all until after the election, the risk to the economy would be too great.
If the administration won’t give way, a plan that’s too small is better than nothing — and Democrats can make it plain why they’ve assented to a smaller package than they’d like or is justified. With voters’ support, they can hope to be in a position before long to provide all the help the economy needs. Under these circumstances, the country would surely applaud the compromise.
Editorials are written by the Bloomberg Opinion editorial board.
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