Did the Democrats Get Rolled on the New Rescue Plan?

(Bloomberg Opinion) -- So a deal was reached on the bill to supplement the money for small business and other new pandemic relief. Congressional Republicans had wanted $250 billion for the Paycheck Protection Program for small-business loans. The final bill added up to a $480 billion package, with Democrats winning aid for hospitals and increased coronavirus testing, plus provisions for smaller banks to handle some loans and for small businesses to get money even if they didn’t have a prior relationship with a bank.

Democrats failed to get a lot more, mainly money for state and local governments. Liberals immediately blamed congressional Democrats for “caving.” Paul Krugman was “baffled.” Here’s Michael Grunwald’s summary:

I’m not so sure the Democrats “caved.” 

What happened? One theory is that Democratic leaders botched the negotiations. Perhaps House Speaker Nancy Pelosi could have gotten a House bill passed with all the relief efforts the Democrats believed were essential and then dared Senate Majority Leader Mitch McConnell and Republican senators to ignore it. Or they could just have refused a deal until Republicans added more, just as they did when McConnell tried to jam the smaller bill through the Senate last week only to have Democrats block it. 

Theory two to explain the Democrats’ support for the current package is that everything in the compromise bill is something they wanted. And while Republicans marginally favor the money for the Paycheck Protection Program, they would have been just as happy overall to make an issue of the Democrats’ objections to the smaller bill than to actually have a bill. That’s how I read McConnell’s decision to force Democrats to oppose it last week. 

I can’t prove it either way, but I lean hard toward believing the second theory.

The Pelosi-bashing liberals believe that Democrats have all the leverage because Republicans, with President Donald Trump the incumbent on the ballot this fall, desperately need the economy to recover. Democrats, that thinking goes, are basically doing Republicans a political favor by going along, and they should demand something in return. 

Perhaps that’s true, but I think it underestimates the extent to which much of the Republican Party simply rejects, well, modern economics and fact-based public policy. 

For some Republicans, nothing is wrong with the economy that opening things back up — as some governors like Georgia’s Brian Kemp are moving to do as soon as this week — won’t solve. Indeed, some voices in the Republican-aligned media are still calling the social-distancing lockdowns nothing but a Democratic plot to ruin the economy and defeat Trump in November.

And many Republicans believe government spending is just irrelevant to economic growth. Sure, a lot of small-business people are solid Republicans, so GOP politicians don’t mind funneling some money their way, but it’s not clear that they see the federal help as necessary for a recovery per se.

After all, if Republicans did think that way, they would be desperate to send money to state and local governments — money that not only could keep economically important services intact, but also prevent large-scale layoffs of government workers and contractors. Even if Republicans believe that people who work for private business are more deserving of relief than those who work for the public sector, they should be able to see that consumer dollars spent on goods and services don’t just come from private-sector workers. A population of unemployed government employees is an economic disaster when they stop buying stuff. But as we know, Republicans fought hard against including money for state and local governments in the bill. 

Remember that Trump is still mainly pushing a payroll tax cut (and the return of the three-martini lunch) as his preferred form of emergency relief, even though no one thinks that makes any sense. Remember, too, that Republican leaders believed that the best course of action after the $2 trillion relief bill passed was to wait to see how it worked, rather than to get to work on the next one. None of that sounds like a party eager to spend money to revive the economy in order to save the presidency.

If it’s true that Republicans were perfectly willing to walk away with nothing and blame Democrats for the result because they don’t believe the economy and Trump’s re-election hinge on emergency spending, then Pelosi and Senate Minority Leader Chuck Schumer had a lot less leverage than some liberals believe. Yes, from the Democrats’ perspective that would also mean the Republicans were being irrational. But it doesn’t mean that this wasn’t the best Democrats could do given what Republicans actually wanted. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Jonathan Bernstein is a Bloomberg Opinion columnist covering politics and policy. He taught political science at the University of Texas at San Antonio and DePauw University and wrote A Plain Blog About Politics.

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