The Case for Compromise on Covid Relief


In weighing how to advance his new Covid relief package, President Joe Biden is wrestling with a dilemma. Does he press as quickly as possible, with or without Republican cooperation, to pass the plan he’s laid out? Or does he seek compromise, risking both delay and a dilution of his proposals, in an effort that Republicans might scorn in any case? With the question posed this way, many Democrats think the answer is obvious: Bipartisan progress is a mirage, so just get on with doing what’s necessary.

They should think again. Yesterday a group of 10 Senate Republicans proposed an alternative plan, saying they’d present the details today, and Biden has agreed to meet them to discuss it. They appear to have a total outlay of some $600 billion in mind. That’s too little to meet current needs, but it’s a basis for discussion and the president is right to see where it leads.

Failing to seek a deal would be wrong for two reasons. First, Biden shouldn’t give up on uniting the country — the theme of his election campaign, and the focus of his inaugural address — within days of taking office. Second, accommodation with moderate Democrats and responsible Republicans could make his plan better.

The administration’s $1.9 trillion proposal — an enormous further stimulus of nearly 10% of gross domestic product — can afford to be trimmed. The only rationale for this number appears to be “more is better.” Yet lack of purchasing power is not the main thing holding the economy back. Demand has needed support, to be sure, and it has gotten plenty already, but more fiscal stimulus can’t overcome the restrictions on spending that the Covid emergency dictates. Moderate Democrats and most Republicans balk at the sheer scale of this new outlay. A smaller package, in the range of $1 trillion to $1.5 trillion, would still be huge by ordinary standards, and enough for now.

More important than trimming the size of the plan is targeting it more accurately to those in real need. One of the most expensive parts of the proposal is the further round of $1,400 stimulus checks to all but the highest paid. This is extremely wasteful. Most households have stronger finances now than before the pandemic began. A new analysis by Harvard’s Raj Chetty and colleagues finds that these checks would generate extra spending of just $105 per higher-income household — meaning that $200 billion of additional outlay would generate only $15 billion of extra demand. Focusing aid on low-income households would relieve more distress and generate more demand at less overall cost.

Under current circumstances, Biden’s proposal to double the federal minimum wage is also ill-advised. As vaccinations bring the pandemic under control and restrictions are eased, getting people back to work in hard-hit sectors of the economy will be crucial. In many parts of the country, a higher minimum wage would make it harder for a lot of businesses to get up and running again. Until full employment is restored, support for workers on low incomes could and should be provided through an expansion of the earned income tax credit and other measures that would increase demand for workers.

On certain points, to be sure, Biden should refuse to give way. Democrats have insisted throughout that state and city governments need more help in coping with the pandemic’s financial stresses. They’re right. Biden’s plan also extends emergency unemployment assistance over the coming months. For now, more help of that kind is needed too. Democrats shouldn’t agree to a compromise that hits the plan’s best features. The point is, the right kind of compromise can align the plan more closely with smart progressive priorities.

Granted, if Biden is willing to bargain on the right issues, and urges his allies in Congress to do the same, it might be for nothing. It’s possible that moderates won’t rally to the offer, or that Republicans in the end will stand together, as they so often have, and oppose for the sake of opposing. But Biden made voters a promise. He owes them his best effort to make bipartisan action succeed. If such action improves his flawed Covid relief plan, as it very well might, so much the better.

Editorials are written by the Bloomberg Opinion editorial board.

©2021 Bloomberg L.P.

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