Will a Handful of Senators Hold Up Help for Millions?

(Bloomberg Opinion) -- Congress is on the brink of passing another Covid-19 stimulus package and a funding measure to keep the government from shutting down. But last-minute demands by some senators are casting doubt on whether Congress can get a bill across the finish line.

The U.S. government runs out of funding at midnight. Unless Congress can pass a stopgap measure before then, the government will (technically) shut down. At the same time, Congress is trying to pass a bipartisan stimulus of around $900 billion.

Republican Senator Josh Hawley and Independent Senator Bernie Sanders are insisting that direct checks to households with income up to $75,000 be included in any deal. Hawley has made clear that he won’t support a deal to keep the government open that doesn’t include the checks.

Hawley and Sanders attempted to get the Senate to vote on $1,200 checks on Friday, but they were blocked by Senator Ron Johnson, the Wisconsin Republican. Johnson cited concerns about adding to the national debt, characterizing the checks as “mortgaging our children’s future.”

Both sides of this dispute are allowing their pursuit of the perfect to be the enemy of the good, and are putting the survival of small businesses and the welfare of households at risk by doing so.

I oppose sending the direct checks because there are better uses of scarce funds. Negotiators have achieved consensus on passing a stimulus bill in the range of $900 billion. So every dollar spent on checks for households is a dollar that would be better spent providing grants to state and local governments, which the nonpartisan Congressional Budget Office estimates would get a significantly larger bang for their buck.

Republicans won’t agree to state and local grants unless Democrats agree to pass restrictions on virus-related frivolous lawsuits. Even so, I would rather see the funds that Hawley and Sanders would put toward the checks used instead for more support for low-income households or small businesses. And in the absence of those options, Congress should pass a smaller stimulus.

Senator Johnson is correct that today’s deficit spending needs to be paid back in the future, and Congress should not be sending checks to middle-class households that are still employed.

But he is wrong to hold up the deal over this. A stimulus compromise that includes expanded unemployment benefits, a second round of the Paycheck Protection Program and the Hawley-Sanders checks is much better than none at all.

Hawley and Sanders have won the argument, with Hawley successfully getting President Donald Trump on board, who views another round of checks as a legacy victory. Deficit hawks need to accept the loss for the sake of providing the economy the support it needs.

Likewise, Senator Pat Toomey, the Pennsylvania Republican, wants to include a measure to scale back the Federal Reserve’s emergency lending programs adopted in response to the recession this spring. There is confusion about the specifics of Toomey’s plan, but press reports suggest it would rescind unused funds from the Cares Act in March that were intended to be used as a credit backstop for the Fed’s lending programs and would make sure those programs expire at the end of the year as scheduled.

As a matter of public policy, Toomey’s plan is reasonable because these programs are no longer needed. Bond-issues volumes have returned to normal levels, after having plummeted this spring when the crisis began and these facilities were created. And after spiking this spring, borrowing spreads in the corporate and municipal bond markets and asset-backed securities markets have all normalized.

Moreover, the Fed’s so-called Main Street lending programs have clearly failed, as borrowers have shown no interest in using them. The other emergency programs have seen relatively modest activity.

Politico reports that Toomey’s plan would go further, barring the Fed from enacting similar programs in the future without explicit authorization from Congress. This would be a terrible idea, as the facilities could be needed again. The rapid announcement of them this spring lowered risk spreads and borrowing costs, and inspired confidence in markets. And under current law the Fed could ask the Treasury Department to create them again in the future, and Congress could provide additional capital.

Regardless of the merits of Toomey’s proposal, now isn’t the time to have this debate. Under the Cares Act, these programs are set to expire. Figuring out what to do with unused capital can wait for another day, when the government isn’t hours away from running out of funding and the economy doesn’t need immediate relief.

The time for new proposals is over. The time for posturing has passed. Congress needs to keep the government open and provide households, unemployed workers and small businesses the support they need to weather a hard winter. The current compromise isn’t perfect. But it is good — and as good as we’re going to get.

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

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”

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