While the COVID-19 relief bill is still lumbering towards a final vote, some Senate Democrats are already coalescing behind a proposal for the next comprehensive package: President Joe Biden’s jobs plan.
In a Monday letter, 10 Senate Democrats urged Biden to use his plan to tie two social safety net measures to economic conditions.
The proactive move to get recurring direct payments and automatic unemployment insurance extensions, called automatic stabilizers, into the package early is a lesson decades in the learning. During the Great Recession, Democrats watched Republicans obstruct their attempts to legislate through the economic crisis, leading to a deflated recovery with years-long ripple effects.
Now, as the U.S. seeks to recover from another economic crisis, Democrats are trying to remove politics — and thus, gridlock-happy, austerity-obsessed Republicans — from the equation altogether.
Deflating The Political Football
“When the CARES Act relief checks ran out, poverty rose, and many families saw spiraling debt,” the senators wrote. “Automatic stabilizers will give families certainty that more relief is coming, allowing them to make the best decisions about how to spend their relief payments as they receive them.”
The proposal outlined in the letter doesn’t yet have much detail, and does not mention exactly which economic conditions — unemployment rate, emergency declarations, etc. — would trigger the aid and at what levels. But the basic idea behind the proposal has been championed by a wide swath of economists since the Great Recession: that emergency aid should be directly tied to the conditions of the economy — not to arbitrary dates set by politicians.
That aid — in this case, expanded unemployment insurance benefits and direct payments — would be automatically triggered by an economic indicator, such as the unemployment rate reaching a certain level, and turn back off when the unemployment rate goes back down.
“This proposal has its heart in the right place, in that it asks that unemployment insurance benefits extensions and direct payments be automatically renewed dependent on economic conditions,” said Stephanie Aaronson, director of the Economic Studies program at the Brookings Institution. She pointed to evidence that the poverty rate dropped during the pandemic when the unemployment insurance benefits were expanded, only to rise again when they lapsed.
In economic aid packages like the CARES Act, benefits were given expiration dates divorced from the state of the economy or endurance of the COVID-19 pandemic. The expirations set up “cliffs” that people would topple over, suddenly without crisis aid but very much still in the crisis.
“The dates used by Congress to cut off programs during recessions rarely, if ever, make sense,” Arnab Datta, senior legislative counsel at Employ America, told TPM. “During this pandemic, these arbitrary cliffs have created uncertainty, turmoil, and pain for millions of families across the country. Automatic stabilizers would create stability and support a stronger, faster economic recovery.”
Datta pointed to the unemployment provisions in the CARES Act that expired on a Friday, June 31. While it might make sense calendar-wise to stop the aid at the end of the month, unemployment insurance benefits go out on Saturdays and Sundays, making the cliff a week earlier than it appeared. It’s a side effect, he said, of politicians trying to navigate 53 different unemployment insurance systems.
With automatic stabilizers, that calculus wouldn’t be needed. They would also divorce the aid from the slow, rancorous, partisan political fights that dampened the previous economic recovery.
Echoes Of The Late Aughts
Those fights from 2007 to 2009 left the labor market limping for years. The aid was too small and too slow. The unemployment rate remained high long after the Recession formally ended, the inequality chasm yawned and economic aftershocks persist today — particularly in the diminished prospects of young workers.
“In the Great Recession, they re-upped unemployment insurance 13 different times,” noted Rep. Don Beyer (D-VA) on a panel last June. “That’s 13 political battles between the House and the Senate, needing 60 votes and the President.”
In particular, Republican criticism and obstruction pushed the Obama administration to shrink and narrow the 2009 American Recovery and Relief Act, making it less effective. After the ARRA finally passed, political will for passing additional aid weakened even further, while economic conditions remained grim.
“After the first few years following the Great Recession, there was a considerable pivot to austerity far in advance of what textbook macroeconomics would suggest,” read a 2019 report on recession response from the Brookings Institute.
The Economic Policy Institute, a progressive think tank, found in 2016 that the sluggish recovery after the Great Recession was almost entirely explained by Republicans’ pivot to fiscal austerity, particularly in regard to spending, on both the federal and state level.
That problem recurred during attempts to get aid passed amid the pandemic-caused economic crisis in the last year. After the CARES Act passed in March 2020, there was a nine-month lag before Congress passed more major funding in a $900 billion package in December. Then-Senate Majority Leader Mitch McConnell (R-KY) became the face of that pause, saying that he wanted to ascertain the results of the CARES package before sending out more aid.
Democrats tried to get more aid passed in that gap: the House passed the $3.4 trillion HEROES Act in May, and then a pared-down $2.2 trillion version (HEROES Act 2.0) in October. But McConnell, who called the first iteration “dead on arrival,” wouldn’t bring the bills to the floor. Senate Democrats also filibustered a $500 billion Republican plan in October, blasting it as much too small and lacking critical pieces like money for contact tracing and state and local governments.
Those 14 years of political jostling have left Democrats convinced that tying crisis aid to economic conditions, not to the whims of the intermittently austerity-obsessed Republicans, is the only way to achieve a faster and stronger economic recovery this time.
Democratic senators have already introduced a flurry of bills to attach stabilizers to unemployment insurance, Supplemental Nutrition Assistance Program (SNAP) and subsidized jobs. Getting them into the jobs package would right an economic failure a decade and a half old, making it much less likely that Biden would have to deal with the same sluggish recovery that was once hung around the neck of his old boss.
“As you have said,” the senators wrote to Biden, “now is the time for boldness.”