The next stimulus deal will be even harder to get
Congress passed three coronavirus stimulus bills in March and began work on a fourth bill in April. This is the bill that Congress will finally pass this week - eight months later.
Part of the reason it took so long to pass the fourth $ 900 billion bailout package was the 2020 elections, where both Democrats and Republicans made absurd demands to show voters how much they felt committed to the basic principles of the party before election day. Democratic House spokeswoman Nancy Pelosi, now calling the $ 900 billion bill a historic success, insisted in the fall that a fourth bill must include at least $ 2.2 trillion in expenses. Apparently less is more. Republican Senate Majority Leader Mitch McConnell said in the fall it was fiscally unwise to spend more than $ 500 billion, but he's now de-signed almost twice as much.
Many economists say that while the latest $ 900 billion package is welcome and necessary, it is nowhere near enough to hold the economy back from the huge decline in production and jobs following widespread business closings. There is little help to states and cities affected by tax revenues that force the firing of police officers, firefighters, teachers, and other public payroll workers. A new $ 300 weekly payment to the unemployed expires in March, long before vaccines are likely to become widespread and the economy normalizes again. The new law extends an eviction moratorium, which expires on December 31, by just one month.
Pelosi and many other Democrats say they will provide further impetus as needed in 2021. Don't count on it. The first problem is the Senate, which is now controlled by Republicans who tolerate deficit spending when a Republican is in the White House but become tax hawks when a Democrat is President. McConnell and a core group of conservative colleagues simply hate bailouts for cities and states, which they see as "blue state bailouts" that let Democratic states off the hook for poorly managing their own budgets.
Senate Majority Leader Mitch McConnell, Ky., Walks past reporters on Capitol Hill in Washington on Tuesday, December 15, 2020. (AP Photo / Susan Walsh)
Blue states like New York and California tax and spend more than red states like Texas and Florida, with more generous protections for public unions. That doesn't mean blue states are more wasteful (with the possible exception of Illinois). But it still ranks conservatives enough to threaten a future state and local aid package. During the last recession, Congress approved some state and city aid, but Republicans blocked further aid and a collapse in tax revenues forced about 800,000 state and local layoffs, slowing the recovery. State and local governments have lost about 1 million workers since February, but Republicans would no longer approve state and local aid in the latest bill.
Importance of the Georgia Senate
The Senate's two runoff races in Georgia on January 5 will have a profound impact on future aid packages. If Republicans win just one of them, they will retain control of the Senate and have a veto over future laws. It's possible that they'll agree to greater relief in the spring or summer - but they'll have even fewer incentives to support a fifth stimulus plan than they do now.
One reason McConnell agreed to raise his fourth bill cap from $ 500 billion to $ 900 is because of the same elections in Georgia. The two Democratic challengers beat up the Republican incumbents for defying more incentives and laying off ordinary workers, prompting McConnell to increase his offering as a sop to Georgia voters. This will no longer be a factor after January 5th. The other change will be Joe Biden's presidency. There is already evidence that some Republicans are looking to curtail Trump-backed stimulus measures so that a Democratic president does not get credit for helping to boost the economy.
If Democrats win both Senate seats, they'll control Congress with one vote. But a slim majority won't let them pass the laws they want. At least a couple of Conservative Democrats could block some spending, and the Senate can only bypass the filibuster rules to pass one spending bill per year without a majority of 60 votes. So Democrats would get a chance at an additional stimulus package if they could control both Houses of Congress and essentially all of their members would agree. If it sounds easy, give it a try.
The two races in Georgia are extremely close, polls will show ... well, who trusts what polls say. Republicans appear to have an advantage as they only need to win one of the two seats, which would suggest that the outlook for further incentives is poor. Even so, Congress has approved more than $ 4 trillion in stimulus spending since March, including the recent bill, which is far more than during a previous recession. And vaccination optimism could become another form of stimulus by spring. Republicans can't refuse that.
Rick Newman is the author of four books, including "Rebounders: How Winners Go From Backlash To Success". Follow him on Twitter: @rickjnewman. Confidential line: firstname.lastname@example.org. Click here to receive Rick's stories by email.
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