160,000 Dead Americans Later, Congress Clears Final Hurdle To New Stimulus Deal

Pat Toomey, who decided to undermine stimulus talks in Washington at the last minute by attempting to insert language into a long-sought virus relief bill limiting the Fed’s capacity to establish certain kinds of emergency facilities, “agreed to drop” at least a few of his demands, Democratic aides said late Saturday.

That, in turn, cleared the way for Congress to finalize and pass the $900 billion proposal, which will be attached to a broader government spending package for fiscal year 2021.

The optics around Toomey’s original demands left something to be desired. That the senator decided to make emergency financial assistance for a virus-stricken nation contingent on a slapdash, eleventh hour rethink of the Fed’s emergency lending powers seemed akin to lunacy. It also felt a bit like self-sabotage for the GOP ahead of the Georgia runoffs.

Read more: The Worst Optics Imaginable

Over the weekend, Mitt Romney politely suggested that now isn’t the time for an esoteric 13(3) debate. “I think the Fed should be returned to the powers it had prior to the CARES Act,” Romney said, in remarks to reporters. “But I think other reforms should wait for another time.”

Yes, indeed. As I struggled to communicate on Friday evening, the idea that Republicans would risk torpedoing stimulus talks on the way to forcing a government shutdown at Christmas over a discussion that everyday Americans neither understand nor care about, wasn’t a tenable strategy.

Ben Bernanke delivered a warning to lawmakers. “I strongly support the passage of new aid for families and businesses suffering from the effects of the pandemic,” he said, in a rare statement. “However, it is also vital that the Federal Reserve’s ability to respond promptly to damaging disruptions in credit markets not be circumscribed,” he added. “The relief act should ensure, at least, that the Federal Reserve’s emergency lending authorities, as they stood before the passage of the CARES Act, remain fully intact and available to respond to future crises.”

This shouldn’t be a debate. And it absolutely shouldn’t be up for discussion right now. Attempting to negotiate away the Fed’s capacity to respond to crises while the country is still in one is the worst kind of self-sabotage imaginable, if you conceptualize of Congress not as a body comprised of two constantly warring parties, but as a collective committed to serving the public interest.

Of course, if you conceptualize of Congress as what it actually is (i.e., a motley crew of random partisans elected by an undereducated public not known for making informed decisions), the whole debacle makes complete sense. Especially in the current environment, and especially considering how much attention the state and local government funding debate has received.

It seems highly unlikely that Republicans would have raised the Fed issue had Donald Trump won the election. At this juncture, you’d be obtuse not to acknowledge that Steve Mnuchin’s demands that the Fed wind down a handful of key facilities and Toomey’s subsequent attempt to enshrine Mnuchin’s gambit into law, were simply an effort to tie Janet Yellen’s hands, weaken the Fed, and thereby limit Joe Biden’s capacity to implement policies with the potential to direct lending to places Republicans don’t want it to be made available.

And that’s actually the more benign interpretation. A less generous (and far more frightening) possibility is that some Republican senators are actually willing to hogtie the Fed in such a way as to virtually ensure the economy and markets collapse should a crisis come calling during Biden’s administration.

“This is about existing authorities that the Fed has had for a very long time, to be able to use in an emergency,” Elizabeth Warren remarked. “It’s about a lending authority for helping small businesses, state government, [and] local government in the middle of a crisis.”

Does anyone really believe Republicans are against corporate welfare? Or against the Fed facilitating lending to small- and medium-sized businesses? Of course not. So it seems silly to suggest this debate was about “moral hazard” as it relates to corporate bond-buying by the central bank or credit provision to business. Rather, this was about trying to limit the scope for fiscal-monetary partnerships that might actually do some good for real people or for struggling state and local governments.

As Chuck Schumer patiently explained, “Senator Toomey’s proposal would do more than just prevent the next Treasury Secretary and the Fed Chair from using the emergency lending programs that saved our economy and stabilized markets back in March and April, it could potentially prevent them from setting up new facilities that look or even smell like those programs, moving forward.”

Again, I implore readers, both Republican and Democrat: Why? Why would Senate Republicans want to do that? Is it because they’re worried that corporate borrowing costs are too low? Or that the Fed’s actions have created bubbles in the economy and financial assets? Of course not. That’s a laughable suggestion. Republicans are trying to sabotage the incoming administration, and they’re willing to kneecap the country’s central bank if that’s what it takes to ensure Treasury-Fed cohesion doesn’t end up facilitating Democratic policy priorities.

You’ll note that both the Fed (in August tweaks to its mandate language) and Janet Yellen (in her first official remarks as Treasury Secretary in-waiting), made it clear that fostering a more inclusive economy where everyone gets a chance to participate is a priority. Telegraphed as it is, Republicans see it coming. And they’re trying to do everything they can to prevent it.

“It’s not some esoteric quibble. And it’s not just Pat Toomey,” John Kennedy said Saturday. “This is now the Republican position.”

I’m not sure that’s something to brag about.

For what it’s worth, Mitch McConnell supported the overall thrust of the GOP position, but he clearly was not enamored with the notion that it could lead to public blame-casting. Democrats were already poised to pounce ahead of the Georgia runoffs.

“If Mitch McConnell wants to leave Americans suffering for a totally irrelevant provision to try to cripple our ability to deal with an upcoming [recession] that’s his choice and he’s going to have to live with it,” Angus King remarked.

The Saturday night compromise “preserved Toomey’s goal but retained the Fed’s existing powers to restart similar facilities in the future,” the AP reported, citing multiple sources. Toomey claimed the compromise is “an unqualified victory for taxpayers” but will “prevent Democrats from hijacking these programs for political and social policy purposes.”

Following the agreement, a spokesman for McConnell said “we can begin closing out the rest of the package to deliver much-needed relief to families, workers, and businesses.”

The deal includes some $300 billion in funding for businesses, $300 per week in federal assistance for the jobless, $600 direct payments to individuals, money for vaccine distribution, and assistance for schools, renters, the Postal Service, and people who are starving (or “in need of food aid” if you like euphemisms).

Lawmakers will doubtlessly claim this represented a heroic feat of legislative prowess in the face of looming deadlines and deep partisan rifts.

In reality, it was a total debacle. A complete failure of government that forced a nation to wait five months for action. Since provisions associated with the last stimulus bill began to lapse, some 160,000 Americans have died.