‘Doing Something Very Significant About It’

‘Doing Something Very Significant About It’

After some 15 laborious hours of the Senate mired in vote-a-rama, Kamala Harris on Friday cast her first tiebreaking vote, setting the stage for Democrats to forge ahead on Joe Biden’s stimulus plan.

As The New York Times recounted, Harris “arrived early in the morning to the dais… and the Senate adopted the resolution along party lines, 51-50, at about 5:30 AM.” Later, it cleared the House 219 to 209.

Chuck Schumer called it “a giant first step,” and it came one month after Raphael Warnock and Jon Ossoff prevailed in Georgia, handing the Senate to Democrats with the slimmest of majorities.

There was staunch opposition to raising the minimum wage to $15 per hour and there were nods to limiting stimulus checks to those with lower incomes. The rest was a predictable (and deliberate) farce. A choreographed sniping session. Politics for politics’ sake. Is a spectacle a “spectacle” if no one watches? You should ask your senators.

Democrats still plan to press ahead on the minimum wage hike. It’s just not totally clear what the path forward is. Bernie Sanders may angle to get it implemented in steps over a period of years.

It’s likely that Republicans will now accuse Biden of abandoning pretensions to bipartisanship just weeks into his presidency. And yet, it’s clear enough that the GOP has no appetite for real “compromise.” While this week’s meeting between Biden and 10 GOP senators was lauded by the latter as cordial and constructive, it’s hard to describe their offer to the White House ($618 billion) as a serious proposal. It’s not even a matter of substance (it never is). The price tags are too far apart. The optics would be bad for Biden. And so would the press.

After years spent stymied by Mitch McConnell, Democrats aren’t keen to squander an early opportunity to capitalize on unified government — especially considering the circumstances. If you want to justify spending money, a vicious pandemic that’s killed more Americans than combat deaths in World War II (figure below) is about as solid a rationale for a blank check as you could possibly conjure. If you’re the GOP, “everybody’s already dead now,” isn’t an excuse that’s likely to play well with the public when it comes to being a Grinch about the purse strings.

“We now come to the end of the debate that has gone on for over 14 hours,” Sanders said, towards the close of the proceedings. “Our country faces more crises, more pain, more anxiety than any time since the Great Depression,” he added, before imploring his colleagues: “We have the opportunity to give hope to the American people and restore faith in our government by telling them that we understand the pain they’re experiencing and are going to do something very significant about it.”

For his part, Schumer alluded to the widely accepted notion that the fiscal impulse following the financial crisis was insufficient and likely contributed to the lackluster character of the recovery. “We cannot repeat the mistakes of the past,” Schumer said. “We cannot do too little.”

Remember: “Doing too little” on the fiscal side almost invariably leads to “doing too much” on the monetary side. If lawmakers revert to outdated thinking about debt and deficits in a bid to subjugate the economic fate of millions to imaginary “lines in the sand” on the federal budget, the result will be a prolongation of monetary accommodation and everything that goes with it, including and especially financial asset price inflation and inequality (figure below).

In any event, the stimulus proposal will now brave the reconciliation process. It’s unclear (and will remain so for weeks) what the final product will look like, but it should generally resemble Biden’s original plan.

There’s leeway around the stimulus checks, where “leeway” means the potential to lower the income threshold or otherwise tweak the phase-out parameters to ensure the money gets to people who actually need it, as opposed to people who might be inclined to spend it on… oh, I don’t know, shares of GameStop. Or something.


 

7 thoughts on “‘Doing Something Very Significant About It’

    1. I’m thinking the lawmakers (the GOP) were posturing late into the night, not actually working. After all, the vote was along party lines (I don’t understand how the GOP gets away with this). But it’s nice you gave them the benefit of the doubt

  1. I’m not sure the income thresholds make sense to manage “stonks” syndrome. Unless you’re going to come up with some sort of actual need based distribution dropping the threshold just means people in cities will get nothing and people in rural areas will get payments. $50k in a major metro area is very different from $50k in Fargo. That and the stimulus portion is meant to stimulate the economy as much as anything else, to help offset things like rising food costs and covid tests which I would dare say hit pretty much everyone in the 75k range just as hard as the 50k range. I really hope they do not let the GOP perspective color their decision when going the 51 route.

  2. Great job, Dems…!

    As for the minimum wage, Manchin, Synema, Tester, and perhaps Collins, Murkowski, and or Toomey could be key as both Manchin and Collins have stated opposition to an increase to $15.

    As for the Republicans complaining about lack of bipartisanship, they can … “Talk to the hand…”

  3. Those wins in Georgia were monumental in their repercussions. It’s so refreshing to see that the Democrats can and will tell the Republicans to pound sand after years of obstruction and do-nothingism. Still a long way to go (infrastructure and green energy stimulus next year?), but it’s a helluva lot better start than what might have happened had Trump not cost Republicans the Senate.

  4. Biden is right, as far as cushioning the blow they really cannot do too much. If it turns out the aid turns out to be “too much” as the virus gets under control quickly and the economy shifts up quickly what happens? OMG, inflation goes up, the Fed raises short rates substantially and gets back real monetary tools… totally not a disaster by any means. Main Street will do well, holders of assets that suffer from higher interest rates (real estate- maybe/maybe not , large cap growth definitely, bonds you bet, gold only if real rates rise not nominal) get hit. Cyclical sectors do well most likely as we see a great rotation in equities. We will run a giant trade deficit but such leakage is to be welcomed not shunned. It will reflect high demand. You would also have to think the dollar would be stronger….

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