Automatic stabilizers for the economy should be part of coronavirus stimulus bills

It’s not too soon for Democrats to prepare for 2021, when Republicans could be far less willing to sign on to big, necessary stimulus bills if Joe Biden is in the White House.

It’s unlikely that we’ll have a fully healthy economy by next winter or spring, given that the unemployment rate could soar into the double digits as significant restrictions on economic activity continue. Laid-off Americans will still need help, and the economy will still need deficit spending to pull itself out of a deep recession.

Right now Republicans and Democrats are arguing over how to boost an ailing economy, not whether to do it in the first place. Republicans have quickly agreed to multi-trillion-dollar packages. But past experience suggests Republicans will revert to an anti-deficit posture if Donald Trump loses the election. They cared little about deficits under George W. Bush but did an about-face under Barack Obama, even as the economy teetered on the brink of a global depression.

Instead of enacting measures that expire on a given date, what Democrats need to do is push for measures that expire if certain conditions are met, like when an unemployment rate is low and clearly falling. Now is the best possible political moment to do it.

Donald Trump’s not personally prioritizing next winter, but he has no good substantive or cynical reasons to oppose it. Congressional Republicans won’t love the idea, but if Democrats make it their key ask, the White House has every reason to give in, and the GOP will have to give way. Now’s the time to future-proof the recovery.

Republicans tend to flip-flop a lot on deficits

When the younger Bush was president, he enacted a large tax cut that made the budget deficit much larger — and he did it with the support of congressional Republicans. The economy also fell into a recession, which had the effect of raising the deficit. Then 9/11 led to deficit-financed security measures and a deficit-financed invasion of Afghanistan. The Bush administration followed that up with a deficit-financed invasion of Iraq, another round of deficit-financed tax cuts, and some big deficit-financed increases in the baseline military budget.

Critically, however, it didn’t stop there. Bush also enacted a deficit-financed expansion of Medicare benefits, raised spending on several domestic policy initiatives, and closed out his term with a major bank bailout and an economic stimulus package.

The rule of the day was, in the immortal words of Dick Cheney, “Reagan proved deficits don’t matter.”

That suddenly changed when Obama became president and hostility to deficit spending was all the rage. Republicans opposed fiscal stimulus in 2009, instigated multiple rounds of crisis politics in an effort to force long-term cuts to Medicare, tried to pass a constitutional balanced budget amendment, and generally made opposition to deficits the centerpiece of their economic philosophy. Most Republicans in Congress even opposed emergency aid to recover from Hurricane Sandy on the grounds it should be offset with spending cuts elsewhere.

Then Trump became president, and Republicans flipped again, enacting a big tax cut and securing congressional support for a huge increase in military spending, as well as agreeing to increase non-military spending. Republicans also decided they didn’t want to cut Medicare after all. And when the economy ran into trouble amid the coronavirus pandemic, they opened the doors to trillions in new deficit spending.

I don’t care to speculate on what motivated these various changes of heart. Suffice it to say, it would not be surprising if an adverse result in the 2020 presidential election causes the GOP to switch positions again. The party that today wants fast votes on hundreds of billions of dollars in small-business assistance could revert to being the party that demands cuts to food stamp in exchange for natural-disaster relief. Democrats need to be smart and take advantage of Republicans’ current open-mindedness to pass bills with significant automatic components.

Stimulus needs automatic triggers

The simplest way to think about what needs to be done is that instead of enacting measures that expire on a given date, Democrats need to push for measures that expire when certain conditions are met.

A few weeks ago, Trump was fired up about the idea of a payroll tax cut that would have been scheduled to last through the end of the year. If Trump gets interested in that idea again, Democrats should be open to it. But instead of ending in December, it should end when the unemployment rate falls below some objective threshold.

Similarly, when putting forward their own ideas — like hazard pay bonuses for essential workers and financial assistance to state governments — Democrats should structure their proposals to have condition-based rather than calendar-based stopping points.

Even more important than any of those ideas is the automaticity itself. If Democrats win in 2020, they’ll still get at least one chance to push through a big budget reconciliation bill that can address their top priorities. But they’ll also face a sudden and disorienting sea change in deficit politics that will be hard to grapple with. They need to consider that not only are Republicans likely to flip-flop, but also that the entire business community — which warned against the dangers of loose fiscal policy, right up until a corporate-friendly president took office — will probably flip-flop too, creating a lot of public pressure on Democrats to reduce deficits.

Automatic measures enacted now, while the opportunity is real, will not only safeguard recovery in 2021 but also ensure that if recovery is underway, the deficit automatically declines with it. It’s a win-win if they can get it done, and Trump has no real reason to say no.

Play the White House against congressional Republicans

Congressional Republicans are, of course, aware of all this.

Mitch McConnell, in particular, has not abandoned his aspirations to cut Social Security and Medicare. He knows it won’t happen as a Trump administration initiative, but says he’d like to do it through a bipartisan bill. If a Biden administration comes into office saddled with a massive Trump-era accumulation of debt, McConnell will start pushing again for big, long-term cuts. In order to keep this trap open, he’ll resist any moves to include automatic elements in future economic rescue efforts.

Trump, however, has no interest in the long-term trajectory of GOP fiscal policy if he loses the election. What Trump wants to do right now is win, which means securing stimulus from congressional Democrats. If he does win, he’ll be glad to have those measures be automatic. And if he loses, he won’t care; his problem will be that he lost.

Unlike other things progressives would like to see Democrats fight for, like vote-by-mail measures, Trump has no particularly good reason to push back hard against Democrats if they prioritize this. A Democratic Party that is very insistent on automaticity but somewhat flexible in terms of exactly what the money gets spent on will likely be able to get what it wants. And if Democrats manage to win in November, they — and the entire American economy — will be very glad they got it.

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