Art for Checkmate.
Robin Kaiser-Schatzlein,  February 15

Checkmate

On the Democrats’ muddled stimulus strategy

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Mass political discourse operates on pure virality these days, and almost every issue that gains traction with the public is reduced to a nub, then ground through the outrage machine until it is barely recognizable. Medicare for all? This means you hate America. Immigration reform? We will not be having a conversation about this . . . Fuck you! Economic stimulus? This is an argument about how big a government check should be. The unthinkable failure of American government in 2020––the fact that Congress passed an inadequate, short-term spending bill in March and then failed to pass another spending bill for nine months while hundreds of thousands of people died and society’s lower orders crumbled––was boiled down to a single question. Should the checks be $600 or $2,000? Relative to the magnitude of this discussion, almost nothing else was up for debate.

Surely, the reductive nature of the checks argument has something to do with how terrible online forums are for having discussions about policy. But it was also the fault of Democratic party politicians, who for most of 2020 were virtually silent about how the federal government might help people. So, into this vacuum of intellect, imagination, and leadership rushed the most straightforward idea.

The Democrats’ silence was particularly strange considering 2020 was an election year, in which political parties typically make promises to voters, or at least sell themselves. The Democrats’ sales pitch for Biden wasn’t a bevy of inspiring economic or social policy proposals (which might have included stimulus checks), but instead a simple negation. Biden promised to not be Trump, an easy task. It reminds me of my childhood friend’s tendency to lower his basketball hoop so low he could dunk without jumping. A fleeting joy. Biden hopping over this low bar was, of course, not an electoral landslide-grade proposition. Millions more people voted for Trump than they did in 2016. Some even said they voted for him because he sent them checks.

Economic stimulus? This is an argument about how big a government check should be.

The CARES Act funding for an additional $600 a week in unemployment benefits, among other things, had expired in July; yet, surprisingly, Democrats issued little in the way of public statements on this travesty. Hadn’t the CARES Act’s fiscal spending capped poverty? Few in the Democratic establishment seemed to notice this fabulous, commercial-ready selling point. Even fewer smeared their Republican counterparts in the press for refusing to agree to another bill. There was so little messaging that people across the political spectrum began to wonder if Nancy Pelosi was willing to tolerate mass immiseration in order to make Trump look bad. And then we had the unforced errors. After Democratic senators like Chuck Schumer (hardly the Platonic ideal of a progressive politician) and Elizabeth Warren suggested $50,000 in student debt relief, Biden, seemingly unprompted and fresh off his victory, walked the proposal back to $10,000. It might have been the worst PR effort by a political party ever.

But even a well-run PR campaign to embarrass Republicans––for refusing to extend federal fiscal help to small businesses, states and city governments, and unemployed workers across the country––would not have been enough. Had Congress managed to pass a second stimulus bill in the fall, the system for delivering that relief would still be seriously broken. The process for claiming unemployment benefits is so bad that, during a viral pandemic, thousands of people were forced to wait in line to claim their benefits (what’s that internet age I’ve been hearing so much about?). Government servers crashed across the country; states like Hawaii were found to be using a computer system from the 1980s; other states were using Eisenhower-era COBOL computers. Many people didn’t get their benefits for months, or registered and were incorrectly denied their claim.

This highlights the problem with much of the stimulus discussion: the impermanence of it all. The word “stimulus” itself is insidious, suggesting an ancillary, temporary action instead of public investment, a vital, continuous function of government. There has been little talk of what economists call “automatic stabilizers”—permanent ongoing support until certain benchmarks are reached—no talk of permanent increases to welfare programs, and certainly no talk of federalizing, streamlining, or (until just a few days ago) dumping tons of money into the administration of the unemployment insurance program so that this completely unbalanced recovery doesn’t happen again.

And so far the economic recovery has been dramatically unbalanced. This has to do with the structure and poor functioning of systems like unemployment insurance and small business lending. On the other hand, rich people and massive corporations––those who hold most of their wealth in investments or raise their funds on the corporate bond market––have a streamlined and well-functioning support system: the Federal Reserve. The Federal Reserve announced in March of last year that it would protect all manner of institutional lending, effectively setting a low ceiling on the cost of borrowing. The wealthy––if they even needed to––could find cheap money to tide them over until the storm cleared. But of course the pandemic has primarily induced a crisis in service work, which the rich just simply do not do.

In December, after Trump was defeated, Congress finally passed a second stimulus bill, which really wasn’t a second stimulus bill at all. It was a little extra spending shoved into an approximately 5,500 page end-of-year appropriations bill. No one on earth had time to read it, but it did include an extra $300 a week for unemployment and $600 in checks which, of course, ignited the current check debate as we know it. When the Democratic party changed tack slightly to explicitly campaign on this issue, they won two Senate races in Georgia, partly because of their “we will send you $2000 checks” platform. But as the checks became a political football, the legitimacy of the promise and the mandate for Raphael Warnock and Jon Osoff in Georgia hung in the balance.

The failure to act for most of 2020, the dilapidated systems to protect workers from poverty, and the absence of clear and convincing public statements on the part of politicians demonstrate the inner workings of a society that has––for decades––accepted a staggeringly high level of poverty and extreme inequities of all kinds. No real long-term, permanent change has been seriously proposed; the scale and duration of whatever public investment we’ll see next is bound to be small and short. Even the trillions Biden has promised to spend will eventually run out. The size of the stimulus only matters a little, compared to the form it takes: the dismal recovery after the financial crash of 2008 was due to inadequate long-term investment by the federal government, and it likely set the stage for the mass of frustration and anger that helped bring Trump into the White House in the first place.

So the stakes are high. A question for the new administration, in short, is whether they will fix a patchwork unemployment insurance system that has the potential to reduce poverty and deliver people money continuously until their crisis is over. Or will they simply commit to another temporary spending bill that expires in a couple months and doesn’t really help those suffering in a meaningful way? Federal Reserve economists suggest the unemployment rate for the lowest paid quartile of workers is “likely above 20 percent.” While total unemployment is around 6.3 percent (which is still high), the Black unemployment rate is just over 9 percent and the Hispanic rate is not far behind at 8.6 percent; the rate for Whites is 5.7 percent. The first jobs report of 2021 showed that the labor market remains nearly ten million jobs below pre-pandemic levels. Fixing the unemployment system is necessary: not in a couple of years, but now. (As of last week, Senator Ron Wyden, a Democrat from Oregon, has in fact, proposed a bill to fix the unemployment system; we’ll see how far it gets.)

Unsurprisingly, Biden’s quick-action stimulus plan is foundering in Congress. One reason may be that he spent so little time—that is, none—on the campaign trail explaining to voters what exactly was going to be in the plan. Republicans could easily claim that their constituents weren’t begging them to compromise with Democrats. Apart from the checks debate, voters were given precious few reasons to be up in arms.

The size of the stimulus only matters a little, compared to the form it takes.

There’s also the fact that, much like a deranged family member planning yet another elaborate family reunion in Puerto Vallarta that no one will attend, Biden’s administration has remained positively addicted to performing the elaborate, hollow circus of bipartisan comity. Biden invited ten Republicans to the White House to talk, and he preemptively declared himself open to whittling down the number of people who would qualify for a stimulus check, hoping to pre-appease a group of unappeasable Congresspeople. “We can’t walk away from an additional $1,400 in direct checks . . . I’m not going to start my administration by breaking a promise to the American people,” he told House Democrats, but “we can better target the number—I’m OK with that.” Sounds like a broken promise to me! Why was the administration making concessions when everyone knew Congress could pass most of the bill through budget reconciliation, a process that only requires a simple majority of the Senate? Wasn’t that alone leverage?

In a rare showing of Democratic unity, the Senate did vote fifty-one to fifty (with Vice President Harris casting her first tie-breaking vote) to advance the reconciliation process for Biden’s stimulus package early this month. But the process, delayed by Trump’s doomed impeachment trial, continues to drag on, with new and conflicting information trickling out each day. Even the all-important matter of the size of the checks and who gets one has yet to be resolved, and it’s unclear if more ambitious proposals—like a $3,000 child benefit—will make it through. Meanwhile, swamped food banks are running out of funds.

The soggy response to the crisis is not new. John Maynard Keynes found the same problem in the years after the Great Depression. In 1940, the economist lamented the failure for governments to spend adequate sums. “It seems politically impossible,” he wrote, “for a capitalistic democracy to organize expenditures on the scale necessary to make the grand experiment which would prove my case.” But he did think one thing animated politicians to spend: all-out war. So maybe the real question is, will we see our way out of this crisis without finding a new country to bomb?

Robin Kaiser-Schatzlein is a journalist who writes about economic life. Follow him on Twitter @robinsreport.

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