Comment: GOP should take the deal on $908 billion relief bill

Otherwise, they risk weakening the economy and strengthening Democrats’ push to repeal tax cuts.

By Karl W. Smith / Bloomberg Opinion

Congress now has roughly one week to come to an agreement on a covid relief package, a subject it has been debating since April. For most of that time, House Democrats insisted on a bill that had no chance of passing the Senate. Senate Republicans, meanwhile, struggled to find consensus on any proposal at all.

Fortunately, House Speaker Nancy Pelosi this week finally abandoned her caucus’ bloated multi-trillion-dollar package in favor of a $908 billion proposal offered by a bipartisan group of senators. Republicans should take the deal.

It’s easy to understand why some are reluctant. First, the U.S. economy has bounced back from its collapse earlier this year faster than expected. Despite dire warnings to the contrary, household savings are in good shape and most (though not all) states have seen far less loss of revenue than expected.

And from a political standpoint, Republicans are being asked to spend almost a trillion dollars to buoy incoming President Biden. It’s not a prospect they look forward to, though it’s worth noting they could have helped President Trump’s reelection chances by approving a similar package last fall, as he asked them to, instead of insisting on a $500 billion package.

Regardless, the simple fact of the matter is that with a vaccine on the way, failure to act decisively now would put millions of jobs and thousands of small businesses at risk. Before the pandemic hit, the U.S. economy was experiencing nearly unprecedented success. After decades of disappointment and stagnation, living standards were finally rising for working Americans.

A few months ago, when Americans were grappling with the possibility of several rounds of lockdowns, it made sense to be pessimistic that the U.S. economy would return to its pre-pandemic levels anytime soon. Now, however, it’s not only likely that the pandemic will be conquered by the middle of next year. It’s also conceivable that the economy could make up all of its lost ground by early 2022.

The possibility of a full rebound exists only because last March’s legislation prevented lasting damage to businesses and workers incapacitated by the pandemic. And a strong recovery will remain a possibility only if Congress extends that same level of protection for the next several months.

Nonetheless, some senators may be worried that piling on more debt now means higher taxes and a weaker economy later. The opposite is likely to be true. Slow growth is self-reinforcing. Businesses that go under may take years to be rebuilt, depressing both employment and tax revenues through 2022 and beyond. States that have seen budget shortfalls are just as likely to reach for tax increases as spending cuts, further slowing down growth.

Republicans might worry that any state bailout, no matter how well-intentioned, will reinforce the idea that the best way for governors and state legislators to deal with their problems is simply to wait until a crisis occurs and then come running to the federal government.

That would have been a valid fear had Congress approved the trillion-dollar giveaway that Democrats were advocating over the summer. The funding for state and local government in the bipartisan deal is far more modest, however, and moral hazard can be further reduced by allocating the money based solely on state unemployment rates rather the complex formula envisioned in the House bill.

In the spring Republicans refused to uncritically accept apocalyptic forecasts used to sell that House bill, insisting that aid be based on real-world data. That was prudent. Now the data is in; and it’s clear that more relief is needed.

The political case is equally compelling. A failure to return to the broadly shared prosperity of 2018 and 2019 could increase demands for the Trump tax cuts to be repealed and for new taxes to be levied on businesses and entrepreneurs. If that happens, it will further slow wage growth, and voters may see it as confirmation that the economy is rigged against them; and that ever greater redistribution is the only way to support struggling families.

Do Republicans really want that? Far better to have a virtuous cycle of rapid business expansion and rising working-class incomes that puts America back on its feet and restores faith in the economy.

Karl W. Smith is a Bloomberg Opinion columnist. He was formerly vice president for federal policy at the Tax Foundation and assistant professor of economics at the University of North Carolina. He is also co-founder of the economics blog Modeled Behavior.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Opinion

toon
Editorial cartoons for Monday, July 14

A sketchy look at the news of the day.… Continue reading

Authorities search for victims among the rubble near Blue Oak RV park after catastrophic flooding on the Guadalupe River in Kerrville, Texas, on Sunday, July 6, 2025. The half-mile stretch occupied by two campgrounds appears to have been one of the deadliest spots along the Guadalupe River in Central Texas during last week’s flash floods. (Jordan Vonderhaar/The New York Times)
Editorial: Tragic Texas floods can prompt reforms for FEMA

The federal agency has an important support role to play, but Congress must reassess and improve it.

Comment: Midterm messaging fight for working class has begun

And Democrats have a head start thanks to the GOP’s all-in support for cuts to the social safety net.

Saunders: Considering attacks from left, ICE agents must mask

It’s not ideal, but with physical attacks against agents up 700%, the precaution is understandable.

Comment: Superman has been ‘woke’ as far back as Krypton

Conservative critics upset by the movie director’s comments on immigration need to read up on the hero’s origins.

Comment: GOP delayed worst of BBB’s cuts until after midterms

Republicans are counting on low-information voters’ party loyalty over their own financial interests.

Tufekci: Link between flood warnings and people wasn’t there

What might have saved many in Texas was a NWS coordinator position eliminated in the DOGE cuts.

2024 Presidential Election Day Symbolic Elements.
Editorial: Retain Escamilla, Binda on Lynnwood City Council

Escamilla was appointed a year ago. Binda is serving his first term.

A Volunteers of America Western Washington crisis counselor talks with somebody on the phone Thursday, July 28, 2022, in at the VOA Behavioral Health Crisis Call Center in Everett, Washington. (Ryan Berry / The Herald)
Editorial: Dire results will follow end of LGBTQ+ crisis line

The Trump administration will end funding for a 988 line that serves youths in the LGBTQ+ community.

toon
Editorial: Using discourse to get to common ground

A Building Bridges panel discussion heard from lawmakers and students on disagreeing agreeably.

toon
Editorial cartoons for Sunday, July 13

A sketchy look at the news of the day.… Continue reading

FILE — The sun sets over power lines in rural Ward County, Texas on Tuesday, May 20, 2025. Republicans plan to terminate billions of dollars in clean energy tax credits. Experts say that will mean more greenhouse gas emissions and more dangerous heat. (Paul Ratje/The New York Times)
Commentary: Bill will deliver dirtier energy at a higher price

Cuts to clean energy policy in the ‘Big Beautiful Bill’ will stifle our energy transition and cost us more.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.