Fiscal leaders need to step up and do something helpful — yesterday
Americans are screaming for government officials to do their damn jobs already.
Unfortunately, many officials — at least, the ones with substantial firepower left — refuse to act. They need to stop letting the perfect (or the stupid) be the enemy of the good.
To be sure, the Federal Reserve is doing what it can. In an emergency meeting over the weekend, central bankers took extreme action, including measures last adopted during the financial crisis a decade ago.
They slashed the Fed funds rate to near zero; restarted quantitative easing; cut the rate at which banks can get emergency loans through the Fed’s “discount window”; and activated currency swap lines with five other central banks.
In other words, the Fed fired virtually every bullet it had — using all artillery on hand, from squirt-gun to bazooka.
Yet U.S. equity markets still crashed. The March 16 session started with such a sharp plunge that circuit breakers had to temporarily halt trading. By day’s end, the S&P 500 closed down about 12%.
That’s the market’s way of saying: There just isn’t that much monetary policy can do to keep an economic crisis at bay. With interest rates already so low, the central bank had limited ammunition to fight a recession, especially one begun by a global pandemic.
Which is why we need fiscal policymakers to step up and do something useful. Yesterday.
Alas, GOP lawmakers and the
White House have been dragging their feet, distracted by bad ideas, as well as good ones that can be addressed later.
Just as President Trump had obsessively pressured the Fed to cut rates to zero long before it made sense to do so — before coronavirus was even a twinkle in a Wuhan bat’s eye — the president has become fixated on a similarly unhelpful fiscal fix: a payroll tax cut.
He and his aides have argued repeatedly for this stimulus measure. Why is not clear; neither political party seems interested in it right now, and for good reason: It wouldn’t help people out of work.
To Trump’s chagrin, a payroll tax cut was missing from the bill the Democratic-controlled House passed on March 14. Still, it contains other measures that would meaningfully address some of the pandemic’s economic fallout (including some the White House has embraced).
Critically, it would provide support for states whose budgets are about to get squeezed by both falling tax revenue and increasing costs. It does this by increasing the share of Medicaid program costs paid by the federal government so long as a public health emergency declaration remains in place.
And, of course, it includes expanded paid sick leave and family leave to allow people to stay home from work without fear of missing their entire paycheck.
Even so, as many on both the left and right have pointed out, the legislation does not go nearly far enough.
For instance, the paid-leave portions of the bill have huge loopholes; they do not apply to large firms with more than 500 employees, and allow waivers for the family leave provisions for firms with fewer than 50 employees.
Lots of other worthwhile options have been proposed that are not included, such as direct cash payments to families (proposed Monday by Sen. Mitt Romney, R-Utah, among others). Or a temporary cut to state sales taxes, financed by the federal government.
Again, these fixes and additional measures are worth considering. But it doesn’t make sense to hold up further votes on the goodif-not-perfect House-passed template while each and every possible improvement is debated.
After all, it’s not as if lawmakers will be able to pass one and only one response to the coming health crisis. We should count ourselves exceptionally lucky if that’s all that is eventually required.