Foreboding Capitol
Oliver Contreras on Twitter

Covid-19 bill in Congress still awful, unnecessary and potentially counterproductive

Moderate Democrats in the Senate are the last line of defense for fiscal sanity and against the $1.9 trillion Covid-19 disaster exacerbation bill. With the economy strengthening, vaccines promised for all adults by the end of May, and schools and states reopening, the need for the bill weakens and concerns about bad effects grow. Fortunately, the Washington consensus away from Capitol Hill has moved against the bill, with even former Treasury Secretary Larry Summers and former IMF chief economist Olivier Blanchard, who in 2017 considered the potential need for massive federal government fiscal policy, warning  the current bill is far too big and is more likely to accelerate inflation.

The initial CARES Act, passed in April 2020 when things looked bleakest, provided money to states, localities, businesses, unemployed people, and everyone else because the time and effort to determine who needed how much assistance could have meant the aid arrived too late. A year into “two weeks to flatten the curve,” it is now fairly clear which industries, companies, people, states, and cities are struggling the most. It should be much easier to provide targeted relief.

Fortunately, the Senate has already dropped a House provision to increase the minimum wage to $15. The bill still may offer money to entice states to expand Medicaid, keep people earning more from unemployment than they can from work well into the summer, and reward profligate states.

The case against a bailout of states is stronger than the case against the rest of the bill. North Carolina is swimming in money. The New York Times admits states are doing better than expected and Michael Lucci reiterates that the federal money that’s already gone out has made them more than whole. The Hill explains it this way:

Counterintuitively, some states have experienced an increase in revenue during the pandemic compared to 2019, according to an Urban-Brookings Tax Policy Center analysis. These states include California, Colorado, Georgia, Maine, North Carolina, Vermont, and Washington.

“I’d like to make sure funding goes to state and localities that actually had a reduction in revenues or unreimbursed COVID expenses,” [Utah Sen. Mitt] Romney said. “If states had rising revenues and have already had reimbursement for their COVID expenses, I don’t see why we should be borrowing more money from China to send them more money.”

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Joseph Coletti / Senior Fellow, Fiscal Studies

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...