The Biden Administration and Democrats in Congress are pressing for another stimulus bill in the amount of $1.9 trillion to address the effect the COVID pandemic has had on the economy. This comes on top of about $4 trillion Congress has already approved, much of which has not yet been spent.
The bi-partisan Congressional Budget Office (CBO) released its updated economic projections for the U.S. The CBO runs economic projections to advise Congress on budgetary issues. The CBO now projects that the nation’s GDP for this quarter will bounce back to what it was prior to the pandemic.
This article by the Committee for a Responsible Federal Budget discusses how think tanks and researchers across the political spectrum have all concluded that an additional $1.9 trillion will substantially overshoot what is necessary for the economy to recover.
That said, it is clear that some segments of the economy have been damaged by the pandemic (and the attendant government response) much more than others. Obviously, the hospitality industry has been decimated. We should continue to support those disproportionately affected until we get past the pandemic. Programs like extended unemployment benefits, bridge loans and direct assistance targeted to those most affected are absolutely warranted. However, that type of aid could be done for a fraction of $1.9 trillion.
One of the other talking points is that the massive bill is necessary to conduct the vaccination campaign. However, there is little evidence of that. In the last week, an average of 1.5 million doses were administered, a rate that is almost certain to continue to ramp up. While certainly that effort should be vigorously supported, the constraints right now are on the manufacturing side. There is no indication that throwing massive amounts of money at state and local governments will do anything to speed up the manufacturing process.
The bill includes $350 billion to bailout state and local governments on the theory that they lost revenue during the pandemic. However, the revenue loss has not been nearly as severe as originally feared. Even the left-leaning Washington Post has opined that this provision is no longer warranted.
No one seems to worry these days much about the national debt, now closing in on $28 trillion. But the national debt as a percentage of GDP is now higher than it has ever been, even higher than during WWII. This is not the time to adding to it unnecessarily.