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Negotiations for the next economic-recovery legislation will begin in earnest today. What should Congress include?
In March, Congress passed the $1.8 trillion “Phase 3” Cares Act. The forthcoming “Phase 4” bill will build off the CARES Act, modifying some of its program and filling in some of the holes in CARES. A few ideas for Congress to consider in crafting Phase 4:
- Reduce the generosity of the $600 weekly federal supplement to state-provided unemployment benefits, and put the federal supplement on a glide path to zero by the end of the year.
- Offer unemployed workers one-time re-employment bonuses when they get jobs.
- Temporarily increase the tax credit for children.
- Expand the earned-income tax credit.
- Extend the Paycheck Protection Program (PPP), and modify it by allowing businesses the flexibility to spend more of the forgivable portion of the loan on non-payroll expenses — essentially, convert PPP into a true revenue-replacement program — and take measures to encourage businesses and banks to participate.
- Provide block grants to state and local governments for schools and other essential services, but make sure that money can’t be spent to shore up pension funds. This would help schools to reopen, support overall economic demand, and stem the tide of layoffs from state and local governments, which have already laid off 1.5 million workers, including 900,000 school employees, since February.
- Address the $454 billion that the CARES Act appropriated to the Treasury Department in support of Federal Reserve lending programs, making sure it is used to support the economy.
- Protect businesses that make good-faith efforts to follow public-health guidelines from frivolous lawsuits.
- Consider including incentives for business investment.
- Fund the virus-related costs child-care centers are facing to help them keep their doors open.
- Provide funding to states for testing and tracing capabilities.
I discuss these ideas in more detail in my latest Bloomberg Opinion column. I also discuss a confusing aspect of the politics of this legislation.
The White House has been publicly conflicted over the past few months on whether additional legislation would be needed at all and, if needed, what should be included in it. President Trump should be made to understand that he has a much better chance to be re-elected if the economy is improving rapidly in the fall. From this political perspective alone, a sensible White House would be pushing Congress for as large an economic recovery package as it could get.
This legislation will be critical. Both the overall economy and individual workers and households need additional support, and this is the last swing Congress is likely to take until the beginning of the next presidential term in January 2021.