With Friends Like These: Moderate Democrats Weaken The COVID-19 Relief Bill, To What Gain?

This is what Sen. Joe Manchin’s demands for “bipartisanship” with a Republican Party with no intentions to ever negotiate in good faith has produced so far on the COVID-19 Relief bill: Democrats negotiating against themselves in a compulsive desire to signal moderation in a futile attempt to appease bad faith Republicans.

First Rule of Negotiation: never negotiate against yourself.

The New York Times reports, Democrats Narrow Stimulus Payments as Biden Works to Keep Aid Plan on Track:

President Biden agreed on Wednesday to place stricter income limits on the next round of stimulus payments, making the latest in a series of crucial concessions to moderates as Democrats worked to hold their fragile coalition together to push his $1.9 trillion pandemic aid package through a divided Senate.

The decision to scale back the direct checks — a popular centerpiece of Mr. Biden’s economic relief initiative — was the second time in a week that Democrats had moved to curtail the sweeping stimulus plan by limiting or removing progressive priorities. The moves have underscored the narrow path Mr. Biden must navigate as he seeks to steer his first major legislative initiative through the 50-50 Senate, where he cannot afford to lose a single Democrat in the face of what is likely to be united Republican opposition.

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[I]n recent days, it has narrowed to accommodate the moderates’ concerns as well as the arcane rules of the Senate.

Under the new proposal blessed by Mr. Biden, individuals earning more than $80,000 and households with incomes exceeding $160,000 would be disqualified from receiving stimulus checks. The caps are $20,000 lower than they were in the last round, wiping out payments for millions of Americans.

The plan would send $1,400 checks to individuals earning up to $75,000, single parents with children earning $112,500 and couples making $150,000, with the amount gradually falling for people with larger incomes. The payment would disappear altogether for those over the cap of $80,000 for individuals, $120,000 for single parents and $160,000 for couples. Mr. Biden’s original proposal, which passed the House over the weekend, would have set the cap at $100,000 for individuals, $150,000 for single parents and $200,000 for couples.

The reduction was another blow to liberal Democrats, who are already angry over a decision last week to remove a minimum-wage increase from the stimulus plan. A top Senate official ruled that measure out of bounds under the rules governing the legislation, but it also lacked support from crucial moderates whose votes would have been needed to pass it.

[I]f adopted, the change in income limits would mean that about 12 million adults and five million children who received stimulus payments under the last round of aid signed in December by President Donald J. Trump would not receive them under Mr. Biden’s bill, according to an analysis by the liberal Institute on Taxation and Economic Policy. The researchers estimated that would bring the number of Americans benefiting to 280 million, down from 297 million.

Kyle Pomerleau, a tax modeling specialist at the American Enterprise Institute in Washington, estimated that it would shave $15 billion to $20 billion off the cost of the bill.

I have to agree with Chris Hayes’ analysis: “It’s not even like there’s some obvious lobbying reason. The big donors want this to happen. There’s not a political reason. This is not some fraught issue like abortion or guns. There’s no group out there that’s single-mindedly focused on making sure that people who make $85,000 year don’t get a check during the pandemic. WHO CARES? Who’s opposing that?”

“There’s nothing more than a reflexive, almost neurotic, compulsive desire to signal moderation by making things worse—both substantively and politically,” said Chris Hayes on Senate Democrats like Joe Manchin and Jeanne Shaheen pushing to narrow who is eligible for stimulus checks.

“But what on earth are you thinking?”

Paul Waldman of the Washington Post essentially agrees with Chris Hayes. Democrats won’t gain anything from scaling back stimulus checks:

One could argue that this change is relatively minor given the massive sweep of the entire bill, which is true. But it might be better to ask the question this way: Do Democrats actually gain anything by making this change? Because it’s hard to see how they do.

It was always a little odd that it was moderates who wanted to make sure those at higher incomes didn’t get too much assistance, but the disagreement wasn’t so much about fairness and equity as it was about how aggressive Democrats should be in confronting the effects of the pandemic. Progressives wanted to do as much as possible, and moderates wanted to find ways to scale back the bill’s ambitions.

And since the checks are the most visible part of the bill, that was a good place for the moderates to come out for trimming it back. Never forget that moderate Democrats such as Sens. Joe Manchin III (D-W.Va.) and Kyrsten Sinema (D-Ariz.) are always on the lookout for high-profile ways they can disagree with their party, which helps them sustain their reputation for independence.

But it’s also probably the case that had Biden wanted, he could have held firm on the House’s numbers and the moderate Democrats would have gone along in the end. It’s implausible to think that Manchin or Sinema would have torpedoed the entire relief bill over this relatively minor question.

And it is relatively minor. A Democratic aide tells The Post’s Jeff Stein that the change reduces the total of checks being sent out by $12 billion. Which represents about six-tenths of 1 percent of the entire bill’s cost, or next to nothing.

It’s not about the money, it’s those 12 million adults who are voters. In our anti-democratic Electoral College system, that is more than enough voters to swing several swing states in the next election. As Cris Hayes said, “What on Earth are you thinking?”

It does mean, however, that some people who got stimulus checks from then-President Donald Trump won’t be getting them from Biden. You could argue that most of those people don’t really need the money, which would be fair — although eligibility is determined by the last tax return you filed, and many people lost income in 2020, which means they might need it now even if they were doing well in 2019.

It’s also true that most of the people who need help the most will be getting enormous benefit from this bill. Among other things, it extends supplemented benefits for those who are unemployed, increases the child tax credit and boosts the Earned Income Tax Credit.

But the point isn’t really whether you can find some people who would have gotten some stimulus under the House version but won’t get it now, and who never really needed it in the first place. Such people do exist. But what would we have lost if they had gotten assistance?

Not much of anything. They would have spent at least some of the money, recirculating it through the economy and helping the recovery. Overall, the amount they would have spent is less than that spent by low-income people, who have urgent needs and so will spend their stimulus checks immediately — but it would have been something.

And it’s not a zero-sum game. That $12 billion in savings isn’t getting pumped back [redistributed] into more stimulus for those at lower income levels.

As Rep. Pramila Jayapal (D-Wash.) argued, leaving anyone who got a check last time without one now is “bad policy and bad politics too.”

Progressives such as Jayapal want Biden and his party to be seen as the benefactors of a struggling country, coming to the rescue with a wallet opened as wide as possible. From their perspective, trying to cut back a few dollars here and there just undermines that claim, for a negligible reward.

I’m sure Biden would respond that the bill is still enormously generous, which it is. And he also likes to be seen as someone willing to negotiate and take into account the views of moderates and even Republicans. (Republicans wanted the stimulus checks to be reduced even further, so you could argue that the final bill will have moved slightly in their direction, even if they won’t support it.)

But this bill is already hugely popular. Cutting back the stimulus checks won’t make it any more so. And no senator would have been the victim of a vicious attack ad skewering them for allowing stimulus checks to phase out slightly more slowly for people in the middle- to upper-middle class.

In other words, Democrats could lose something with the change they’re making, both politically and for the economy. But they won’t gain much of anything.

But wait! It gets worse. Now these moderate Democrats are giving aid and comfort to the divisive Republicans’ polarizing claim that the COVID-19 Relief bill is a “blue state bailout.”

Roll Call reports, Draft Senate aid plan would cut direct funds to cities, counties:

A new version of Senate Democrats’ coronavirus relief plan would put new restrictions on some $350 billion in aid to states and localities while diverting $10 billion of the money for cities and counties to “critical capital projects” like broadband access.

State and local aid guardrails

The changes to state and local funding, sought by moderate Senate Democrats, could prove at least a little controversial with their House counterparts.

Total funding for states would remain the same at $195.3 billion, but direct aid for cities, counties and smaller units of local government would take a hit in order to finance the new $10 billion capital projects fund.

The reductions would come proportionally: the amount for counties generally would be cut by $5 billion, to $60.1 billion; metropolitan cities would get $3.5 billion less, or $42.07 billion; and so-called nonentitlement units of local government, or the smallest cities and counties, would get $1.5 billion less, or $18.03 billion.

There would also be new guardrails on the money for states and localities.

The funds would be distributed in two tranches — with 50 percent up front. States with a high proportion of unemployed individuals could receive the remainder of their funding simultaneously. But the rest would have to wait until they’ve spent at least 80 percent of the first tranche or 60 days before the start of their fiscal year starting in 2023, whichever is earlier.

And in order to receive the second round, states would have to prove they weren’t using the money just to stave off a tax increase they otherwise would need to impose. Contributions to state pension funds would also be barred. And states would have to use the money for certain purposes, including:

• • • Aid to households, small businesses or nonprofits, or aid to “impacted” industries like tourism, hospitality and travel.
    • Funding government services that reduced due to the pandemic-related hit to tax revenue.
    • To make “necessary investments” in water, sewer, or broadband infrastructure.

The same restrictions would apply to units of local government, except they could receive their second tranche a year after receiving the first.

The Treasury secretary would be charged with writing regulations to recoup payments to states if the restrictions aren’t adhered to.

The $10 billion capital projects fund, meanwhile, would be distributed evenly with $100 million to each state, territory and the District of Columbia, with another $100 million for tribal governments and Native Hawaiians.

The rest would be distributed based on a formula, allocating 50 percent based on population, 25 percent based on proportion of individuals living in rural areas, and 25 percent based on the proportion of individuals living below 150 percent of the poverty line.

Once the text is finalized and senators have a budget score from the Congressional Budget Office and Joint Committee on Taxation, Senate Majority Leader Charles E. Schumer plans to offer a motion to proceed to the House-passed bill. A Senate Democratic aide said that wasn’t expected to occur until Thursday at the earliest.

Republicans do not want any federal aid going to states and cities. So one can argue that Democrats are still giving aid to states and cities, but do Democrats actually gain anything by making these changes? Because it’s hard to see how they do.

The Senate is jeopardizing passage of this weaker Senate version of the COVID-19 Relief bill by pissing off the Democratic wing of the Democratic Party in the House who passed a bill to go big and bold to meet the moment.