Relief package still unsettled as GOP cries oh-the-deficit! Stephanie Kelton's book is the antidote
Still unable to agree on all elements of a financial relief package to help keep the economic damage from the Pandemic Recession from getting worse, Congress passed and Donald Trump quickly signed a temporary, two-day extension of overall federal spending Friday to give lawmakers another two days to continue negotiating those elements without a government shutdown. House Majority Leader Steny H. Hoyer (D-Md.) said lawmakers have “still some significant issues outstanding” to deal with before they can reach agreement on relief. No congressional session will be held today, and Hoyer said no vote should be expected before 1 PM Sunday.
So, here we are, exactly one week before the federal extension of unemployment insurance expires and 12 days until the Centers for Disease Control’s national eviction moratorium expires, with the raging coronavirus forcing even some previously reluctant officials to impose restrictions to stop its spread. That means more Americans will have their work hours cut or be furloughed or laid off. And it means more small businesses already on the financial precipice will go over the cliff.
Yet when it comes to assistance for rank-and-file Americans, with rare exceptions Republicans have proved themselves impervious to their plight and apparently determined to make things worse. They fought the $2.2 trillion CARES Act passed by the House in March. Now, besides low-balling the new relief bill, they seek to undermine the incoming Biden administration’s ability to take additional actions to repair the economy by killing not only the existing emergency lending programs of the Federal Reserve established in March, but also by blocking such methods of dealing with economic crises in the future.
As it stands, the relief bill under consideration includes $600 “stimulus” checks for millions, hundreds of billions of dollars in jobless aid including further extension of how long someone can receive unemployment assistance, rental assistance, small-business assistance, and money for vaccine distribution. Not included is aid to cities and states whose revenues have been slashed by the Pandemic Recession, putting at least some of them on the road to bankruptcy.
Anybody who looks at what’s been proposed in the package knows that its $900 billion isn’t nearly enough. Democrats recognized this in May when they voted in the House of Representatives for another $3.4 trillion in relief funding under the HEROES Act. Senate Majority Leader Mitch McConnell wouldn’t even allow the bill to be discussed. No discussion either when the House passed the slimmed down $2.2 trillion HEROES Act in October.
Too much, too much, think about the deficit, say the Republicans, most of whom are never heard asserting economic disaster will result if America’s richest get trillions in tax reductions.
One likely reason the GOP isn’t under heavy pressure from constituents to support ample relief is the uneven course of the Pandemic Recession. As with pandemic itself, the economic impacts are worse if you’re poor or a person of color. In August, The Washington Post reported “The recession is over for the rich, but the working class is far from recovered.”
Though recessions almost always hit lower-wage workers the hardest, the pandemic is causing especially large gaps between rich and poor, and between White and minority households. It is also widening the gap between big and small businesses. Some of the largest companies, such as Nike and Best Buy, are enjoying their highest stock prices ever while many smaller businesses fight for survival.
Nonetheless, Republicans stubbornly oppose another round of direct “stimulus” payments like the $1,200 that went to every qualified American in the CARES Act, with $500 for each dependent child in such families. Sen. Bernie Sanders took on this wretched callousness Friday evening in a speech excoriating Sen. Ron Johnson for his whining about the deficit:
The senator from Wisconsin threw out some numbers. Let me throw out some other numbers. Half of the people in this country are living paycheck to paycheck. Millions of workers are trying to survive on starvation wages of $10 or $12 buck an hour. 90 million people are uninsured or underinsured, can’t afford to go to a doctor. 19 million families spending half of their limited incomes on housing. Madam president, today we have the most severe hunger crisis in America that we have had in decades. Children in this country are going hungry while a half million people are homeless and many millions more fear eviction. Today, as a result of the pandemic, not only do we have the worst health care crisis in 100 years, but the worst economic crisis since the Great Depression.
$900 billion in relief is better than nothing, of course. But take a look at just one hole.
The Center for Disease Control’s eviction moratorium expires Dec. 31. Without congressional action, the Low Income Housing Coalition estimates that 6.7 million renter households will be at risk of being tossed into the street. The proposed relief bill includes two items: $25 billion in direct assistance for landlords and tenants, and a one-month extension of the moratorium. But the National Council of State Housing Agencies, which estimates 8.4 million renter households with 20.1 million people, will owe up to $34 billion in back rent. A one-month extension and $25 billion won’t be good enough, and you can bet that come Jan. 20, Republicans will still block new aid, obstructing President Joe Biden with the same smash-everything-he-tries-to-achieve tactic they imposed on President Barack Obama. This time without the racist animus.
The pandemic and Pandemic Recession need immediate attention, as does the climate crisis and our crumbling infrastructure. And that means more money, a lot of it. Anytime this is suggested and it’s not about helping America’s 1%, the cry of oh-no-the-deficits is raised. This is not just a function of Republican ideology. Most Democrats, too, worry about deficits. And the majority of economists weigh in likewise.
They all need to read economist Stephanie Kelton’s book out last June: The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy.
This is no place for a full-throated review. Condensed, Kelton argues that deficit spending by the government is actually good for the nation and that this should not be judged in the same way as a household budget. The only constraint is inflation, and that must of course be guarded against. She writes: “Deficits can be too big. But evidence of overspending is inflation, and most of the time deficits are too small, not too big.” She goes on:
The real crises that we’re facing have nothing to do with the federal deficits or entitlements. The fact that 21 percent of all children in the United States live in poverty—that’s a crisis. The fact that our infrastructure is graded D+ is a crisis. The fact that inequality today stands at levels last seen during America’s Gilded Age is a crisis. The fact that the typical American worker has seen virtually no real wage growth since the 1970s is a crisis. The fact that forty-four million Americans are saddled with $1.7 trillion in student loan debt is a crisis. And the fact that we ultimately won’t be able to “afford” anything at all if we end up exacerbating climate change and destroying the life on this planet is perhaps the biggest crisis of them all.
These are real crises. The national deficit is not a crisis.
Renowned economist James K. Galbraith writes of the book:
“Clear! Compelling! Eye-opening and persuasive, The Deficit Myth is an adventure in the world of budgets, jobs, trade, banking, and—above all—money. With the great force of common sense, Stephanie Kelton and the MMT team have broken through the closed circles of so-called sound finance, a stale orthodoxy that has weakened and impoverished us all. This book shows how they did it, and it blazes a path forward, toward a better world built on better ideas.”
If you have visions of the hyperinflation of Zimbabwe or the Weimar Republic in which Germans in the 1920s took wheelbarrows of currency to the store to buy a loaf of bread, this book carefully explains in plain English why that never has to happen if caution is observed. It ought to be read by every Democrat in Congress and acted upon. The book has been called “radical” and it is. But that’s no bad thing. After all the founders were radical, as were the feminists at Seneca Falls in 1848, as were abolitionists, as were union organizers, as were civil rights advocates. What matters is the books is sensible.