Cutting $2,000 Payments, and Limiting Who’s Eligible for Them, Is Bad Economics and Loser Politics

Cutting $2,000 Payments, and Limiting Who’s Eligible for Them, Is Bad Economics and Loser Politics

Cutting $2,000 Payments, and Limiting Who’s Eligible for Them, Is Bad Economics and Loser Politics

Biden’s under pressure from deficit hawks to slash his stimulus plan. Ro Khanna warns that doing so would be a “terrible” idea.


The same cabal of compulsive neoliberals and centrist grifters who derailed meaningful progress in previous Democratic administrations are at it again. This time, they want President Biden and the Democrats to lower expectations for Covid-19 relief by reducing the amount of direct payments to Americans and imposing harsh restrictions on who might be eligible for them.

On Sunday, a group of 10 Republican senators sent the president a letter outlining a plan to reduced his $1.9 trillion stimulus package to approximately $600 billion. To cut costs, the Republicans propose to limit direct payments to just $1,000 and to prevent them from going to anyone earning more than $50,000 a year. They also want to jettison Biden’s plan to increase the minimum wage to $15 an hour. The Republicans say they hope Biden will work with them to achieve “unity and bipartisanship.” In fact, they’re proposing austerity under the guise of “targeted relief”—a dangerously bad idea that some Senate Democrats have also begun to peddle.

If Biden buckles to the deficit hawks who favor a narrow response to the economic turbulence spawned by the coronavirus pandemic—a compromise some of the president’s recent statements suggest is possible—he will do his agenda and his party deep damage.

A “go-small” approach to the crisis would surely gain applause from the usual suspects—austerity-inclined members of Congress and the elite editorial pages that cheer them on. But a surrender of ambition at this point would reinforce a sense that, even when Democrats control the presidency and the Congress, they cannot get government to work for the great mass of Americans. That is precisely the vulnerability congressional Republicans hope to exploit in order to regain power in 2022.

Don’t think it will happen? Think back to the midterm elections of 1994 and 2010, when Democratic administrations that had been elected with high hopes were punished for prioritizing reduced spending and deficit reduction over bold responses to economic downturns. There are never any political rewards for conceding to the budgetary vigilantes who demand that Democrats give up on the dream of once again forging a New Deal or a Great Society. And there never will be.

That’s why savvy members of the party, led by Representative Ro Khanna (D-Calif.) are cautioning against restricting payments in a way that denies them to middle-class families.

“This is not just bad economics, but terrible politics,” Khanna explained after proposals surfaced to restrict direct payments to smaller amounts and fewer Americans. The Californian has long been one of the House’s most outspoken advocates for addressing poverty. But he also recognizes that there are many Americans who earn over $50,000 a year and yet are struggling to make student loan payments, get out from under credit card debt, and cover housing costs in communities where rents and home prices are skyrocketing. “Why would we want to further the perception that the government cares for the needy and the elite but not for the middle class?” he asks. “Have we learned nothing?”

Khanna, who worked in the Obama White House before his election to Congress, understands something that too many Democrats neglect. The early stages of a new administration define a president and their party. If Biden and the Democrats present themselves as cautious and compromising when it comes to the economic agenda, they will invite frustration with the party and set it up for failure at the polls.

That’s political common sense. Unfortunately, too many times, Democrats fall for the siren call of austerity,

That call has been sounded with increasing frequency in recent days. Newspapers are headlining columns with predictable counsel such as “Cutting off stimulus checks to Americans earning over $75,000 could be wise” and highlighting calls by a growing congressional chorus to “target aid to lower-income families only.” A Washington Post piece last week announced, “calls are escalating to target the aid solely to low- and moderate-income families,” and pointed to studies that it said showed restricting eligibility for direct payments “would provide the most needed and effective boost for the economy.”

Khanna pushed back by noting that initiatives that benefit CEOs and Wall Street investors—as well as tax cuts for the rich—are regularly portrayed as benefiting the overall economy. “Where were these studies when the Fed lent companies money to pay dividends or executives? Did we look at the impact on consumer spending? But suddenly economists are opposed to middle class families paying off credit card, mortgage and student loans!” charged the congressman, who graduated Phi Beta Kappa with a BA in economics from the University of Chicago and, after earning a law degree at Yale, taught economics at Stanford.

Unfortunately, there are powerful players in Washington who refuse to recognize the economic and political danger of negotiating away one of the most popular initiatives this administration and this Congress could undertake.

West Virginia Senator Joe Manchin, the Democrat who is emerging as the biggest barrier to Democrats’ actually getting anything done with their new Senate majority, has been objecting to Biden administration proposals to increase direct payments from the stingy $600 Congress allocated in December by $1,400—so that Americans would get a total of $2,000. Manchin says he’s “absolutely” opposed to an ambitious plan that gets money to most Americans. “If the next round of stimulus checks goes out they should be targeted to those who need it,” he tweeted.

Maine Senator Susan Collins, the supposedly moderate Republican who always has “concerns” about doing the right thing, shares Manchin’s enthusiasm for restricting payments. After a call between 16 senators from both parties with White House aides, Collins said, “I was the first to raise that issue, but there seemed to be a lot of agreement…that those payments need to be more targeted. I would say that it was not clear to me how the administration came up with its $1.9 trillion figure for the package.”

Now, Collins is at the center of the group of ten Republicans proposing a dramatic reduction in the size of the relief package, with deep cuts to direct payments.

Might Biden bend to the pressure? He’s not going to embrace the $600 billion figure–less than one-third of his $1.9 trillion plan. But he has shown an openness to negotiating on proposals to reduce direct payments.

“There’s legitimate reason for people to say, ‘Do you have the lines drawn the exact right way? Should it go to anybody making over X number of dollars or Y?’” the president said Monday. “I’m open to negotiate those things.”

That statement raised fears that Biden’s preparing to retreat from the more populist position he seemed to be taking in early January when he argued that “$600 is simply not enough when you have to choose between paying rent or putting food on the table. We need $2,000 stimulus checks.”

In fact, Americans need more than just one $2,000 stimulus check—or, more precisely, a $1,400 check on top of a $600 check. They need monthly direct payments until the pandemic and the economic turbulence that extends from it has passed. That’s what Khanna and Representative Tim Ryan (D-Ohio) have been proposing since April. This idea is gaining traction. Last week, more than 50 House members signed on to a letter authored by Representative Ilhan Omar (D-Minn.), which urges the Biden-Harris administration to recognize that “one more check is not enough during this public health and economic crisis.” The letter argues, “Recurring direct payments until the economy recovers will help ensure that people can meet their basic needs, provide racially equitable solutions, and shorten the length of the recession.”

That’s not a radical plan. That’s smart economics and smart politics. “We need to go bold,” says Khanna, “Let’s give everyday Americans the support they need: $2,000 every month until we’re out of this.”

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

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