Ezra Klein is mad at the Democrats over automatic stabilizers
The HEROES act passed by House Democrats did not include a formula that would keep expanded unemployment insurance benefits in place until the economy has recovered. The always thoughtful Ezra Klein is very critical of this omission. His argument can be boiled down to two points:
- If Biden wins the presidency, Republicans will predictably try to destroy Biden politically by refusing to extend economic supports needed to protect families and promote an economic recovery. Automatic stabilizers are critical to protect a possible Biden presidency from Republican sabotage.
- Republicans need an economic stimulus package in the run up to the November elections more than Democrats do. This gives Democrats the bargaining power they need to force Republicans to accept automatic stabilizers.
According to Klein, moderate and progressive Democrats all support automatic stabilizers, and the idea polls well, but House leadership backed off when the CBO said the stabilizers for unemployment would cost $1 to 2 trillion dollars. At the same time, Pelosi emphasized that the money would be spent if needed, so there is no actual savings from refusing to include automatic stabilizers, it’s political posturing all the way down.
I agree with Klein on point 1 above. Automatic stabilizers are critical to protect a Biden presidency from Republican sabotage. (It would be foolish to count on winning a working majority in the Senate and repealing the filibuster.)
I am less sure that Klein’s analysis of bargaining power (point 2 above) is correct, although I am sympathetic to his position.
Suppose that July rolls around and states are laying off workers and expanded unemployment benefits are about to expire. The Republicans can agree to aid state and local governments and to extend UI benefits for a few months. Democrats can reject this and hold out for automatic stabilizers. Republicans will paint them as obstructionist. It is not entirely clear who wins this public relations war, and with the election approaching the Democrats may not be willing to gamble if Biden appears to be leading.
Even more important, failure to agree to a package will lead to immense suffering as UI benefits expire. Faced with this human catastrophe, Democrats may not be willing to play hardball with Republicans. It’s like a real mother and an imposter mother bargaining over a baby: if the no agreement point is cutting the baby in half, and the real mother is unwilling to do this, the imposter mother gets the baby.
Should the Democrats be willing to play hardball against the Republicans? Should they be willing to inflict tremendous economic damage on innocent people to protect a Biden presidency? I understand why the Democrats are reluctant to do this. It is tempting to think that Democrats should respond to Republican hostage taking and hardball politics in kind, but the short-run humanitarian costs are very real, ratcheting up the level of inter-party conflict is bad for our democracy, and there is a legitimate question about whether the Democrats should wait and hope that the political environment shifts in a way that moderates the Republican party (e.g., perhaps demographic replacement will force Republican elites to change tactics). On the other hand, perhaps the Republican party is so authoritarian that hardball is inevitable and necessary, despite the short-run suffering it will cause and the potential damage to our democracy from further escalating partisan conflict.
Finally, it is not clear from Klein’s article exactly how the bargaining inside the Democratic party went down. It is possible that members from swing districts opposed automatic stabilizers for narrow careerist reasons, even if the inclusion of automatic stabilizers would have had only a small effect on their re-election prospects. In this case, the real problem here is not the democrats as a group, but the careerism of a small group coupled with the weakness of parties in the American political system (that is, the inability of parties to discipline wayward members).
Thoughtful post, and I agree with you that Klein’s thought about the Dems bargaining power is way overstated.
McConnell packed his bags when the 40th million person lost their jobs. He couldn’t care less. He will run out the summer relying on the inevitable good “gross” economic reports that will come in the 3rd quarter. That is all he cares about, a dialogue(no matter how dishonest) that the economy is “roaring back”.
“Jason Furman
@jasonfurman
·
May 26
The Survey of Professional Forecasters expects an average of 2.3m jobs per month in July, August and September.
I would personally take the under on that.”
But even if correct, would still be 10.6 million jobs lost—worse than the financial crisis. https://philadelphiafed.org/-/media/resear
Even if, as Furman says, the numbers of new jobs in that forecast is high, the Reps will be able to say that the economy is “roaring back” as “the most new jobs were created in one month in the history of the US”.
That’s enough of a sound byte to keep McConnell ignoring any help. As wrong as it is in “real” terms.
States have neutered the “automatic” stabalizer” line.
Not sure why the lack of automatic stabilizers next January is any kind of threat to a possible Biden administration. There might be a small amount of damage left to repair, but not so much. The job numbers even in June will be net good. Testing is getting better, much like NDD insists is necessary. Another couple of weeks and there will be a lot of optimism building.
Structural damage. Employment numbers are a waste in that regard until you can see the recession components. See the forest from the trees and see the debt based ponzi side, clearly has lost steam.
Eric: I hope you’re right about a quick recovery, but it seems that even if we have a relatively rapid recovery there will be at least 10 million unemployed in January 2021, no? If their benefits expire that would be a large negative demand shock as well as terribly harmful to millions of families. And the number of unemployed could easily be 2 or 3 times higher. Finally, putting automatic stabilizers in place should be a critical priority for Democrats because it is good policy in an age of low interest rates and limited effectiveness of monetary policy, and because Republicans will sabotage any efforts to use fiscal policy that will be politically beneficial to a Democratic president. Even before COVID, automatic stabilizers were at the top of my todo list for a new Democratic president/congress, along with various democracy reforms (some version of HB1).
In 2016 it was about competency; much of the current predicament is about the lack of competency. Now, more than ever, it is about competency. It is not for lack of leadership. We’ve plenty of that in the wrong directions. The man is simply incompetent. We don’t need flashy, pizzazz, … we just need someone competent; competent enough to do those things that need to be done; to do what any competent manager or president would do.
Well Eric K today is my final day of work at a firm involved in aviation. I could and did do my work from home, but no way to offset the impact of our customers’ customers stopping buying plane tickets. Looking for a job for the first time in decades. But the first few days of looking around at the labor market leaves me more upbeat than I expected to be. Won’t be automatic, but things are out there and more showed up at the end of the week than the beginning. How to explain it? Bad but not dire? Dire but looking up? I am going around (cautiously) and people’s spirits seem clearly higher than early May. My autistic son is crazy about outdoor advertising. He noticed that several billboards have changed in the last week. They seemed very stagnant for a couple of months, but now there is at least a bit of a pulse evident. Maybe the country is just stumbling towards the proper test regime, but we are stumbling in the right direction almost certainly. No way in that extreme fear will hold a grip on the country much longer anywhere. As for what this means for the election, I predict that the winner will be the one that most convinces people that they want success for American families. My sense is that the trajectory will be easily good enough this summer and autumn to make the emotional appeal to you and your family much more important than talking about automatic stabilizers.
Mt reading of the hard bound in Congress is that states are not happy with their own automatic stabilizers If the state capitals were happy they would signal that to their senators..
States are part of the system, Ezra is a minor pundit. Which hard bound do you think Congress will react to? They will respond to the Constitution, I recently read it and in fact states get automatic stabi8lizers, sorry for that fact. I can prove it by listing the endless ear marks which foul up our legislation.
Philosophy of self discovered morality will not work. If Nancy sent five billion/year, in cash to each state capital I guarantee she will passing votes on most of her proposals.
Even if there is not a second wave (which we won’t know until the first wave is completed), the idea that there is going to be a quick recovery with 10 million people losing their jobs is silly.
And that’s probably the rosiest prediction.