Why Biden Has The Right Covid Relief Strategy

President Biden met with 10 Republican senators on Monday to discuss their proposed $600 billion alternative to his $1.9 trillion American Rescue Plan. Both the White House and Sen. Susan Collins described the meeting as a productive exchange of ideas and the start of continued talks. But some Democrats believe these discussions are doomed from the start and want Biden to focus on passing his plan through reconciliation – a complicated process that allows budgetary legislation to pass with just 51 votes instead of the 60 required to bypass the filibuster on all other legislation. Although Democrats are right to move forward with reconciliation, there are several reasons why it makes sense for Biden to pursue the talks further and seek common ground beyond just a platonic ideal of “bipartisanship.”

The main downside of a reconciliation-only strategy is that a reconciliation bill is unlikely to pass before the end of February due to all the parliamentary processes that must be followed to enact it. Some elements of Biden’s Rescue Plan simply cannot wait that long. The outdated IT systems that states use to administer unemployment insurance can take several weeks to incorporate changes in benefit formulas. UI benefits lapsed for millions of people in December because Congress (and former President Trump) waited until the last minute to pass an extension. The only way to avoid another lapse in benefits is by passing a bill quickly through regular order – and that requires the support of 10 Republican senators. It is also essential that Congress approve funding for vaccines, PPE, and paid sick leave to halt the spread of covid as soon as possible.

But as Senate Finance Committee Chairman Ron Wyden rightly noted, there are two major dealbreakers in the Republican plan. The first problem is that it doesn’t meet the needs of struggling families because expanded unemployment benefits would end on June 30^th, which is very likely to be before enough of the population is vaccinated to achieve the herd immunity necessary for returning our economy to normal. The second problem is that the proposal is simply too small to meet all our relief needs. Updated economic projections released Monday by the non-partisan Congressional Budget Office indicate that our economy facing a $380 billion output gap (the difference between our actual and potential economic output) in 2021 and an $760 billion gap between now and 2023, both of which could be underestimates. Furthermore, not every dollar of relief translates into a dollar of economic output. $600 billion is simply not enough to ensure our economy achieves full employment after the pandemic ends.

However, there could still be an opportunity for compromise if Republicans are willing to accept it. The White House has said that they are open to ideas for improving the package, so long as the final bill doesn’t “fail to meet the moment” and is not stalled by extended negotiations. Republicans, on the other hand, are skeptical that a $1.9 trillion package exceeds our real economic needs and prefer a more-targeted approach.

The two parties could potentially satisfy each other’s concerns by agreeing to structure relief programs as well-targeted automatic stabilizers, which is the approach I, former Chairman of the Council of Economic Advisers Jason Furman, and other experts have long advocated. Timing the expiration of relief programs to economic indicators rather than arbitrary calendar dates would ensure expanded benefits phase out earlier if the economy bounces back stronger than expected (addressing Republican concerns that stimulus is excessive) or later if we face a prolonged recession (addressing Democratic concerns that relief could be cut off prematurely). The Director of Biden’s National Economic Council, Brian Deese, has also expressed a preference for including similar triggers.

Alternatively, the parties should consider agreeing to a $1.2-$1.4 trillion package. This is likely the amount our economy actually needs, and it also happens to split the difference between the GOP and White House proposals. Economist Mark Zandi has estimated that a package of this size would be the right amount of stimulus for our economy, and the new projections from CBO suggest that it would be enough to fill the output gap through 2023 even if the true output gap is bigger than CBO believes. Such a package would also be big enough to include a sufficient extension of expanded UI, a more-targeted version of $1400 stimulus checks, aid for state and local governments, and many of Biden’s other priorities that deliver needed relief to struggling households.

If 10 Republican senators can agree to back a package along these lines within the next two weeks, this early bipartisan success could lay a strong foundation for the rest of Biden’s presidency. But should the GOP refuse to support a comprehensive compromise, Democrats must be prepared to pass essential policies through reconciliation. They could either pass a bipartisan bill through regular order addressing our most urgent needs and areas of common ground, then follow it up with a reconciliation bill that fills the remaining need; or, if no agreement can be reached, Democrats will have to pass a comprehensive reconciliation bill quickly to avoid missing crucial deadlines.

President Biden is right to keep all options on the table by simultaneously working towards a compromise with Republicans while Congressional Democrats get the ball rolling on reconciliation. Negotiations cannot be allowed to drag out for months as they did last year, nor can Democrats allow themselves to be constrained by unreasonable Republican penny-pinching at a time when most economists agree that the risks of underdoing stimulus far outweigh the risks of overdoing it. But there is no harm in continuing to seek common ground while pursuing reconciliation as a backstop. If Biden can get a bipartisan win early without jeopardizing the recovery, that would be the best outcome of all.