Pelosi Eyes Another Massive Coronavirus Bill

Pelosi Eyes Another Massive Coronavirus Bill

Printer-friendly version
Plus: How health insurance rates could soar
Monday, March 30, 2020

What’s After the $2 Trillion Rescue? Pelosi Plans a Big Stimulus

President Trump signed a $2 trillion coronavirus relief bill into law on Friday — the largest such package in U.S. history. Now, officials are already looking ahead to the next phase of emergency measures — and the cost of those measures could again run into the trillions.

As The Wall Street Journal reported late Sunday:

“Legislators from both parties, administration officials, economists, think tanks and lobbyists are already roughing out the contours of yet another emergency-spending package—perhaps larger than the last—to try to keep the coronavirus crisis from turning into a 21st-century Great Depression. Many expect the debate to begin in earnest by late April.”

Pelosi prioritizing help for states: The legislation passed last week was mostly aimed at minimizing the wreckage from the forced economic shutdown that has choked off business revenue and worker wages. The next step reportedly could involve more economic stimulus while also extending the benefits in the latest legislation and addressing the gaps it left — most notably, more aid to state and local governments whose budgets are sure to face massive shortfalls due to lost tax revenues and emergency spending needs.

“We have to have more resources for state and local government,” House Speaker Nancy Pelosi said in an interview with The New York Times on Monday. Pelosi added that “this isn’t about how fast we can do it, it’s how fast we must do it.”

Partisan differences could quickly reemerge: There’s some disagreement on just how urgent additional action is, though — and some early signs that the unusual speed and cooperation Congress displayed in scrambling to pass the $2 trillion “Phase Three” package could be harder to come by for future legislative steps as ideological differences bubble up again.

“The left is going to want to do infrastructure, welfare payments and food stamps,” Stephen Moore, a fellow at the conservative Heritage Foundation and an outside economic adviser to the Trump administration and some congressional Republicans, told the Journal. “Our side will want to do tax cuts and deregulation.”

Some Republicans also want to tap the brakes before considering additional action, a hesitation fueled in some cases by concerns about a more permanent expansion of government. “I would hope anybody that’s talking about a phase four would pause right now,” House Minority Leader Kevin McCarthy, a California Republican, said Friday on Fox News. “Let’s make sure this is actually working in the process and be smart, get the data back of where—if—we do need more help.”

Travel restrictions and social distancing requirements could also complicate any future legislation.

The bottom line: The state budget crunch is going to be real, and you’ll likely hear more governors raise the issue as we approach July 1, when the fiscal year begins for most states. This could also be an opportunity for the Trump administration and Congress to resurrect the large infrastructure plan all sides seem to want, perhaps with some less pressure than in the past to figure out how to finance it all.

Chart of the Day

The world has never seen anything like the current fiscal and monetary response to the coronavirus epidemic, says Gavyn Davies of the Financial Times, and the U.S. taking some of the most aggressive steps so far in its effort to keep the economy afloat. “The increase in fiscal spending and loans in the US this year alone will reach more than 10 per cent of gross domestic product,” Davies writes, “larger than the rise in the federal deficit through 2008 and 2009.”

Low interest rates mean the relief and stimulus efforts will likely be affordable, as long as the Federal Reserve absorbs the increased debt. “It is likely, given present economic conditions, that part of the rise in public debt ends up on central bank balance sheets for a very long time,” Davies says.

Health Insurance Rates Could Spike 40% Next Year: Report

The coronavirus pandemic could cost commercial insurers in the U.S. anywhere from $34 billion to $251 billion, and possibly more, according to a new analysis by Covered California, which runs that state’s public health insurance marketplace. The surge in costs could mean higher insurance premiums in 2021 for the roughly 170 million Americans who are covered by private plans, with increases ranging from 4% to 40% — or even higher.

“Health plans went into 2020 with no hint of coronavirus on the horizon,” Peter V. Lee, executive director of Covered California, told The New York Times. “No insurer, no state, planned and put money away for something of this significance.”

Enormous uncertainty: The range of possible cost increases is huge, but some actuaries say that expenses for insurers may not soar when all is said and done. While spending on testing and treatment for Covid-19 will almost certainly increase, spending on just about everything else, from heart surgery to hip replacements, will likely fall as hospitals cancel procedures in order to focus on the pandemic. And, gruesomely, some patients may not be able to receive care in hospitals flooded with patients. For those who are able to receive treatment for coronavirus infections, costs could range anywhere from $20,000 to more than $70,000 per patient.

Insurance for insurers: The insurance industry is pushing Congress to create a new reinsurance program to cover some portion of the cost of coronavirus claims, in order to limit the increase in premiums next year, the Times’ Reed Abelson says. A group representing employers and health care companies, the Alliance to Fight for Health Care, which recently scored a victory in its battle to keep the so-called Cadillac tax in the Affordable Care Act from taking effect, has also expressed interest in some kind reinsurance program.

Lawmakers need to act fast: Insurers will submit their proposed rate hikes in May, with approval typically occurring by July 1. While some states will likely push back against unusually large increases, others may allow them if insurers are hit with huge costs increases. Without significant federal intervention, Lee says, “[c]onsumers will feel these costs through higher out-of-pocket expenses and premiums, as well as the potential of employers dropping coverage or shifting more costs to employees.”

Critics take aim: The report of potential 40% price increases for premiums gave opponents of the for-profit health care system a new talking point, with Sen. Bernie Sanders and others suggesting that the crisis reinforces their calls for a single-payer system.

What better time for Some Good News? No wonder John Krasinski's new YouTube channel is an instant hit.

Send your tips and feedback to Follow us on Twitter: @yuvalrosenberg, @mdrainey and @TheFiscalTimes. And please tell your friends they can sign up here for their own copy of this newsletter.

Op-Ed of the Day: How the Government Could Save More U.S. Jobs

The $2 trillion coronavirus relief package passed by Congress last week beefed up unemployment insurance benefits. Most states provide a maximum of 26 weeks of benefits. The new law would extend that by 13 weeks and add four months of $600-a-week payments on top of the usual unemployment checks. That’s a sizable boost to benefits, which have averaged $372 a week for the 12 months through February, according to the Labor Department.

Senate Minority Leader Chuck Schumer (D-NY) described the provisions as “unemployment insurance on steroids.”

Those checks will undoubtedly help ward off some economic devastation as an unprecedented number of workers file for unemployment benefits — a record-shattering 3.3 million filed in the week ending March 21 alone.

But in a New York Times op-ed, two leading liberal economists argue that providing unemployment insurance to laid-off workers is a less effective approach than preventing those workers from losing their jobs in the first place.

Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley, who have gained prominence for their work on inequality and their proposals for a wealth tax, say that jobs are being destroyed in the United States like almost nowhere else. They suggest that policymakers could minimize a spike in jobless claims and help ensure a speedier recovery by following the approach adopted by many countries in Europe and elsewhere, which allow workers to keep their jobs while the government covers their wages via direct payments to employers.

“Even if unemployment is generously compensated — as it is in the $2.2 trillion bill Congress passed — there is nothing efficient in letting the unemployment rate rise to double digits. Losing one’s job is anxiety inducing. Applying for unemployment benefits is burdensome. The unemployment system risks being swamped soon by tens of millions of claims. Although some businesses may rehire their workers once the shutdown is over, others will have disappeared. When social distancing ends, millions of employer-employee relationships will have been destroyed, slowing down the recovery. In Europe, people will be able to return to work, as if they had been on a long, government-paid leave.”

This approach, Saez and Zucman say, would also allow workers to keep their employer-provided health insurance.

The economists also argue that the government should look to keep businesses from going bankrupt by covering essential costs like rent and health insurance premiums — and that it should do so without attaching conditions that some liberals have called for, such a limits on stock buybacks or a $15-an-hour minimum wage. To prevent companies from benefiting disproportionately from the crisis, the economists suggest the government could impose “excess profits taxes” similar to those they say were imposed in several past crises.

One counter-argument: At New York magazine’s Intelligencer, Josh Barro responded to those who say they’d rather have the government pay workers’ salaries than provide expanded unemployment benefits: “[I]n a crisis like this, it is important to focus on what can be done fastest. We entered this crisis with an already existing system for sending checks to recently unemployed workers that can be scaled up. We don’t have an existing system for the government to pay the salaries of employees of private firms. Rolling it out would essentially entail relying on those firms to lend money to the government — asking them to pay salaries now to employees who may not be working, on the promise of reimbursement from the government later — at a time when those businesses are already under financial strain, in many cases with their doors closed. I am skeptical that such a system could be stood up quickly enough to forestall layoffs.”

Read Saez and Zucman’s full piece at The New York Times.


Views and Analysis