The pressing urgency of more US fiscal relief


In retrospect, the achievement was underrated. A fractious Washington came together in March to agree the largest programme of fiscal relief in US history. Cash payments and business credit were among the measures that eased the economic shock of the coronavirus pandemic. In near-unprecedented circumstances, America’s governing class outperformed its low reputation.

Eight months on, the question is whether it can repeat the feat. The US needs another round of government assistance. Jay Powell, chair of the Federal Reserve, has warned that people’s savings are running down. The boost to unemployment benefit, passed in March, is due to end on December 31. A spate of evictions and foreclosures could mar a winter already darkened by a surge in virus cases.

It is in this context that Joe Biden prepares for the White House, and Janet Yellen for the Treasury. The president-elect could not name a more seasoned figure for that role than this former Fed chair. The first woman atop the Treasury would be at once a historic and conventional choice. After the amateur chaos of the Trump administration, experience is the theme of Mr Biden’s emerging cabinet.

Ms Yellen will need all of hers. If some of the crisis of the spring has returned, Washington’s constructive spirit has not. Republicans, who run the Senate for now, balk at Democratic plans for $2tn of relief. There are squabbles over detail, too, with Republicans averse to bailouts for state and local governments. Some of this is the cynicism of a lame-duck Congress. But even when Mr Biden takes office in January, there is no certainty of a deal. His party will have a narrow majority in the Senate, if they have one at all.

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What the Democrats do have is the more persuasive argument: as Mr Powell said last month, too much intervention is better than too little. But if Republicans do not budge (President Trump, needing them as he contests his election loss, can hardly press them to) then a smaller relief bill might be preferable to none. The emphasis must for now be on urgency, not perfection. Mr Biden and Ms Yellen can impart that message to Congressional Democrats. They retain the option of later adding to whatever is agreed, especially if the party clinches the Senate.

In the meantime, they can signal to households and businesses that other kinds of help are on the way. Last summer, in an enlightened moment, Mr Trump used an executive order to extend unemployment aid, raiding other funds to do so. The incoming administration can commit to similar actions, if Congress does not act.

A president Biden could extend the curbs on landlords who wish to evict tenants, for example, which also run out soon. He could also improve the pay and conditions of federal workers. None of this would have the sweep and scale of a proper, legislated relief bill. And executive orders are invariably contentious. But with formal power still two months away, Mr Biden’s options are constrained. He can do something for economic sentiment now by pledging bold measures in the near future.

Agreeing to a scaled-down bill would be a political hazard for Democrats. If it leads to a slower than necessary recovery, the Republicans would disavow blame, and run against a weak economy in the 2022 midterms. Something similar befell the Democrats in the past decade, as Mr Biden, then vice-president, will recall with a shudder. But he and his Treasury secretary-in-waiting will have time enough to reflect on the electoral implications. A fragile economy won’t wait.

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