Tuesday, April 28, 2020

No, Progressives Are Not Exploiting the Pandemic to Push Their Policy Agenda

by Neil H. Buchanan

Today's topic is political opportunism. Are politicians merely using the coronavirus pandemic to mount their hobbyhorses, no matter their relevance (or not) to the real problems we face?

In short, is everyone emulating the indicted-and-then-resigned Texas Republican Tom Delay, who infamously said in 2003: "Nothing is more important in the face of a war than cutting taxes"? -- a claim that would have been less laughable if: (a) cutting taxes were not Delay's top priority in the face of everything under the sun, and (b) we had not increased taxes to pay for winning two world wars.

OK, but all politicians are opportunists and hypocrites, right?  The editors of The Washington Post sure think so, as they preceded their (quite appropriate) excoriation of Republicans' recent actions by offering this: "Republicans in Congress have cautioned Democrats not to use emergency legislation intended to rescue the economy as a vehicle to achieve long-sought progressive goals. We think the warnings are, for the most part, fair."  Given that The Post is solidly on the record as opposing Democrats' long-sought progressive goals, that is not exactly the kind of self-restraint that the editors pretend it to be, but they clearly feel comfortable making us think that Democrats are on the prowl to misuse the crisis.

So is this another case of false equivalence?  Of course it is.  Even so, it is interesting to think through why progressives' policy goals became even more important during this unprecedented crisis.  Sometimes (but not always), the right policy is even more essential when conditions change.

Last week, I mocked (here and here) articles in The New York Times and The Post in which, respectively, reporters Carl Hulse and David J. Lynch ridiculously stoked fear about deficits and debt even as the case for debt-phobia has become completely untenable.  And those were hardly exceptions.  A few days later, in a headline to the constantly updated Times coronavirus updates article, passage of the most recent $484 billion disaster relief bill was described as happening "even as the deficit reaches $3.7 trillion."  The economy is in free fall, and investors are literally willing to pay the government to borrow their money, but The New York Times has decided that the proper framing is anti-debt orthodoxy.  Great.

Then, in my Friday column on Dorf on Law, I noted that Lynch's claim that we are "locking in a future of lower growth" was defensible at best as a statement that perhaps the absolutely necessary recent policy moves will reduce long-term living standards (and it is truly a stretch to give him that much benefit of the doubt).  But even that is wrong, because the decrease in future living standards will be a result of the pandemic (which forces us to redeploy economic resources that could have been invested in future growth), whereas Lynch would have us believe that it is the debt itself -- and not the reason that taking on debt is necessary -- that will reduce future living standards.

I subsequently edited that column to add an important point that I also want to emphasize here: It is not just the pandemic, but Donald Trump's catastrophic responses and non-responses to it, that will reduce people's living standards now and in the future.  Everything that Trump did to delay dealing with the crisis made things worse.  Egging on his base to force early lifting of stay-at-home orders is making things worse.  Refusing to put the necessary money into testing, or to coordinate with states, makes things worse.

And worse means lost lives and reduced long-term prosperity.  Yes, there were going to be costs when force majeure reared its ugly head and necessitated a temporary suspension of life as we knew it.  Those costs did not, however, have to be this high.

In my column here last Wednesday, I promised to "write about how that [borrowed] money should be spent, in part to show why spending and borrowing can be good, and in part to respond to another emerging trope of the neoliberal orthodoxy, namely that 'liberals should not use the pandemic to get what they have always wanted.'"

We thus need to ask when advocates are merely using the pandemic as a pretext to push an unrelated, longstanding political goal.  Republicans' recent decision to push anti-lawsuit provisions to prevent people from suing businesses for negligence during the pandemic are a perfect example, because the last thing we need right now is to give businesses still greater ability to abuse employees and customers when people have even less bargaining power than usual.  But that is what Mitch McConnell thinks should be our highest priority.

At the other end of the spectrum, what would a not-at-all-opportunistic response to a crisis look like?  Interestingly, the Obama Administration's payroll tax cut during the Great Recession provides a perfect example.  There, the White House decided that it wanted to give workers a tax cut that would allow them to increase their spending, in a classic example of good old-fashioned Keynesian stimulus.  The problem was that the economists working for Obama knew that sending people big checks can make the cuts "salient" in a bad way.  That is, a worker who suddenly sees a big check arrive in the mail (assuming that the Post Office exists) might decide to save it rather than spend it, which is not what we need during a recession.

How to get around that?  By hiding the tax cut, showing up as a bit more take-home pay in every pay period rather than as a lump sum.  And the best way to do that was to cut the payroll taxes that are withheld from every worker's paycheck.  Thus did the Obama people reduce workers' share of Social Security taxes from 6.2% to 4.2% temporarily.  This, by the way, turned out to be politically foolish, because people did not notice that they had gotten a tax cut.  Hiding it was the whole point, from an economic perspective, but it did no political good for Democrats.

It is the next step, however, that is important for the discussion here.  Social Security taxes are sent to the Social Security Administration to be earmarked for the retirement system, thus adding to the system's trust fund.  Reducing those additions would have accelerated the date on which the trust fund might reach zero, which could then force a reduction in future Social Security benefits.

Many readers might not remember this (or might never have known it in the first place), but the Obama Administration was pretty openly on board with the wrongheaded idea that Social Security is too generous and that benefits needed to be cut.  Obama himself offered Social Security cuts to Republicans multiple times as part of a so-called Grand Bargain on the federal budget, but Republicans refused to take yes for an answer.  So one might think that Obama would have happily used the payroll tax cut as an indirect way to force the future benefit cuts that he wrongly supported.

Instead, the payroll tax cut was paired with a provision that treated the Social Security trust fund as having received its full 6.2% contribution from every worker, essentially paying for the stimulative tax cut from the general Treasury rather than from Social Security.  And that is as it should be, because they were only using the Social Security withholding system as a vehicle for disbursing those tax cuts, that is, as the most effective available means to deliver tax cuts quickly and quietly.

The Social Security system should have had nothing to do with the tax stimulus, but making it whole actually required the extra step of saying, "We're cutting the payroll tax by 2% but replacing that money with Treasury borrowing."  At the very least, this was a policy package that recognized the overall effect of its design.  And as noted above, it was arguably a deliberate choice not to exploit the Great Recession to advance an unrelated policy goal.

This is useful to remember today, if for no other reason than that there are already proposals to enact another payroll tax cut, which will quickly lead to claims that this must necessarily take money from Social Security.  We know, thanks to the Obama experience, that that is not at all necessary.  It is useful more broadly, however, because it allows us to think about what it means not to be opportunistic, even when a policy choice all but begs to be abused for other purposes.

So how should money be spent today?  During the Great Recession, people like me were saying that we needed more infrastructure spending.  After the Great Recession faded into memory, people like me were saying that we needed more infrastructure spending.  Now, with the need for massive efforts to create jobs, people like me are saying that we need more infrastructure spending.  Sounds like infrastructure spending might be liberals' version of Tom Delay's tax cuts, right?

Wrong.  In the years between the Great Recession and now, I advocated borrowing to spend on infrastructure because such borrowing has been demonstrated to lead to higher growth and (unlike tax cuts) actually pay for itself in the sense of reducing the debt-to-GDP ratio over time.  Had we actually spent the trillions of dollars necessary in 2009-11 to fight the worst downturn since the 1930's, we would not have needed to spend on infrastructure when such projects were more expensive (in an economy with fewer available workers).

Today, because we did not repair and upgrade our infrastructure during bad times or good, we have even more need for such spending (bridges and sewer systems, for example, having become even more dilapidated).  And because there are now tens of millions of newly unemployed workers, this is again the best possible time to ramp up such spending.

What about giving people unemployment benefits?  No progressive that I know wants people to live on such benefits long term, and none of us would say that we should pay employers to keep workers employed when the economy moves past the Trump-enhanced pandemic depression.  We are in favor of things when they are needed and opposed to them when they are not.

But what about universal health care?  Progressives have wanted that for decades, and now we are saying that the pandemic is a good reason to fight harder -- at the very least severing the tie between jobs and health insurance.  That, however, is not an example of opportunism but of pointing out that a policy that was already a great idea for other reasons is even more important today.  "You know, you guys have been saying for years that fixing the roof would be a good idea, and now you're saying that torrential rains proved your point?  How opportunistic!"

Similarly, increasingly grotesque levels of economic inequality were already causing massive social problems, including severe and growing differences in life expectancy and chronic diseases.  Those problems are simply heightened during the current health crisis, especially in minority communities that are dealing with much higher death rates and difficulties caused by poor public health infrastructure (and simple crowding).

I cannot think of any policies for which, a la the Social Security payroll tax cut, it is actually necessary to add elements to the policy mix to make sure that proposals do not paint outside the lines; but if there are, we can and should deal with that.

In any event, the editors of The Post are simply wrong to suggest that progressives are just as guilty as Republicans in exploiting the crisis.  Having been right (but ignored) all along and now seeing that our policy agenda is especially well suited to this moment is not opportunism.  No one should tell progressives that we somehow need to stop being progressive exactly when our ideas are most essential.