Crossing the Rubicon

Of the bill’s provisions, the $1,400 direct payments (or “stimulus checks,” as they’re popularly known) have received the most attention because of their immediate impact and broad appeal. The payment amount was quietly scaled back from the initial promise of $2,000, and capped off more quickly as a concession to the conservative wing of the party. Nevertheless, the checks remain incredibly popular and will provide a quick financial boost.

Other items in the bill are more significant, but the popularity and success of the previous direct payments — passed by both parties last year and signed by Donald Trump — have paved the way for further cash aid and federal benefits. While no Republican legislators signed on to the relief bill, the widespread popularity of the stimulus checks, including among Republican voters, helped mute conservative opposition to the package.

As Samuel Hammond from the center-right Niskanen Center told the New York Times: “Republicans can’t count on running a backlash campaign. They crossed the Rubicon in terms of cash payments. People love the stimulus checks.”

In a recent Monmouth University poll, 62 percent of those polled favored the stimulus package, with almost three-quarters of those making less than $50,000 per year supporting it (compared to 55 percent of those making over $100,000).

An expanded child benefit will have some of the most far-reaching consequences. Technically, it’s a tax credit, but as it’s now structured, it is in effect an unconditional per-child cash benefit to nearly all families. As the Times notes: “framed in technocratic terms as an expansion of an existing tax credit, it is essentially a guaranteed income for families with children, akin to children’s allowances that are common in other rich countries.”

The bill increases the maximum credit that families can receive by up to 80 percent per child. More importantly, by making it fully refundable, and ending the minimum income qualifications previously attached to it, millions of poor families who had not qualified before will be able to receive the full credit: $3,600 per child under age six, and $3,000 per child aged seven to seventeen. Instead of paying out at the end of the year with tax refunds, the IRS will send monthly checks of up to $300 per child.

With a price tag of more than $100 billion for the year, and a reach of approximately sixty-nine million children, it’s a substantial gain, and an even bigger one if Democrats succeed in making it permanent. It will be a hard genie to get back in the bottle.

Again, while Republican support on Capitol Hill was nil, opposition to the increased child credit was faint, apart from the most conservative corners. Republican legislators like Marco Rubio and Mike Lee denounced it as a return to welfare to little effect. And from their think-tank perches, right-wing wonks bemoaned the erosion of the bipartisan anti-welfare consensus that had persisted for decades. They hung stubbornly to reactionary arguments that welfare disincentivizes a good work ethic and encourages single parenthood. At least they admit their assumption that marriage should be a matter of economic coercion rather than romance.

Meanwhile, the unemployment insurance expansion that was put in place by the CARES Act last year has been extended, albeit at half the rate. As Doug Henwood explained in Jacobin at the time:

The unemployment insurance provisions of the CARES Act were the most generous welfare state measures in our ungenerous history. Job losses from late March onward resulted in steep declines in wage and salary income — almost twice as bad as the declines after the 2008 financial crisis and exceeded only by the onset of the Great Depression in the early 1930s. But those declines were more than offset by the huge increases in unemployment insurance benefits, along with the $1,200 checks. These payments were so large that personal income actually rose overall despite the giant hit to wage and salary income.

The United States does not have a national unemployment insurance system, instead relying on a patchwork of state-level systems, with wildly varying levels of benefit allotments. The introduction of a supplemental federal benefit has the potential of turning the woefully low level of assistance from states into a viable system.

That Democrats agreeing to halving the extra benefit amount from $600 to $300 per week is a damaging concession. But the fact that a national unemployment framework remains for the time being is a good indication of the types of demands that are possible and necessary to fight for in the coming months.

Money in Our Pockets

Taken together, the direct payments, childcare benefits, and unemployment insurance, as well as over $70 billion in funding for other services and benefits like Medicaid, Supplemental Nutrition Assistance Program (SNAP), and rental and mortgage assistance, will put money in people’s hands relatively quickly.

There are longer-term implications to increased funding for state and local governments, schools and childcare centers. For years, families and teachers’ unions have been lectured by austerity-minded privatizers that “throwing money at schools” won’t help their outcomes. Now $200 billion has been allotted to primary and secondary schools, and $350 billion to state, local, and tribal governments.

Undoubtedly, this money will only fill immediate gaps and not address systematic underfunding and racial disparities. To put those numbers in perspective, the New York City school budget alone is $34 billion a year. But while heading off further cuts to education is only a partial victory, it is an important one. Education spending comprises more than a quarter of state budgets, making it a prime target for budget cuts. School districts across the country have still not recovered from the downsizing inflicted during the Great Recession.

Neither is the $350 billion allotted to states and local governments insignificant. New York State, for instance, will receive $23.5 billion of aid. According to the Urban Institute, the state has so far lost about $2.5 billion in tax revenue during the pandemic. Unlike the CARES Act, the provision of aid to states is not limited to spending related directly to COVID-19, so that funding could be put to broader use. As Eric Levitz argued, aid to states “improves the left’s prospects for winning progressive reforms at the local level by leaving states in better fiscal health than they were pre-pandemic.”

On balance, a $1.9 trillion stimulus, aimed almost exclusively at providing public benefits, is a win. It doesn’t reverse long-term systematic inequality, nor the decades-long assault on working people. Neither does it bring the United States anywhere near in line with what other wealthy nations have provided for their populations. But the bill’s passage can improve employment and the economic health of the working class from where they were before the pandemic. In the process, it may turn the US political compass in another direction than the miserly, austerity-obsessed one it’s been locked into for the past forty years.

The fact that this is happening under the leadership of President Joe Biden — whose commitment to austerity is long-standing — is an indication of how much the American economic and political terrain has shifted in recent years.

A Pendulum Shift

Four decades ago, then–Federal Reserve Chair Paul Volcker deliberately triggered a devastating recession by hiking interest rates sky-high to fight inflation. President Ronald Reagan signaled the government’s support for an all-out employer’s offensive by firing over eleven thousand striking air traffic controllers. And in the UK, Margaret Thatcher crushed the coal miners’ union, and went on a deregulating and privatizing spree.

These events were among the opening shots of the era of neoliberalism, which has battered working-class organization and living standards since. The conventional wisdom of the era favored austerity over safety nets and deficit hawkery over government spending.

But last spring, with widespread lockdowns around the world, production, employment, and demand all cratered at unprecedented speeds. Governments employed massive amounts of spending to keep their economies on life support. In the process, a pendulum shift of economic policy may have been put into motion.

In a flip of Margaret Thatcher’s dreaded slogan “there is no alternative” to free-market neoliberalism, the severity of the crisis, the threat of long-term economic scarring, and the experience of the underwhelming government response to the Great Recession and its ensuing anemic recovery, has convinced much of the ruling class that governments have no choice but to borrow and spend their way out of the crisis. Austerity orthodoxy has little traction among policymakers, big business, much less working-class people.

US Treasury secretary Janet Yellen represents a near consensus when she argues: “Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”

The consensus view that is emerging sees an intractable crisis as a greater threat than debt and inflation. The cost of servicing debt is cheap given historically low interest rates. And policymakers are wagering on increased revenue once the economy recovers.

But another likely source of confidence among capitalists is the still abysmally low level of organization of the US working class. As Paul Heideman argues, “inflation is a question of class politics.” The economic growth that is expected to result from the stimulus spending doesn’t necessarily translate to significantly higher wages and therefore inflation. Heideman explains, “Government spending only tends to spark inflation when the working class is strong enough to prevent capitalists from capturing all of the money being distributed.”

This is certainly the lesson drawn from Trump’s presidency. “It may not have been the best economy ever, as [Trump] has repeatedly claimed,” explains Neil Irwin for the New York Times, “but it was easily the strongest since the late 1990s.” While joblessness rates fell and income levels did moderately rise, neither happened dramatically enough to spark inflation. With wealth polarization at all-time highs in the United States, there’s plenty of wiggle room for the capitalist class to absorb some pay raises without transferring those costs into higher prices.

Indeed, support for government spending has come from the US Chamber of Commerce, corporate executives, and the International Monetary Fund — forces you would usually expect to find on the other end of the fiscal “responsibility” versus spending debate.

It is more than a little satisfying to find neoliberal mouthpiece Larry Summers, a man with a long history of wielding “disastrous influence” in Washington, now an outlier with little sway over anyone. Summers returned to public life from hibernation in order to lecture against stimulus spending going “too big”, and to lay out technocratic arguments about the “limiting principles” of direct checks to families. His arguments have mercifully been ignored.

Making Use of Partial Victories

We’re at a moment of unprecedented wealth and income polarization, when the top 1 percent of wealth holders control close to a third of the nation’s wealth, while the bottom half of the population are sharing out 2 percent of wealth scraps among them. The extraordinary levels of pre-pandemic wealth inequality were largely responsible for society’s inability to tackle the spread of the virus and its economic fallout: A decimated public health system, decentralized state unemployment systems designed to keep people off the rolls, dilapidated schools which could barely expect windows that can open, let alone advanced ventilations systems.

Last year, the US economy shrank by an incredible 3.5 percent. Jobs are beginning to come back, but the US economy is still almost ten million jobs behind where it was before the pandemic. The official unemployment number rate dropped down to just over 6 percent, but once you count the number of workers who have stopped looking for work, the number reaches 9.5 percent.

The recession has impacted low-wage workers and people of color most. They fell into the deepest holes and have been the slowest to regain their jobs. Black and Latina women in particular have suffered the greatest employment losses relative to where they were at before the pandemic.

The latest stimulus bill will not definitively answer the crisis, and it certainly won’t be enough to fundamentally shift the depth of the wealth inequality behind it. But it will make a substantial difference in people’s lives, and in the process create a fertile terrain for the Left to organize.

On the one hand, Americans will see the concrete impact of government benefits to their lives, and anti-welfare ideology’s credibility will be further eroded. On the other hand, while Democrats hope to make at least the child tax credit permanent, their commitment to that project (as well as to raising the minimum wage or maintaining federal unemployment enhancement) is only as strong as it doesn’t irritate corporate America or face too strong of an opposition from their Republican counterparts.

In that context, the Left should throw itself into organizing to make benefits like the child credit permanent. Success on that front will bring us further down the road toward rebuilding a welfare state, and building the kind of confidence and fighting capacity necessary to fight for an increased minimum wage, Medicare For All, and much more. We should embrace this partial victory for what it is — and fight like hell for more.