Gary Latanich


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With a rising virus death toll and the economy beginning to sink, the goal of the Biden administration is to have COVID-19 relief approved by mid-March when extra unemployment assistance and other pandemic aid measures expire.

President Biden has expressed an interest in achieving a bipartisan agreement, but he also wants Congress to go fast and go big. But if you take a step back and look at the rival proposals, you have to question the negotiating strategy of both Democrats and Republicans.

For starters, if you’re serious about achieving a bipartisan consensus through negotiation, then you don’t start the process by advancing your final position first. Successful negotiations have a “shadow position,” which is a starting point for any discussions. President Biden’s initial offer was a $1.9 trillion relief package, and apparently, as least in terms of its size, it was a take-it, or leave-it proposition.

The Republican counter offer was a relief package of $680 billion, and while later they proposed an amendment that provides grants for restaurant owners and their employees, they didn’t address most of the concerns of the Biden administration in their initial stimulus proposal.

By being so far apart in terms of dollar funding and items covered, one wonders if the Republican proposal was no more serious, from a negotiating perspective, than the Biden proposal.

Democrats for their part are insisting that it is essential that the bill contain relief checks for every family of $1,400. Republicans insist that there be no relief for state governments. Researchers have found those upper income families who received relief checks saved a significant portion of their stimulus check as opposed to lower income families who spend the vast majority of their relief payments.

Why this is being reported as startling new evidence is beyond me. This is something every first-year economics student learns. On this issue the Republicans are correct, the checks should be targeted to those in need, and they should be of longer duration than one month. Sending money to upper income families who won’t spend it is the essence of “trickle down” economics, which doesn’t work.

The fiscal policies of state governments intensify any recession for the simple reason that budget cuts are mandated as tax revenue falls. The reason for this is that each state is prohibited from running a deficit in its operating budget.

By eliminating the $350 billion in state government assistance from the relief package, Republicans will be forcing the state to begin laying off workers once their rainy day funds have been exhausted. On this issue, the Democrats are correct, aiding the states will preserve essential services. It’s true that unemployed state workers’ quality for unemployment compensation, but that does little to replace the services lost to the people of each state.

Other critics of Biden’s big plan, including Lawrence Summer, President Barack Obama’s treasury secretary, claim that the proposed Biden stimulus is far more than is needed to restore full employment. Summer’s worry is that the Biden plan will ignite an inflationary spiral.

However, Fed Chairman William Powell disagrees. Right now inflation is well below the Feds target rate of 2 percent. According to the Fed, the risk to the nation of extended levels of unemployment exceeds any perceived risk of inflation. This fact makes the extension of the monthly $400 unemployment benefits until the end of September more important that any one-time stimulus check.

By the spring of 2020, the economy had lost 22 million jobs, and more than half of those jobs have yet to be recovered. The latest report from the Bureau of Labor Statistics (BLS) shows the overall unemployment rate decreased to 6.3. But this figure is grossly misleading. There are vast differences in unemployment when the unemployment figures are broken down by race. While the white unemployment rate was 5.7 percent, it was 9.2 percent for Black workers, 8.6 percent for Hispanic workers, and 6.6 percent for Asian workers.

These figures also fail to address the number of people who have dropped out of the labor force. The latest BLS report fails to account for 275,000 women who have dropped out of the labor force. If we use the unofficial (U-6) unemployment rate, which includes, discouraged workers who have dropped out, involuntary part-time workers, and those marginally attached (seasonal workers), the actual unemployment rate in January was not 6.3 percent, rather it was an astounding 12 percent.

These figures, by themselves, reinforce Biden’s message that we need to go fast and go big, and why any lengthy delay due to protracted efforts at gaining bipartisan support would be counter productive, especially given the ending of relief benefits by the end of March.

Gary Latanich, Ph.D., is professor emeritus of economics at Arkansas State University. He can be contacted by email at