Phase 4 Relief Must be Targeted to Struggling Americans

In March, Americans struggling to cope with the Coronavirus pandemic were held hostage to political theater before a relief bill was ultimately passed. Following the GOP-controlled Senate releasing its version of “Phase 3” of COVID-19 relief, House Speaker Nancy Pelosi (D-Calif.) unveiled a bloated $2.5 trillion alternative filled with handouts to special interest groups. Under the guise of COVID-19 relief, Speaker Pelosi tried to mandate strict airline emissions requirements, force union representatives onto business boards, and usher in unlimited “green” subsidies.

Congress stood firm in their resolve to target relief to struggling Americans, and Pelosi’s machinations were (mostly) foiled. But unless policymakers stand firm in opposition to wasteful spending masquerading as COVID-19 relief, lawmakers are likely to try these shenanigans again. Already, Senate Democrats are pushing for an indefinite extension of the $600-per-week federal unemployment benefit.

According to the Congressional Budget Office (CBO), this misguided policy would result in unemployment benefits being higher than previous take-home pay for more than 80 percent of recipients. The CBO predicts that "the extension of the additional $600 per week would probably reduce employment in the second half of 2020, and it would reduce employment in calendar year 2021. The effects from reduced incentives to work would be larger than the boost to employment from increased overall demand for goods and services."

Fortunately, there’s a way to avoid this disastrous scenario. Capping federal unemployment benefits to 100 percent of employees' previous wages, as proposed by Reps. Ken Buck (R-Col.) and Ted Budd (R-N.C.), would lessen the problems posed by expanding benefits. With this pivotal policy reform, lawmakers could expand federal unemployment benefits by, say, two more months without having to worry about incentivizing unemployment.

But even the soundest unemployment insurance reforms won’t be sufficient to buoy the economy without some clarification on business liability. Lawmakers such as Senate Majority Leader Mitch McConnell (R-Ky.) reasonably worry that businesses won’t want to reopen without assurances that they won’t be sued by consumers who claim they got sick on their premises.

While liability protections are important, Congress must clarify that it is up to states to lead the way on this issue. Tort reform measures, such as qualifications requirements on expert witnesses, may work well in some states and localities (e.g. with a high concentration of advanced degree holders) but may not work well in others. Therefore, Phase 4 ought to encourage states to create their own COVID-19 liability systems instead of ushering in a one-size-fits-all “solution.”

In addition to liability measures and unemployment insurance reform, lawmakers are also likely to consider additional direct relief to struggling Americans. While checks sent by the Internal Revenue Service undeniably blunted the pain of the pandemic for millions of Americans, snafus abounded, such as processing delays and checks sent to dead people.

These pitfalls could be avoided by letting Americans keep more of their hard-earned dollars rather than relying on a sluggish federal agency to disburse dollars. For example, a mere 2 percent payroll tax cut could put more than $1,000 in the pockets of 121 million workers, according to simulations by the Urban-Brookings Tax Policy Center. Tax relief would send a powerful message that the American people, not bureaucrats, know how to best spend their dollars.

Ultimately, members of Congress and the Trump administration will need to quickly coalesce behind a plan that will help struggling workers and boost the economy. Policymakers must pursue timely, reasonable relief, not a grab-bag of unrelated pet projects.