On the latest Facing the Future, I was joined by Concord Coalition Executive Director Bob Bixby, Director of the Progressive Policy Institute’s Center for Funding America’s Future, Ben Ritz, and Fiscal Policy Analyst, Brendan McDermott, for a discussion of PPI’s recent publication titled "A Roadmap to Recovery" and deficit figures from the CBO's monthly budget review.
[Note: Portions of this week's Facing the Future can be seen in the video clips posted below.]
Ritz said the economic recovery from the COVID19 pandemic could be a multi-year effort, and the purpose of PPI’s roadmap was to show what policies are likely needed in the short, medium and long term.
“After Congress finished with its initial wave of responses, we wanted to outline what we think those next stages look like,” Ritz said. “The three main categories we focus on are supporting state and local governments, strengthening automatic stabilizers and preparing to restart the economy.”
McDermott said there are a couple reasons why Congressional actions thus far to assist state and local governments are not adequate.
“For one, the Medicaid support that the federal government has passed is still less than it passed even during The Great Recession, for a crisis that is directly related to the health care system and is probably going to be deeper,” he said. “And, even with the support they have already provided, it’s clear from a lot of different analyses that state and local governments are going to need a lot more moving forward; the $150 billion fund that Congress passed is only directed towards expenses related to reacting to this pandemic, not to the revenue losses from a slowed down economy.”
Ritz explained what automatic stabilizers are and how Congress should bolster them right now.
“Automatic stabilizers are really any policy that pumps money into the economy naturally by design during a recession, and conversely, a good automatic stabilizer will pull that stimulus out during a recovery,” Ritz said.
And he said that a few of the most important stabilizers to strengthen right now are unemployment insurance, low income assistance and support for small businesses.
On restarting the economy, Ritz said, they examined more traditional stimulus policies because such policies look beyond the current effort focused on keeping the economy afloat while dealing with a public health crisis. Infrastructure investment and cutting consumption taxes are typically good policies for stimulating economic growth, he said.
He also noted that Congress should avoid “bad” policies that would do little to help the current economic and health crisis and would also make preexisting fiscal conditions worse.
“What might be good temporary economic-support policy, especially if its deficit financed, is probably not going to be a good long-term policy,” he added. “We want to make sure that we are providing the support we need in the crisis now, but it doesn’t mean we can keep doing this forever.”
You can read PPI's “Roadmap to Recovery” by clicking here.
Bixby provided a summary of CBO’s monthly budget review for April, which was record setting in a bad way. He said that, usually, the monthly budget review is something that you look at almost in passing because the cumulative effect of each month throughout the fiscal year is what matters.
“But, April does tend to be an important month because there are a lot of tax filings and deadlines in April,” Bixby said. “So, it can be a real bellwether of where the budget is going to end up, whether deficit or surplus.”
“This one is really stunning; nobody has ever seen anything like it because April is normally a surplus month,” he said. “The deficit was $737 billion for April, versus a $160 billion surplus last year; so that gives you some sort of a comparison for how quickly things have changed.”
Bixby said this is just the tip of the iceberg, adding that due to further economic decline, reduced revenue and increased spending as Congress responds to the crisis, the year-end deficit is expected to be around $4 trillion.
“Frankly, the way to get the budget back under control is to get the economy growing again, and the way to get the economy growing again is to get the virus under control, and that may take a while,” he said.
Read Concord Coalition analysis of CBO’s budget review by clicking here.
Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, iTunes, Google Play Music or with an RSS feed. Follow Facing the Future on Facebook and watch videos from past episodes on The Concord Coalition's YouTube channel.