Republicans, Democrats Debate Whether Next Relief Bill Should Be $1 Trillion or $2 Trillion

Pelosi

Talks over another coronavirus relief package have stalled following House Speaker Nancy Pelosi’s (D–Calif.) insistence that the White House agree to at least $2 trillion in new spending as a precondition of continued negotiations.

Senate Republicans have introduced a $1 trillion relief bill; a not insubstantial sum that is nevertheless short of the $3.5 trillion measure House Democrats passed back in May.

“Democrats have compromised. Repeatedly, we have made clear to the Administration that we are willing to come down $1 trillion if they will come up $1 trillion,” Pelosi and Senate Minority Leader Chuck Schumer (D–N.Y.) said in a joint statement released Wednesday evening. “We have again made clear to the Administration that we are willing to resume negotiations once they start to take this process seriously.”

U.S. Treasury Secretary Steve Mnuchin issued a statement of his own blaming Pelosi, who he says “made clear that she was unwilling to meet to continue negotiations unless we agreed in advance to her proposal, costing at least $2 trillion,” Mnuchin added that “the Administration is willing to move forward with legislation that allows for substantial funds for schools, child care, food, vaccines, hospitals, PPP for small businesses, rental assistance, broadband, airports, state and local government assistance, and liability protection for universities, schools, and businesses.”

Helping to hold things up is White House Chief of Staff and former House Freedom Caucus Chairman Mark Meadows, who The Wall Street Journal reports is taking a tougher line on additional spending measures.

Senate Republicans’ $1 trillion proposal includes calls for another round of $1,200 stimulus checks, $150 billion in aid to state and local governments, a $200 weekly unemployment benefit, as well as a few pet defense projects.

Democrats’ $3 trillion proposal would instead provide a $600 unemployment bonus, plus close to $1 trillion in aid to state and local governments. It also includes $175 billion in assistance to homeowners and renters.

President Donald Trump signed an executive memorandum on Saturday that taps $44 billion of already-appropriated disaster relief funding to create a new $400 unemployment bonus, of which $100 would have to be provided by state governments.

Senate Majority Leader Mitch McConnell (R–Ky.) is reportedly urging Democrats and the White House to come to a deal. Up to 20 senate Republicans are reportedly a no vote on any new relief funding, meaning McConnell will need every Democratic vote he can get.

Regardless of what passes, it is remarkable that the lower-bound proposal on the table is a $1 trillion relief effort that comes just months after the passage of the $2.3 trillion CARES Act.


FREE MARKETS

Rideshare giants Uber and Lyft both say they may have to pause service in California due to a court decision from earlier this week requiring them to treat drivers on their platforms as employees.

“If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly,” said Uber CEO Dara Khosrowshahi Wednesday during an MSNBC interview.

Lyft President John Zimmer said the same thing during a quarterly earnings call with investors on Wednesday.

On Monday, a San Francisco Superior Court judge ruled that California’s infamous A.B. 5 labor law forbids rideshare companies from classifying drivers as independent contractors, meaning these companies must provide benefits like health insurance and sick pay.

An internal Uber assessment found that this would require the company to raise prices by 20-111 percent in California, with less densely populated areas seeing larger price hikes.

Lyft, Uber, and delivery businesses like Doordash and Instacart, are backing a state ballot initiative that would exempt workers using their apps from the requirements of A.B. 5.


COVID-19

New Zealand is reimposing lockdown restrictions in the city of Auckland after a rash of new COVID-19 cases. Most businesses and schools in the city must now close. Restaurants and bars can offer take-out only.

The island nation had gone more than 100 days without any community spread, reports NPR.

The new cases appear to have spread in a workplace setting, reports Science. One New Zealand public health professor speculates the cases are the result of some sort of screening failure at the border.


QUICK HITS

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  • Socialist publication In These Times has a series of pieces on Sen. Kamala Harris’ (D–Calif.) surprising foreign policy hawkishness.
  • Republicans and Democrats near agreement on further reforms to the Paycheck Protection Program, which has provided loans to distressed small businesses during the pandemic.
  • Life got you down? Perhaps thinking about death will make you feel better.
  • The six podcast genders:

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Brickbat: Surely You Can’t Be Serious

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Poltimore Arms pub owner Steve Cotten in Exmoor, England, recently announced (as a joke) he was turning his beer garden into an international airport. In fact, he had hired the owner of a micro-light airplane to take customers on flights over the village, taking off and landing from a nearby field. But when local planning officials heard Cotten’s announcement they didn’t think it was funny. They sent him a letter asking him to clarify his plans to see if there were any violations of local planning rules.

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Brickbat: Surely You Can’t Be Serious

tinyplane_1161x653

Poltimore Arms pub owner Steve Cotten in Exmoor, England, recently announced (as a joke) he was turning his beer garden into an international airport. In fact, he had hired the owner of a micro-light airplane to take customers on flights over the village, taking off and landing from a nearby field. But when local planning officials heard Cotten’s announcement they didn’t think it was funny. They sent him a letter asking him to clarify his plans to see if there were any violations of local planning rules.

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Cancelling Chief Justice Melville Fuller


Chief Justice Melville Fuller

Outside the Kennebec County, Maine courthouse is a statue of Chief Justice Melville Fuller. Most people have no idea who Melville Fuller is. The Cleveland nominee served as Chief from 1888-1910. Perhaps his most famous decision is Pollock v. Farmers’ Loan & Trust Co., which declared the federal income tax unconstitutional. He also wrote the majority opinion in U.S. v. E.C. Knight, which found that the federal Sherman Antitrust Act could not be applied to the local manufacture of sugar.

The statue of the Mainer was installed in 2013, 125 years after he was appointed Chief Justice. Now, the Maine Supreme Judicial Court has asked the county to consider removing the statue. Why? Fuller was one of seven Justices who joined the majority in Plessy v. Ferguson.

Pop quiz! Do you know who wrote the majority opinion? Everyone knows Chief Justice Roger Taney wrote Dred Scott. Some people know that Justice Story wrote Prigg v. Pennsylvania. But most people do not know that Justice Henry Billings Brown wrote Plessy. He was a fairly insignificant justice. Also in the majority were Justices Stephen Field, Horace Gray, George Shiras, Edward Douglass White, and Rufus Wheeler Peckham. In due time, all of these Justices will be subject to cancellation.

The only dissenter in Plessy was Justice John Marshall Harlan. But he may too be subject to cancellation. Consider his slander of Chinese people:

There is a race so different from our own that we do not permit those belonging to it to become citizens of the United States. Persons belonging to it are, with few exceptions, absolutely excluded from our country. I allude to the Chinese race. But

Also, Harlan’s discussion of a “color-blind” Constitution is anti-anti-racist.

But in view of the Constitution, in the eye of the law, there is in this country no superior, dominant, ruling class of citizens. There is no caste here. Our Constitution is color-blind, and neither knows nor tolerates classes among citizens. In respect of civil rights, all citizens are equal before the law.

There was one recusal in Plessy. Fortunately, Justice David Brewer did not participate. He had to suddenly leave for his home in Kansas after his daughter unexpectedly died. He may be safe for now. But he wrote the majority opinion in Muller v. Oregon, which was also unanimous.

It’s only a matter of time for the Great Chief Justice. John Marshall has a statue of limitations problem.

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Cancelling Chief Justice Melville Fuller


Chief Justice Melville Fuller

Outside the Kennebec County, Maine courthouse is a statue of Chief Justice Melville Fuller. Most people have no idea who Melville Fuller is. The Cleveland nominee served as Chief from 1888-1910. Perhaps his most famous decision is Pollock v. Farmers’ Loan & Trust Co., which declared the federal income tax unconstitutional. He also wrote the majority opinion in U.S. v. E.C. Knight, which found that the federal Sherman Antitrust Act could not be applied to the local manufacture of sugar.

The statue of the Mainer was installed in 2013, 125 years after he was appointed Chief Justice. Now, the Maine Supreme Judicial Court has asked the county to consider removing the statue. Why? Fuller was one of seven Justices who joined the majority in Plessy v. Ferguson.

Pop quiz! Do you know who wrote the majority opinion? Everyone knows Chief Justice Roger Taney wrote Dred Scott. Some people know that Justice Story wrote Prigg v. Pennsylvania. But most people do not know that Justice Henry Billings Brown wrote Plessy. He was a fairly insignificant justice. Also in the majority were Justices Stephen Field, Horace Gray, George Shiras, Edward Douglass White, and Rufus Wheeler Peckham. In due time, all of these Justices will be subject to cancellation.

The only dissenter in Plessy was Justice John Marshall Harlan. But he may too be subject to cancellation. Consider his slander of Chinese people:

There is a race so different from our own that we do not permit those belonging to it to become citizens of the United States. Persons belonging to it are, with few exceptions, absolutely excluded from our country. I allude to the Chinese race. But

Also, Harlan’s discussion of a “color-blind” Constitution is anti-anti-racist.

But in view of the Constitution, in the eye of the law, there is in this country no superior, dominant, ruling class of citizens. There is no caste here. Our Constitution is color-blind, and neither knows nor tolerates classes among citizens. In respect of civil rights, all citizens are equal before the law.

There was one recusal in Plessy. Fortunately, Justice David Brewer did not participate. He had to suddenly leave for his home in Kansas after his daughter unexpectedly died. He may be safe for now. But he wrote the majority opinion in Muller v. Oregon, which was also unanimous.

It’s only a matter of time for the Great Chief Justice. John Marshall has a statue of limitations problem.

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Why Stimulus Spending Fails

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When revenue shrinks by 1 percent of GDP and spending increases by 51 percent over 10 months, you get a $2.8 trillion deficit. That figure, according to the Congressional Budget Office, is significantly larger than the deficit Uncle Sam accumulated over the first 10 months of 2019. Yet, many in Congress demand that even more spending be enacted in the name of stimulating the economy.

More spending means more debt and more future taxes. That much we know. What we also know is that the calls for sustained spending—in the form of unemployment checks, individual stimulus checks, small-business grants, and payroll tax cuts—which are made regularly in newspapers, political speeches, and partisan punditry, are overblown to stay the least. The idea here is that if Uncle Sam continues paying people to stay home, their consumption will continue, and the economy will grow.

These calls are based explicitly or implicitly on the belief in an all-powerful federal spending multiplier, or the idea that if the government spends one dollar, the economy will grow by more than a dollar.

That’s right; the belief is that when the government takes a dollar out of your pocket, puts that dollar through the political process, and decides where to spend it (based on input from special interest groups), the economy will somehow return more money in growth than the money invested, even after Washington bureaucrats take their cut. It’s magic! Sadly, these arguments ignore recent empirical evidence that the costs of increased government spending far outweigh the benefits to the economy.

For starters, contrary to the claims of pro-government spending proponents, economists are far from having reached a consensus about the actual return on government spending. While some economists find that a dollar spent by the government generates more of a return than the dollar spent, others find that the return is less than one dollar. And yet others find that if you take into account the future taxes needed to pay for the dollar that’s spent, the multiplier is actually negative, and the economy takes a hit.

After reviewing the recent academic literature for the Mercatus Center’s publication The Bridge, my colleague Jack Salmon and I found that most of “the empirical literature on fiscal multipliers conducted since then (2009) has found economic multipliers resulting from additional government spending ranging from a lower estimate of around 0.2 to an upper estimate of around 0.9.” We go on to explain that in “(p)ulling the results from two dozen academic studies, we calculate an average multiplier at the low end of 0.31 and an average multiplier at the high end of 0.66.”

Now, in fairness, there are narrow cases when government spending can stimulate the economy, but for that to happen, the environment in which the spending takes place is important. Work by economists Ethan Ilzetzki, Enrique Mendoza, and Carlos Vegh on the impact of government fiscal stimulus shows that it “depends on key country characteristics, including the level of development, the exchange rate regime, openness to trade, and public indebtedness.” Many other economists have found the same. Unfortunately for the proponents of fiscal stimulus, the United States has the features of a country where stimulus by spending does have an impact and, in fact, can have a negative impact on growth.

Making matters worse is the fact that, even if you had a country with little debt and the right environment, implementing the spending correctly is a key to getting a multiplier that’s larger than one. As former Treasury Secretary and former Director of the National Economic Council Larry Summers has explained, stimulus spending needs to be timely, targeted, and temporary. Unfortunately, evidence from the last recession shows that it rarely is.

There are always economists, journalists, and pundits willing to assume that this time will be different and government spending will deliver on the promises made on its behalf by pro-spending advocates. Unfortunately, this is wishful thinking. It is also a dangerous game to play. If spending doesn’t deliver on the promised economic growth, what it will undoubtedly achieve is more debt. That, sadly, is a scenario where future growth goes up in a puff of smoke.

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