Joe Biden got a big, if preliminary, win in the Senate this morning on his my-way-or-the-highway COVID-19 relief bill. Biden and his team have repeatedly declared that they think the bill avoids the supposed mistakes of Barack Obama’s 2009 stimulus bill, which progressives have insisted for a dozen years was too timid for the kind of robust economic recovery that they expected. They refused to negotiate with Republicans on a smaller bill that would have allowed for more time to see the impact of previously appropriated relief and stimulus before going deeper into debt to spend nearly $2 trillion.
But what if the bill is more of a my-way-and-the-highway bill? Politico reports this morning that staffers in the White House have become worried that former Obama adviser Larry Summers could be correct that the Biden plan is too big. Summers predicts that the bill’s impact will start draining economic growth in the second half of next year — precisely when Democrats need to protect their razor-thin majorities in Congress:
Summers, the former Treasury secretary for BILL CLINTON and top economic adviser to BARACK OBAMA, puts down on paper what many liberal wonks have been whispering about for weeks: that President JOE BIDEN’S stimulus bill may be too big, that its overall cost could sacrifice other progressive priorities and that it could harm the economy next year, when Democrats will be defending narrow congressional majorities in the midterms.
For weeks the key economic talking point from the White House has been that the risk of going too small is worse than the risk of going too big. Now comes Summers who says … that might not be true. “[M]uch of the policy discussion has not fully reckoned with the magnitude of what is being debated,” he wrote.
Summers cops to the fact that the 2009 stimulus, which he helped craft, wasn’t big enough to fill the hole in the economy back then. The shortfall was $80 billion a month and the Obama stimulus only filled about half of that.
But in 2021, after the December package of $900 billion, the economy will face a $20-$50 billion-a-month hole. The Biden plan would fill it with some $150 billion a month.