The $8.3 Billion Coronavirus Deal

Plus: The Biden boost for health care stocks By Yuval Rosenberg and Michael Rainey House Approves $8.3 Billion in Emergency Coronavirus Spending The House on Wednesday passed an $8.3 billion emergency spending [package]( to help combat the novel coronavirus outbreak as lawmakers race to send the legislation to the president’s desk by the end of the week. The Senate is expected to vote on the funding Thursday. “We worked together to craft an aggressive and comprehensive response that provides the resources the experts say they need to combat this crisis,” Senate Appropriations Committee Chairman Richard Shelby (R-AL) said in a [statement](. The deal is more than triple the $2.5 billion total the White House had requested last week, which lawmakers in both parties criticized as inadequate, and it includes all new money rather than shifting funds from other accounts, as the administration had proposed. “We have to recognize this is one giant step,” House Speaker Nancy Pelosi (D-Calif.) told reporters, according to [The Washington Post](. "In this bill we’ll go from the administration putting forth $2.3 [billion] and money taken from Ebola and home heating to over $8 billion clean money.” The package was passed in a 415-2 vote, with [two Republicans]( voting against it. The funding includes $7.767 billion in emergency appropriations to address the virus outbreak and $490 million for a Medicare telehealth program meant to help more seniors get access to health services. The details: - More than $3 billion for research and development of vaccines, treatments and diagnostics; - $2.2 billion in new funding for the Centers for Disease Control and Prevention to help public health agencies, including $950 million to reimburse state and local governments for their response efforts; - Nearly $1 billion for medical supplies such as drugs and masks and to boost preparedness and community health care centers, among other things. - $1.25 billion for the State Department to assist in containing and preventing the spread of the coronavirus in other countries, including $300 million for humanitarian needs. Bipartisan congressional negotiators reached agreement on the legislation after days of talks that temporarily got bogged down over language Democrats had wanted to include to ensure that a coronavirus vaccine would be affordable once it was developed. Some Republicans objected to that language, which they saw as government price control that would stifle drug research, and accused Democrats of playing politics with the supplemental funding. The standoff was resolved by the inclusion of a $300 million fund for the purchase of vaccines and treatments as well as language requiring those drugs developed using taxpayer funds be made available to consumers at affordable prices. Democrats said that the bill would allow for about $7 billion in low-interest loans to affected small businesses and would require reimbursement of the $136 million that was shifted by the Trump administration from other health accounts and the heating assistance program for low-income families toward coronavirus efforts. Is it enough? The economic costs of the virus outbreak now appear likely to require a greater response (see more on that below). Writing at Bloomberg, Narayana Kocherlakota, former president of the Federal Reserve Bank of Minneapolis, [argued]( that lawmakers must do more: “Congress has to step up to show its willingness to systematically insulate the economy against aggregate demand shocks by, for example, using a combination of tax cuts and increases in infrastructure spending. Without a much clearer strategic commitment to fiscal policy support of the economy, we can expect further declines in long-run expectations about growth and inflation — and that will make the current aggregate demand shortfall even worse.” Will the $23 Trillion National Debt Hinder the Response to the Coronavirus? If the U.S. economy hits a rough patch in the wake of the coronavirus, policymakers have plenty of tools at their disposal to respond to the slowdown. The Federal Reserve deployed one such tool this week, slashing interest rates by half a percentage point, though the move seemed to backfire in financial markets, signaling fear about how bad the economic damage could get rather than offering reassurance. One problem is that monetary policy may not be the best tool for the job. Lower interest rates essentially reduce the price of money, but cheaper money won’t spur factory workers to return to work, schools to reopen or worried tourists to start travelling again. The government has other options, but there are questions about whether it will use them. What the federal government could do: Policymakers have a broad range of options to stimulate the economy, including fiscal policies that focus on getting money into the hands of the people who will spend it. “They could give cash to employees whose workplaces are shut, provide credit to small businesses and offer rescue packages to industries most affected, like airlines and other tourism-related concerns,” Peter Goodman of The New York Times [said]( Wednesday. The government could also treat regions affected by an outbreak of the virus like national disaster areas, Claudia Sahm of the Washington Center for Equitable Growth told Politico. That could involve providing cash payments to individuals who have lost their jobs to help them pay their rents, mortgages and car loans. Why policymakers may hesitate: According to Goodman, a “widespread political aversion to increasing public debt” has made fiscal stimulus less appealing. “The crisis has offered the latest glimpse of an established truth in the world’s largest economies: Public money can frequently be found for tax cuts,” he writes, “but then disappears into a fog of warnings about the dangers of deficits when spending for nearly anything else is discussed.” Worries about the size of the current deficit – already large by historical standards at more than $1 trillion a year – will only strengthen that aversion. Along the same lines, Politico’s Nancy Cook and Victoria Guida [said]( Wednesday that efforts to boost the economy could collide with the “Republican orthodoxy” that underwrote deep resistance to fiscal stimulus during the last recession. One administration official Cook and Guida spoke to argued that fiscal stimulus is not good policy: “The whole litany of temporary measures to stimulate the economy ... I don’t think it works,” the official said. Many economists disagree with that orthodoxy. Adam S. Posen, president of the Peterson Institute for International Economics, said that the government should focus on workers affected by the spread of the coronavirus. “If you don’t spend money for people put out of work with no fault of their own when there’s a clear public-health virtue in making it in workers’ interests to stay home and not spread the virus, then everything else by comparison is a complete waste,” Posen told the Times. Why stimulus may happen in the end: Worried about his reelection prospects, President Trump is reportedly pushing for stimulus now to boost the economy. Earlier this week, the president expressed support for a short-term payroll tax cut, a stimulus policy that policymakers turned to during last recession, and Treasury Secretary Steven Mnuchin talked about a massive infrastructure plan. Outside the administration, former House Speaker Newt Gingrich is reportedly pitching the idea of a tax credit for companies that bring production facilities back to the U.S. from China. Other ideas being considered by the White House include guaranteeing paid sick leave for workers or providing money to small businesses to help avoid layoffs, CNN reported, though the administration’s planning reportedly “was still loose and in its early phases.” As the discussions continue, there will likely be considerable resistance to the use of aggressive fiscal measures, especially before there are clear signs that the economy is in trouble. President Trump met with airline officials Wednesday, and despite United’s announcement that it will be reducing flights in April and suspending new hiring at least through June, Trump pushed back against the idea of providing federal funds to the industry. “Don’t ask that question, please, because they haven’t asked that," Trump [responded]( to a question about a possible airlines bailout. “I don’t want you to give them any ideas.” Number of the Day: $48 Billion That’s how much health insurer stocks rose Wednesday as investors reacted to Joe Biden’s surprisingly strong showing in the Super Tuesday primaries. Wall Street apparently saw the result as a reduction in the threat to the for-profit health care industry represented by Bernie Sanders and his Medicare-for-All plan. The market cap of UnitedHealthcare Group, the nation’s largest health insurer, increased by about $20 billion. And as the Bloomberg News chart below shows, more than half of the 15 top-performing stocks in the S&P 500 were health-care companies. Chart of the Day: How Drug Prices Have Soared A [new study in JAMA]( finds that the price of brand-name prescription drugs rose 60% between 2007 and 2018, after accounting for rebates and discounts. “Drugmakers often argue that the uproar over drug prices is overblown, saying it focuses too much on list prices instead of the discounted prices insurance plans end up paying,” Axios’s Caitlin Owens [explains](. “But this study shows that those prices, too, are rising.” News - [White House Seeks Options to Blunt Economic Fallout From Coronavirus]( – CNN - [House Passes $8.3 Billion Coronavirus Response Package]( – Roll Call - [Fragile Safety Net Leaves U.S. Economy Vulnerable to Coronavirus Hit]( – Reuters - [Waive Fees for Coronavirus Tests and Treatment, Health Experts Urge]( – New York Times - [Coronavirus Costs: Who’s Paying for All This?]( – Wall Street Journal (paywall) - [Congressional Leaders Downplay Possibility of Capitol Closing Due to Coronavirus]( – The Hill - [Senate Seeks Massive Permanent Boost in Conservation Funding]( – The Hill - [After Trump’s Conservation Fund Reversal, Senators Are Urged to Get on Board]( – Roll Call - [Sparks Fly at Budget Hearing as Mnuchin Grilled About Trump Tax Returns]( – Reuters - [Trump Charter School Funding Shake-Up Worries School Choice Supporters]( – Roll Call - [Defense Department Weakens U.S. Military Housing Bill After Consulting Industry]( – Reuters - [House Bill Tries to Force Trump to Keep Troops in Africa]( – Defense One Views and Analysis - [Coronavirus Might Make Americans Miss Big Government]( – Noah Smith, Bloomberg - [Congress Has an $8 Billion Plan for Coronavirus. It's Not Enough.]( – Narayana Kocherlakota, Bloomberg - [We Are Ignoring One Obvious Way to Fight the Coronavirus]( – New York Times Editorial Board - [Tax Cuts Won’t Treat the Coronavirus or Rebuild Broken Supply Chains]( – Howard Gleckman, Tax Policy Center - [Trump’s Immigration Policies Will Make the Coronavirus Pandemic Worse]( – Wendy E. Parmet, STAT - [The Official Numbers on the Coronavirus Are Wrong, and Everyone Knows It]( – Alexis Madrigal, Atlantic - [The Solution to Soaring Drug Prices? A Public Option for Pills]( – Vishal Khetpal, Salon - [Why Support for Medicare-For-All Didn’t Translate Into a Bigger Super Tuesday for Bernie Sanders]( – Dylan Scott, Vox - [3 Reasons Doctors Want Medicare For All, Not a Public Option]( – Dr. Sanjeev Sriram, The Hill - [Why Biden Is the Change Candidate]( – Nicholas Kristof, New York Times - [Beware Biden Fever Heating Up Health-Care Stocks]( – Max Nisen, Bloomberg - [Corporate Taxes: Are They Fair? Who Really Pays Them, And When?]( – Renu Zaretsky, Tax Policy Center - [The Fed Gambled — and Lost]( – Robert J. Samuelson, Washington Post [Like Us on Facebook]( [Like Us on Facebook]( [Read Us On the Web]( [Read Us On the Web]( Copyright © 2020 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. Our mailing address is: The Fiscal Times 399 Park AvenueNew York, NY 10022 [Add us to your address book]( Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](.