House Financial Services Committee Hearing on the Need for COVID-19 Stimulus
House Financial Services Committee
More than a Shot in the Arm: The Need for Additional COVID-19 Stimulus
Thursday, February 4, 2021
- Clarence Anthony, CEO and Executive Director, National League of Cities
- Derrick Johnson, President and CEO, National Association for the Advancement of Colored People (NAACP)
- Janet Murguía, President and CEO, UnidosUS
- Dr. William Spriggs, Chief Economist, The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)
- Dr. Michael Strain, Economist, American Enterprise Institute
Chairwoman Maxine Waters (D-Calif.)
In her opening statement, Waters noted that the focus of the hearing is the urgent need for Congress to provide additional stimulus to address the COVID-19 crisis. She stated that the stimulus package passed in December 2020 was a first step and served as an emergency “stop-gap,” but it was clear then and now that much more relief is needed. Waters noted that the plan includes additional direct stimulus payments, rental assistance, unemployment assistance, and emergency aid for state, local, and territory governments, as well as other critical relief. Communities of color, she said, were the hardest hit, and women, and especially women of color, have suffered the worst. Waters concluded that the pandemic cannot be defeated until it is defeated everywhere.
Rep. French Hill (R-Ark.)
In his opening statement, Hill noted that Congress has already provided $3.8 trillion to support the economy, calling this “a tremendous and often bipartisan effort.” He argued that the best way to support the economy now is to safely reopen it. Hill noted that the not all of the $900 billion package from December 2020 was used, and he stated that some of the stimulus “has not yet seen its full impact in our economy and for our families.” Hill stated that the most effective policies are an increase in testing and faster vaccination distribution, as well as potentially more funding for front-line workers to stay safe. Congress should, Hill argued, be targeting assistance to those who need it the most and to return those people to the workforce. Hill concluded that we should not be deliberating a partisan, wasteful, and not targeted $1.9 trillion stimulus bill, arguing “now let politics get out of the way and let us provide the targeted help we do.”
Clarence Anthony, CEO and Executive Director, National League of Cities
In his testimony, Anthony stated that local government employees are on the frontlines of enforcing government measures that protect residents from COVID-19. Anthony noted that local elected officials are making painful budget cuts to preserve essential day-to-day operations that sustain cities, and that their residents are relying more than ever on the safety net programs provided by local governments. Anthony noted that public sector employment is down by more than a million jobs as compared to February 2020, and as result of these layoffs, many local governments are less able to enact guidance on connecting emergency funding to individuals in need. He concluded that the National League of Cities supports several policy goals: (1) emergency funding should be fair and appropriate for each and every local government, with no minimum population threshold for eligibility; (2) allocations of aid should be built on familiar and proven government revenue sharing programs; (3) funding should be separate for states, counties, and municipalities; and (4) eligible expenditures should be targeted to widespread health and economic consequences of COVID-19, including unavoidable revenue shortfall.
Derrick Johnson, President and CEO, National Association for the Advancement of Colored People (NAACP)
In his testimony, Johnson stated that his focus was on critical workers, many of whom, he contended, are straddled with student indebtedness. Discharging student debt, Johnson argued, can be seen as economic stimulus because the capital retained by individuals could be infused back into the economic system, boosting the GDP. He also discussed the disparity and inequity in vaccination deployment, citing incidents in New York where wealthy white individuals traveled to Latino communities to get vaccines that were intentionally allocated to those communities.
Janet Murguía, President and CEO, UnidosUS
In her testimony, Murguía noted that pre-pandemic, most Latinos were already concerned about high housing costs and said they struggled to make ends meet. She continued that 70 percent of Hispanic workers are essential workers, explaining that they are twice as likely to contract COVID-19 and three times as likely to die from COVID-19. Murguía stated that Latinos were also drastically impacted by job loss in industries like hospitality due to the pandemic; more than half of Latinos surveyed lost jobs, wages, or businesses due to the pandemic. Further, Murguía noted, access to relief has been especially difficult because many Latinos and mixed-status families have been excluded from aid due to immigration status. She argued that Congress must include everyone, particularly all essential workers, in emergency pandemic relief. Murguía called for additional provisions, including ensuring that HUD and Treasury assistance reach the hardest-hit communities, $700 million in assistance for housing counseling organizations, expanding foreclosure protection, establishing a homeowner’s assistance fund, and setting aside a portion of small business aid for impacted, minority-owned businesses.
Dr. William Spriggs, Chief Economist, The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)
In his testimony, Spriggs stated that the COVID-19 pandemic has created a severely damaged labor market and there is a need for an all-out, coordinated fight to contain the virus. He argued that there needs to be a full fiscal and monetary policy response to reduce the incidence of the virus and to heal the global economy. Through December, Spriggs noted, the United States is still down 9.8 million payroll positions since February 2020. He further said that several key economic provisions passed in the CARES Act in March 2020 have shown to be weakening after several such provisions phased out in July. Spriggs cited that during the fourth quarter of 2020, the economy grew at significantly slower rate than the third quarter of 2020. Acknowledging that state and local employees are being depleted, Spriggs noted that congressional action is necessary now. Spriggs called on Congress to reinstate the additional $400 in unemployment compensation, provide $1400 direct payments, and increase the federal minimum wage to ensure wage growth and racial equity.
Dr. Michael Strain, Economist, American Enterprise Institute
In his testimony, Strain discussed the differences between top-down and bottom-up approaches to assessing the need for economic support. He said that applying both is most sensible, but Biden’s economic stimulus package is too large and too wide in scope when judged under either criterion. He noted that his calculations determine that the output gap is approximately $420 billion, including the effects of the $900 billion law passed in December 2020. Strain noted that Biden’s plan fills the economic gap several times over and, while acknowledging that it is prudent to err on the size of a slightly larger package, the stimulus package should not be untethered to the size of the economic need. He argued that there are several major components of Biden’s plan, including direct payments to certain individuals, the $400 unemployment supplement through September, and the increase of the minimum wage, that are unnecessary or are holding the recovery back. He argued that the plan would destroy jobs for low-income Americans while handing out checks to employed, upper-middle income households. Strain concluded that a more targeted bill that only contained necessary provisions, including adequate funding for vaccine distribution and necessary relief for state and local governments, would cost under $750 billion.
Question & Answer
Need for Additional Stimulus
Many questions throughout the hearing were focused on the need for an additional stimulus package. Reps. Ann Wagner (R-Mo.), Andy Barr (R-Ky.), Ted Budd (R-N.C.), Barry Loudermilk (D-Ga.) and Hill expressed concerns that previously allocated funds have not been spent, stating that Congress should first seek to understand where targeted aid is needed. Strain noted that the recent stimulus package is still working its way through the economy, and more untargeted relief could result in overheating and inflation. Rep. Blaine Luetkemeyer (R-Mo.) asked about the risk of inflation; Strain said there are “real risks” to “dumping another $2 trillion” into the economy right now. Although Strain argued against the $1.9 trillion stimulus bill, he was still in favor of some relief. In response to Rep. Roger Williams (R-Texas) asking if there are options to incentivize reopening the economy without additional spending, Strain said some federal spending should go towards widespread vaccination access, a more adequate testing regime, and aid for municipalities but that other relief options, like direct stimulus payments and unemployment insurance, would be an imprudent and discourage people from returning to work.
Countering these premises, Rep. Michael San Nicolas (D-Guam) disagreed that money is “languishing,” noting that this money is being programmed by state and local governments and cannot be repurposed. Anthony said that state and local governments had to develop a plan and create an infrastructure to utilize those funds and the money will eventually be spent. Rep. Gregory Meeks (D-N.Y.) asked about the risks of doing too little. Spriggs replied that there is more risk in doing too little than too much, saying it would be more difficult to fix the labor market if we let workers become homeless. Rep. Bill Foster (D-Ill.) asked what past recessions have taught us about fiscal policy and whether more benefits accrue from tax cuts for the wealthy versus aid to low-income families. Spriggs said during the last recession, we lost a lot of state and local government sector jobs and cannot allow a repeat, saying there is a bigger fiscal multiplier in helping low-income families. Rep. Al Lawson (D-Fla.) expressed concern about getting relief to the people who need it most.
State and Local Government Aid
Throughout the hearing Democrats, including Reps. Ed Perlmutter (D-Colo.), Brad Sherman (D-Calif.), David Scott (D-Ga.), Emanuel Cleaver (D-Mo.) and Meeks, asked questions about the need for additional state and local aid. Anthony stressed that no one was prepared for the pandemic, and local governments need aid to get back on track. Anthony explained that the CARES Act provided funding to cities only with a population greater than 500,000, and smaller communities had to access funds through governors, citing problems with implementation. Rep. David Kustoff (R-Tenn.) asked what alternative population threshold would be appropriate for funding cities and municipalities; Anthony replied that the community development block grant threshold of 50,000 would be appropriate. He said that states and local governments need these funds to help America recover, otherwise they will have to continue to make difficult decisions including laying off essential public sector personnel, such as police. Perlmutter asked the panel how much state and local aid is needed, Strain said $100 billion would be appropriate and Anthony responded $300 billion.
Republicans including Reps. Bryan Steil (R-Wis.), Lee Zeldin (R-N.Y.), Bill Posey (R-Fla.) and Luetkemeyer raised concerns about providing funds to states that were mismanaged prior to the pandemic. Strain said that revenue issues vary state to state, noting that those that rely more on tourism, for example, have been hit harder. He said it is appropriate for Congress to aid states with pandemic-related revenue losses, not those who mismanaged their rainy-day funds or their pension plans. Strain continued that not doing so will be a strain on the broader economy and affect the overall national recovery.
Reps. Juan Vargas (D-Calif.), Joyce Beatty (D-Ohio), Nikema Williams (D-Ga.) and Ritchie Torres (D-N.Y.) asked what Congress can do to support minority communities, particularly those facing high unemployment. Murguía said making sure we are concentrating on targeted relief to essential workers, speaking specifically about undocumented individuals and mixed-status families. Murguía argued to include all essential workers regardless of their status. Spriggs said the stimulus checks and unemployment insurance do not discourage workers in these communities from going back to work. He emphasized that individuals in these communities often live paycheck to paycheck, so additional unemployment assistance for them is vital. Rep. Ayanna Pressley (D-Mass.) asked what a slow labor recovery will mean for women of color, to which Spriggs said that it will become increasingly difficult for them to find a job as time goes on. He said a robust labor market will take longer to restore than the economy, so we need to focus on unemployment assistance.
Housing & Rental Assistance
Waters initiated questions on renters and homeowners, particularly those of color who are more likely to be at risk of eviction and foreclosures, and asked Spriggs to explain how a wave of evictions and foreclosures would impact the economy in the short run and long run. Spriggs said evictions will complicate things, and if we allow people to become homeless there will be irreversible scarring in the long run. Perlmutter asked if there has been an uptick in rental and homeowner delinquencies in African American and Hispanic communities. Murguía said these communities are being impacted and there is a need to extend eviction moratoriums and mortgage relief as well as funding housing counseling programs to provide and translate the information.
Rep. Stephen Lynch (D-Mass.) asked how to provide relief to small landlords. Spriggs said rental assistance is the most prudent and effective way to help the landlords. Murguía said there is an opportunity to partner with community-based lenders. Beatty asked about the consequences of not providing more rental assistance. Spriggs said letting workers become homeless complicates the situation and will make it even harder for them to reconnect to labor force. He said it would be “foolish” to not make investments now to prevent homelessness.
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