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Congress Can Make a Deal on Coronavirus Relief

Bloomberg logo Bloomberg 8/19/2020 Ramesh Ponnuru
a group of people standing next to a man wearing a suit and tie: WASHINGTON, DC - JULY 29: Speaker of the House Nancy Pelosi (D-CA), Senate Majority Leader Senator Mitch McConnell (R-KY), and Senate Minority Leader Chuck Schumer (D-NY) speak after the casket with the remains of Rep. John Lewis (D-GA) is carried from the U.S. Capitol building July 29, 2020, in Washington, DC. After lying in state at the Capitol, the body of Lewis will go to Atlanta, Georgia where he will lie in repose at the State Capitol ahead of Thursday's funeral service. (Photo by Brendan Smialowski-Pool/Getty Images) © Photographer: Pool/Getty Images North America WASHINGTON, DC - JULY 29: Speaker of the House Nancy Pelosi (D-CA), Senate Majority Leader Senator Mitch McConnell (R-KY), and Senate Minority Leader Chuck Schumer (D-NY) speak after the casket with the remains of Rep. John Lewis (D-GA) is carried from the U.S. Capitol building July 29, 2020, in Washington, DC. After lying in state at the Capitol, the body of Lewis will go to Atlanta, Georgia where he will lie in repose at the State Capitol ahead of Thursday's funeral service. (Photo by Brendan Smialowski-Pool/Getty Images)

(Bloomberg Opinion) -- Split the difference. That’s what Republicans and Democrats should do on Covid-19 relief.

Compromise doesn’t always work. If one group wants to build a bridge and another doesn’t, there’s no point in trying to make everyone happy by building half a bridge.

In the case of the stalled negotiations over “phase four” of the federal response to the pandemic, though, meeting in the middle is exactly what ought to happen.

The biggest sticking points concern unemployment benefits and aid to state and local governments. In both cases, the Republicans are being too stingy and the Democrats too generous. Reaching an agreement should not be beyond their wits.

The House Democrats’ bill included more than $900 billion for states and localities. The Senate Republican counteroffer was nothing. Republicans have said they are worried about the deficit and don’t want to bail out irresponsible blue states.

That concern about the deficit has not been in evidence at any earlier point during the Trump administration. It is ill-timed now. Congress should have restrained spending while the economy was expanding, and still ought to put limits on the growth of spending on Social Security and Medicare over the next few decades. An economic contraction, on the other hand, is when the federal government should tolerate higher deficits.

It’s not just blue states that are facing pandemic-related budget trouble. State revenue is dropping everywhere. States don’t have the borrowing capacity the federal government does, and tax increases and layoffs in the middle of a slump would harm the economy. Hence the need for federal aid.

The Democrats’ $900 billion request is nonetheless too high. The National Governors Association has asked for $500 billion. Moody’s Analytics has estimated that states will suffer a worst-case scenario of $200 billion in lost revenue and higher spending through the end of the next fiscal year.

Structuring some of the federal aid as a long-term loan instead of a grant would bring down its cost while serving the essential function of keeping states from having to take dramatic action to cut spending or raise taxes now. It would also reduce the size of any transfers from low-spending states to big-spending states.

In March, Congress passed a temporary measure to supplement unemployment benefits by $600 a week. That authorization has now expired. President Donald Trump attempted to bypass Congress and give states access to a new stream of federal funding that would have given the unemployed $400 a week on top of their regular jobless benefits. But his idea appears to be unworkable.

Republicans say that unemployment benefits have been set too high, in many cases paying people more than they were getting while working. In their view, this level of benefits will impede the recovery by making it harder for employers to get workers back on the job. Some Republicans want to get rid of the extra unemployment benefit entirely.

Democrats, on the other hand, tend to doubt that this effect is large enough to matter and think that in any case it is wise to keep people out of the workforce as long as there are coronavirus outbreaks. They favor higher benefits as a way of supporting consumer spending. They also savor the political opportunity to denounce hard-hearted Republicans.

If the parties are willing to make a deal, though, it’s not hard to see what shape it would take. Excessive unemployment benefits will have worse effects as the pandemic recedes and the economy recovers. So why not set the federal supplement to taper off as these things happen?

Reaching a deal on these matters is one of the two most important actions Congress and the president need to take for the rest of the year. (The other is keeping the operations of the government funded.) If they can’t find a way to agree, they will cause a lot of unnecessary hardship. Given how much the underlying issues lend themselves to compromise, that failure would be hard to excuse.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Ramesh Ponnuru is a Bloomberg Opinion columnist. He is a senior editor at National Review, visiting fellow at the American Enterprise Institute and contributor to CBS News.

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