While the world is trapped in the worst pandemic in over 100 years, Congress is set to debate another round of stimulus to help businesses, individuals, and state and local governments survive. Democrats in the House made the first volley with their $3.4 trillion plan. Several weeks later, Senate republicans passed a $1 trillion bill. Now the negotiations will begin. Will the final version look more like the republican or democrat plan?
Negotiating: The Anchor Has Been Dropped
Negotiating is a strategic exercise, and, in this case, the democrats may have the upper hand. Why? In the field of human behavior, there are few that are more qualified than 2002 Nobel laureate, Daniel Kahneman. In chapter 11 of his book “Thinking, Fast And Slow,” Kahneman explains the anchoring bias. When he taught negotiations, he suggested that when one party makes an offer which the other party considers to be unreasonable, rather than respond with an outrageous counteroffer, which will create a gap that may be difficult to close, the other party should walk out and make it clear that they will not continue the negotiation with that number on the table. Since the republicans’ offer is much smaller and the democrat plan was passed weeks earlier, the final bill may look more like the democrat version. Why? People are hurting and fearful. It is during times like these that citizens look to government for relief. Since democrats are offering substantially more, it should have greater appeal. While we don’t know what the final bill will look like, it should fall somewhere between each proposed plan. Let’s compare.
Overview of Both Plans
As mentioned, each party has passed its own coronavirus relief package. The table below highlights some of the differences.
Where is the common ground? If one had to speculate, it seems likely the parties will reach an agreement on the amount of the stimulus checks since the gap is small and they also agree on the income phase out limits. But that’s where consensus ends, and the real negotiating begins. In areas such as continuing unemployment benefits, aid to states and cities, money for schools to operate safely, and funds to ensure fair elections, the divide is substantial. It will likely take some time to reach an agreement. As the virus continues to spread and the world rushes to develop a safe and effective vaccine, the pressure on Congress will intensify.
Pressure is Mounting
As the federal unemployment subsidy nears an end, will Washington move quickly to avoid a gap in benefits? Failure to do so could lead to even more protests as affected individuals become increasingly frustrated. If the republicans succeed and no additional aid is sent to state and local governments, many locales will find it necessary to cut their budget. Given the current level of civil unrest and the very vocal ‘defund the police’ movement, budget cuts will be felt by many. If this holds true, there will be unintended consequences.
In cities such as Portland, Oregon, BLM protests have persisted accompanied by the destruction of property and peoples’ livelihoods. Why let those who are destroying property and ruining lives continue unchallenged? That is a curious one to this writer. Recently reported news tells the story of a restaurant owner in Portland who called the mayor’s office for help. He was ostensibly laughed at and told nothing could be done. He is moving his business to another city. How many other businesses will do the same?
The urban exodus is not exclusive to businesses. Many individuals are leaving the congested city for the suburban lifestyle. If local governments fail to maintain law and order, many businesses and individuals will relocate, leaving a large tax deficit in their wake. Consider Detroit, Michigan. During the 1950s, Detroit was the wealthiest city in the world. But growing competition from foreign auto manufacturers took market share from GM, Ford, and Chrysler, who were beginning to employ automation to replace workers. This led to a net population outflow in Detroit in every year from 1971 through 1990. With fewer taxpayers remaining, the city experienced a severe budget deficit. While this may argue for aid to cities, the current administration may not be so amenable, especially if local leaders don’t aggressively deal with the violence.
Many are asking how long it will take to pass the new stimulus and what will be included in the final version? It will take as long as is needed to assure it provides what each party deems important. It will likely become a focus leading up to the November election as each party attempts to claim success. Unfortunately, we could see politics obstruct what should otherwise be an act of compassion for those who are hurting.
This coronavirus has created a massive struggle, pitting the health of the individual against the health of the economy. This is also one of those things that no matter what side you choose, whether you lean toward economic health or personal health, the result is painful. Here’s what we know for sure. Without government assistance thus far, we would likely be in the throes of another great depression. Therefore, the bill under consideration is far more important than partisan political squabble. If we are to defeat this invader, we must work together. And that means compromise, which has been part of the political fabric for eons.