Hoyer said in an interview April 7 that the New Democrats’ idea to use automatic stabilizers to keep relief flowing “makes sense given the problems that we have.” “I think they’re taking a lot of inputs.” ‘Reasonable, rationale proposal’ “Leadership has never argued with it,” Peters said. New Democrats have raised the idea on various Democratic Caucus conference calls and more formally in an April 2 letter to leadership. They’re hoping that House leadership, which is taking a larger role in drafting the next big package, will consider including stabilizers. Scott Peters, one of the New Democrat Coalition vice chairmen, said the group had raised automatic stabilizers for consideration in the $2.3 trillion economic relief package, but none were included. “To me, the problem we’re trying to solve for is how do you create some certainty for people in really uncertain times.”Ĭalifornia Rep. “Rather than having Congress play whack-a-mole and stick their fingers in the dike, there is strategic value in building triggers in the system,” Kilmer told CQ Roll Call. The coalition is also looking at other relief measures that could benefit from automatic stabilizers, like direct payments to low- and middle-income Americans, expanded unemployment benefits and funding for states and hospitals. PPP is expected to run out of money by the end of the week and negotiations over a bill to add funds are at a standstill. Derek Kilmer of Washington, chairman of the New Democrat Coalition, will soon release legislation proposing an automatic stabilizer for the popular Paycheck Protection Program, which provides loans to small businesses that will be fully forgiven if the companies keep a majority of their employees on the payroll. “As appropriate, build automatic stabilizers into direct assistance programs to provide certainty and trigger additional assistance and stimulus without the need for additional congressional action if economic conditions continue or worsen,” the coalition wrote March 19 in a list of principles and priorities for responding to the economic challenges associated with the pandemic. Most economists do not believe that Ricardian equivalence characterizes consumers’ response to tax changes.A growing number of House Democrats are pushing an idea to provide more certainty to American families and businesses that need help from the federal government to financially weather the coronavirus pandemic.įor nearly a month, the New Democrat Coalition has called for automatic stabilizers - a mechanism for keeping government assistance flowing by tying relief programs to economic or timing triggers - to be added to coronavirus relief legislation. But if consumers decide to spend some of the extra disposable income they receive from a tax cut (because they are myopic about future tax payments, for example), then Ricardian equivalence will not hold a tax cut will lower national saving and raise aggregate demand. If these economists were right, then my earlier statement that budget deficits crowd out private investment would be wrong. The extreme of this argument, known as Ricardian equivalence, holds that tax cuts will have no effect on national saving because changes in private saving will exactly offset changes in government saving. Recognizing that a tax cut today means higher taxes in the future, the argument goes, people will simply save the value of the tax cut they receive now in order to pay those future taxes. Some economists have argued that this effect of fiscal policy on future taxes will lead consumers to change their saving.
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