If Republicans don’t support Biden stimulus plan, pass it anyway. It will boost our economy | Opinion

Economists for several decades have underestimated the potential of the U.S. economy. With Joe Biden’s election to the White House, we have a chance to reverse that serious misstep, which has cost jobs and income — and caused serious bitterness — to enable America to grow as it did in the post-World War II era.

Biden’s $1.9 trillion spending package could well achieve that — or come close.

Yes, the package is historically large, but so is the problem. While some significant portion of the population is doing well — the already wealthy for the most part — millions are earning little or nothing. They cannot find even a low-paying job. Poverty rates have climbed, children are hungry and, most important, the economy might not bounce back quickly even as COVID vaccines are distributed. Indeed, there is some chance they will not work as well as forecast.

The recent uptick in the economic forecast by the Congressional Budget Office still leaves the unemployment rate high for years. The Biden plan will fill a large gap between traditional measures of the economy’s potential growth — that is, the growth in jobs, incomes and investment — and the current path. The Biden stimulus, on top of the earlier $900 billion stimulus, will fill more than that gap. It could reduce the suffering and also be a propulsive engine to launch a new economic era.

Some think such spending is dangerous and could ignite inflation and unmanageable budget deficits. But the odds are low. The $600 billion compromise just offered by 10 Republicans is more a political strategy than an honest economic one. It will not close the current economic gap and surely not launch a new prosperous era.

Two economists at the Hamilton Group of the Brookings Institution believe the stimulus could get the U.S. economy growing far faster than its pre-COVID growth rate. Wendy Edelberg and Louise Sheiner argue the Biden stimulus would raise growth by 4 percent more by the end of 2021 than its path before the pandemic and another 2 percent in 2022.

The pre-COVID path of GDP growth, despite Donald Trump’s posturing, was not especially vigorous by historical standards.

Edelberg and Sheiner admit this would eventually put growth above the conventional measures of the economy capacity, creating the threat of renewed inflation. But this is a risk worth taking. As Adam Hersh of the University of Massachusetts at Amherst and Mark Paul of the New College of Florida in Sarasota say, we don’t truly know the potential growth of the economy and we have been underestimating it for decades.

Too much fear of inflation, stemming from the experience in the 1970s, has led to the wrong economic policies and lower wage growth than necessary since the Reagan ‘80s.

It’s time to risk optimism. Rapid growth will stimulate investment, technological progress and worker effort once again. Bitterness toward American elites will diminish.

The politics of passing the President’s bold and large package is complicated. It will require the unanimity among Senate Democrats to pass. Some Democratic senators are queasy about the passing a package this size soon after the recent $900 million package. Additionally, the Democrats don’t have many votes to spare in the House either. Chuck Schumer and Nancy Pelosi probably jumped out on this a little faster than President Biden would have liked. The president does have wiggle room to negotiate and to satisfy a recalcitrant senator.

We know that, as a former senator, Biden rightly yearns for a return to bipartisanship. The country is certainly better served from it. This is the president’s first initiative out of the box, and he cannot afford to lose.

The most important currency in politics is winning, not a good or noble losing fight. Biden should not stubbornly stick with the hopes for bipartisanship. Passing the plan without Republican support comes, we think, with only modest political risk. It can be done by using the budget reconciliation process, as the Democratic leadership and president is now considering. We know that voters don’t give a damn about process, they want results. This is not a just a COVID bill, it can also narrow the gap between rich and poor.

It must pass.

Mike Abrams is former chairman of the Dade Democratic Party, a former state legislator and currently a policy adviser to Ballard Partners. Jeff Madrick is former director of policy research at the Schwartz Center for Economic Policy Analysis, The New School. He is the author of “Invisible Americans, The Tragic Cost of Child Poverty.”

This story was originally published February 2, 2021 at 4:21 PM.