Nancy Pelosi says Democrats opted against putting federal aid on autopilot in their $3 trillion coronavirus spending package to avoid amplifying sticker shock

House Speaker Nancy Pelosi of Calif., arrives for a news conference on Capitol Hill, Thursday, May 14, 2020, in Washington. (AP Photo/Andrew Harnik)Associated Press
  • Pelosi said Democrats had decided against putting federal aid on autopilot to avoid increasing the sticker shock of their $3 trillion coronavirus spending package.
  • Tying federal aid to economic conditions and putting so-called automatic stabilizers in place has gained traction among many left-leaning economists.
  • Some Democrats have already called for stabilizers, but it was left out of the House plan that's set to pass on Friday.
  • Visit Business Insider's homepage for more stories.

House Speaker Nancy Pelosi said on Thursday that Democrats had decided against putting federal aid on autopilot to avoid heightening sticker shock in their $3 trillion coronavirus spending package.

During her weekly press conference, Pelosi said while she supported the idea of federal aid that automatically kicks in as economic conditions deteriorate, it would lead to a heftier price tag for the proposal.

"What I know, many years an appropriator and in leadership, do not realize because we have never spoken in these big terms before, is that if you have a stabilizer in it that something will happen next January and then you'll have $400 billion, $500 billion worth of unemployment checks going out, it counts in the bill today," she said.Advertisement

She went on, and mentioned the role of the Congressional Budget Office in projecting the cost of legislative spending packages.

"Why would it? It doesn't happen, and it might not ever happen. God willing, we won't have that high unemployment rate," Pelosi said. "But the CBO, if you say, people are still hungry by such and such, we want to double SNAP after the first of the year, they count it today."

Pelosi appeared to say Democrats were looking for other ways to embark on spending initiatives without being counteracted.
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"We want to look and see what our legislative, constitutional and other prerogatives might be to give us more latitude to prepare, even though not spend in the moment, but not have it count in the moment, but I.. was disappointed to learn that we just couldn't go to that place," she said.

When reached for comment, a spokesperson for Pelosi pointed Business Insider back to her Thursday remarks. Mike Konczal, the director of progressive thought at the Roosevelt Institute, a left-leaning think-tank, said Democrats could be scaling back their ambitions out of confusion.Advertisement

"I often think Dems hide behind CBO as an excuse to not have to actually use their power to progressive ends," he wrote in a tweet. "But with this I worry they're actually scared and confused on how to stand up for what they need to do."

The idea of tying federal aid to economic conditions — known as automatic stabilizers — has gained traction among many economists, particularly those leaning liberal, The New York Times reported. Putting stabilizers in place means that government aid like increased state funding and enhanced unemployment insurance automatically jumpstarts when the economy craters.

Then, the flow of federal help would scale back to normal levels once the nation's economic health is restored. Many experts believe it's an effective way to respond to an economic crisis as it removes the need for congressional action, saving time and resources.Advertisement

Three Democrats released a draft framework earlier this month to include stabilizers in the coronavirus spending package. Rep. Don Beyer and Sens. Jack Reed and Michael Bennet called for connecting unemployment insurance payments to the state of the recovery.

"This pandemic and the resulting economic crisis may continue to inflict horrifying suffering on the country for many months to come," Beyer said in a press release. "Passing emergency relief legislation that incorporates automatic triggers would have the enormous benefit of ensuring assistance continues to flow to workers even if Congress itself is unable or unwilling to act."

But stabilizers were ultimately left out of the House spending package. The legislation instead keeps enhanced unemployment benefits in place through January 31 and extends $1 trillion in aid to states and municipal governments. It's set to pass the House on Friday.Advertisement

Republicans have staunchly opposed the Democratic proposal, attacking it as a costly progressive wish list that's dead on arrival at the GOP-held Senate. But they have not offered an alternative plan yet.

With unemployment rising to levels unseen since the Great Depression, the devastating economic effects of the pandemic are projected to linger for the next few years. The Congressional Budget Office projects the unemployment rate could stay as high as 10% through 2021.

As a result, policymakers are increasingly calling for aggressive government action. Federal Reserve Chair Jerome Powell issued a dire warning of a painful economic recovery if lawmakers don't pass additional relief measures.Advertisement

"Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery," Powell said on Wednesday.

Jason Furman, formerly a top economic advisor to President Barack Obama, previously told Business Insider that the economy could "easily absorb" up to $5 trillion in additional borrowing to confront the pandemic's fallout.Read the original article on Business Insider
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