COVID | Fiscal Policy | Politics & Geopolitics | Rates | US
A Smaller COVID Relief Deal and Yellen’s Funding Dilemmas
- By Dominique Dwor-Frecaut and George Goncalves
- 3 min read
The next COVID relief plan has two options for adoption. Either it gets 60 senators’ support or it goes through the budget reconciliation process, which requires only a simple majority. But the Democrats have just 50 Senate seats, which gives the moderate Democratic senators a de facto veto on any bill adopted through budget reconciliation. Moderate Democratic senators have already expressed discomfort with the size of President Joe Biden’s bill and its lack of targeting.
Therefore, as Table 1 shows, a bill passed under reconciliation is likely to be much smaller than the $1.9tn Biden bill. At the same time, reconciliation will probably bring about a larger bill than bipartisanship because moderate Democrats are less fiscally conservative than GOP senators. My estimate for the bipartisan scenario is $700bn, in line with the $600bn that 10 GOP senators offered on 30 January.
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