The GOP’s anti-stimulus rallying cry: What happened to the unspent $1 trillion?

Republicans opposed to President Joe Biden’s economic relief proposal have settled on a central line of attack: Congress shouldn’t spend more money when $1 trillion in aid allocated last year hasn't even been doled out.

It’s a criticism meant to underscore their argument that the resurgent U.S. economy doesn’t need another giant influx of cash, and certainly not the $1.9 trillion package that Biden is seeking — a view that some Democrats like former Treasury Secretary Larry Summers also embrace.

“Is it not too much to ask what the current administration plans to do with the $1 trillion in unspent taxpayer funds, especially before we toss another $2 trillion onto that pile?” said Rep. Ted Budd (R-N.C.). “This is a basic question that would come up during a family budget discussion, with a lot less zeroes.”

GOP lawmakers are seeking to stoke public concern over the extraordinary levels of federal support: $4 trillion in aid enacted last year, almost $2 trillion more about to be approved, and another multitrillion-dollar proposal expected in the coming months. It's a strategy that worked a decade ago, when deficit fears spawned the Tea Party movement, which eventually stalled much of President Barack Obama's agenda.

But congressional Democrats, the White House and many economic experts argue that even as money continues to get to unemployed Americans, small businesses, cities and schools, it’s clear that they and the broader economy require more.

“Just because there’s money unspent doesn’t mean there aren’t still needs,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, a nonpartisan group that set up the COVID Money Tracker to follow the aid as it goes out.

At this point, most of that unspent money — comprehensive estimates place the figure at $1 trillion — has been assigned to various programs that were designed to distribute it over an extended period of time.

Enhanced unemployment insurance benefits are sent out weekly. Paycheck Protection Program and other small business aid is supplied as employers apply for them. Enhanced federal Medicaid matching funds are provided to states on a regular basis as long as the public health emergency remains in place. And rebates and tax breaks will be doled out after Americans file their taxes.

Focusing on the money left to go out through those and other programs, then, “is mostly a red herring,” said Jason Furman, who was Obama’s chief economist.

Lawmakers could have a real discussion over substantive aspects of the plan, such as the size of the stimulus checks or who should receive them, said Furman, now a Harvard economics professor. But the unspent $1 trillion is simply a reflection of how the relief packages are designed — namely, to spend money over an extended period of time.

“Congress doesn’t legislate once a month for the bills coming up for the next month,” he said. “It is so much better to pass money three months in advance rather than three months late, especially when you’re in the middle of fighting a war.”

Congressional Republicans have made a risky but calculated bet in unifying against Biden’s relief plan, given that it is popular among both Democrats and Republicans across the country. Four in five adults said last month that another economic assistance package was necessary, the Pew Research Center found. And a Morning Consult poll this week showed three in four voters back Biden’s plan.

But zeroing in on the unspent money helps drive home the GOP’s argument that Democrats are the party that “spends money like there’s no tomorrow,” as Sen. Lindsey Graham (R-S.C.) put it this week. Republicans have also framed the legislation as overly generous, a “liberal wishlist for Democrats” that addresses far more than just the coronavirus and its economic fallout — and spends too much in even those key areas.

The broader concern, too, among some critics of the plan is that even as Democratic policymakers explain where the remaining $1 trillion is going, that money is not being sufficiently taken into account as Congress debates how large the next package should be.

Goldwein, whose organization advocates for deficit reduction, said that while some further aid is still needed, he feels “this package is almost written as if December didn’t happen” — when Congress passed a $900 billion relief package and two coronavirus vaccines started becoming available.

“I think Congress should be nervous about adding another $2 trillion into the mix,” said Michael Strain, director of economic policy studies at the conservative American Enterprise Institute.

Concern about the size of the package has become a flashpoint in the debate even among some Democrats, especially amid new economic projections that suggest significant growth this year.

The latest forecast from the nonpartisan Congressional Budget Office shows the economy returning to pre-pandemic levels this year and reaching growth levels of 4.6 percent without significant new relief measures. When factoring in an expected $1.5 trillion in fiscal relief, Goldman Sachs economists forecast a head-snapping 6.8 percent growth rate for 2021, which would be the highest since the Reagan era.

Many economists argue, however, that despite those forecasts, there is still more work to do. Federal Reserve Chair Jerome Powell cautioned lawmakers in a pair of congressional appearances this week not to declare victory on the economy too early, warning that “the job is not done.”

“We’re far from a return to a normal state,” said Kathy Bostjancic, the chief U.S. financial economist at Oxford Economics. “When you have such a hole, a deficit where you’ve fallen from where the economy was on track previously … you have a lot of ways to make up to get back there.”

Even taking into account unspent federal money, excess personal savings and the rollout of coronavirus vaccines, another $2 trillion in fiscal stimulus is the appropriate amount to get the U.S. economy back to full employment by the middle of next year, said Mark Zandi, the chief economist at Moody’s Analytics.

“In terms of the arithmetic,” he said, “that’s about right.”

One area of particular concern to some GOP lawmakers and other critics of the plan is in funding for state and local governments. Biden’s plan would send an additional $350 billion to states, cities and localities, adding onto $150 billion passed early last year. Republican members of the House Ways and Means Committee this week published a report saying that nearly one-third of that original money remains unspent, and some states are facing a significant budget surplus — as high as $15 billion in California.

The risk in sending too much money to states that don’t need it is if governors or local officials use it as an opportunity to cut taxes, for example — and there’s no easy formula to allocate aid only for states that are hurting the most. But those closely tracking this area argue that while states are doing better than they had originally expected, they are still not doing well.

The National Association of State Budget Officers also says states on average have allocated 97 percent of their initial round of funding and spent 77 percent of it, contradicting the Ways and Means numbers. Other experts note that federal restrictions made it hard for state officials to spend the money more quickly than they have.

And more broadly, as Biden administration officials say, many economists feel the risk of doing too little to help the economy right now is far greater than the risk of spending too much, even when $1 trillion in aid is still on its way out.

“It’s like, your garden needs water, but you only have so much of a hose that can get the water out. That’s the problem here — we just can’t get the water out as fast as needed,” Zandi said. “But that doesn’t argue you need any less water.”