Biden’s $1.9 Tr. Rescue Plan

Update 499 – Biden’s $1.9 Tr. Rescue Plan:
Sound in Scope and Scale, but Ambitious

Last night, President-Elect Joe Biden announced the details of his $1.9 trillion ‘American Rescue Plan’ — an appropriately constructed and comprehensive rescue package designed to meet the needs of the moment and launch a robust recovery. An ambitious plan, it will no doubt face legislative hurdles, discussed below. 

Despite these hurdles, this package is a substantial first step intended to accelerate the economic rescue in a fair and equitable way. Step two, a package to address long-neglected needs like infrastructure, will come later and is expected to be even larger.

Good long weekends and happy MLK day, all. 

Best,

Dana

————————————–

President-elect Biden needs ten Senate Republican votes to avoid a filibuster of his $1.9 trillion economic rescue package, as Democrats prefer not to use budget reconciliation — a procedure which eliminates the usual 60-vote Senate requirement — on the first spending/relief bill. So expect compromise with Republicans on major components of this package. Democrats could seek to pass a compromise measure quickly, free from the constraints of the Byrd Rule. Budget reconciliation of this sort can only be used once a fiscal year, so Democrats could save it for more ambitious legislation such as the expected phase two component package. 

Biden’s Stimulus Package

The relief bill passed in December was necessary, but $360 billion in new funds and $560 billion in repurposed CARES Act money is not enough to ensure a robust recovery in the coming year. Many economists argue that a stimulus package of up to $3 to $4.5 trillion is needed to get the economy back to its full potential. Though Biden’s plan does not go as far as many would like, it includes a range of provisions not adequately addressed in prior legislation.

Biden’s stimulus plan includes the following key elements:

  • $1,400 Checks ($390 bn.): During the Georgia runoffs Biden promised that a Democratic Senate majority would increase direct payments from $600 to $2,000. Though Biden has received some pushback from fiscal conservatives in his own party like Sen. Manchin, there appears to be enough Republican members of Congress in favor of additional stimulus payments to pad the Democrats’ thin majority on this issue. The question now is whether the $1,400 payment should be its own standalone bill to achieve maximum bipartisan support or the sweetener to entice Republicans to vote for a larger relief package.
  • Child Tax Credit ($90 bn.): Biden incorporates the Bennet/Brown CTC proposal into his stimulus plan. This would convert the CTC from a $2,000 per child partially refundable tax refund into a $250 ($300 for children under 5) fully refundable monthly payment. This would lift around three million adults and four million children out of poverty. 
  • Unemployment Benefits (~$320 bn.): Federally-expanded UI is set to expire in mid-March. Biden’s proposal pushes that date back to the end of September. Some lawmakers were hoping for automatic triggers that would adjust UI to economic conditions, but a six-month extension of UI benefits, with an additional $400 per week, gives the country time to vaccinate enough people before reopening our economy fully.
  • State & Local Government ($560 bn.): For months, states and municipalities have been staring down the barrel of insurmountable deficits. Education and transit related services across the country face significant cuts without federal aid. In December, Congress omitted a provision for $160 billion in state and local aid due to Republicans’ insistence on corporate liability protections. Biden’s budget more than doubles what was proposed last month. Of these funds, $170 billion would be directed to schools, $20 billion towards transit, and $20 billion to native tribes.
  • Small Business Support ($50 bn.): Biden’s proposed small business assistance is divided into two parts: grants and loans. Fifteen billion of these funds would be distributed as flexible grants to struggling small businesses. The other $35 billion would be leveraged to provide $175 billion in federally backed low interest loans. Though it is less than many policy experts expected, the inclusion of grants will aid many smaller businesses unable and unwilling to take on additional debt obligations.
  • Rental Assistance ($30 bn.): Since the outbreak of COVID-19, millions of families have fallen behind on rent and mortgage payments. Biden proposed doubling the rental assistance appropriated by Congress in December and extending the eviction moratorium, which expires January 31st, to the end of September. Biden hopes to allocate $5 billion towards securing housing for families experiencing homelessness.
  • Vaccine Funding ($20 bn.): Biden set a goal of vaccinating 100 million Americans within the first 100 days of his presidency. So far, only around 10 million Americans have received COVID vaccinations — a pace well behind initial forecasts. Biden’s proposal includes additional funds for the distribution of the vaccine, as well as for COVID testing and contact tracing. 
  • Increasing the Federal Minimum Wage: Biden called for increasing the federal minimum wage to $15 an hour, more than double the current level of $7.25. This is a long overdue change — it was last increased in 2009 — and would bring about a much-needed boost in income for 17 million Americans, especially frontline workers.

Procedural and Legislative Hurdles

Passing large-scale economic programs through Congress is a difficult task, even when the case for action is clear. Although Democrats will soon enjoy full control of Congress and the White House, Biden’s stimulus package will almost certainly face some hurdles, including:

  • The Filibuster: With only 50 seats in the Senate, Democrats have far fewer than the 60 votes necessary to stop a filibuster. Finding ten GOP senators to support the bill would require concessions. Without the 60 votes, Democrats will need to use the budget reconciliation process in the Senate, which would lower the threshold of passage to a simple majority. However, the reconciliation process involves rules which could disallow policies currently included in the bill.
  • Narrow Democratic Majorities: Democrats control the House by a slim majority of 222-211. This margin will temporarily shrink more when a few Democratic members leave the House to join the Biden administration. The Senate will be split 50-50, with Vice President Kamala Harris serving as the tie-breaking vote. Although Senate committees will be chaired by Democrats, their membership will be divided evenly, so Democrats on the Budget and Appropriations committees will have to remain unified. 
  • Internal Democratic Divides: The Democratic caucus in the Senate ranges from leading progressives like Sens. Sanders and Warren to moderates like Sens. Sinema and Manchin. Manchin has already expressed skepticism toward raising stimulus checks to $2,000.
  • Impeachment: The Senate will soon hold a trial to consider Donald Trump’s second impeachment. Current Senate Majority Leader McConnell refused to bring the Senate back early from its current recess, so the trial will occur sometime after Biden has officially taken office. Senate rules stipulate that legislative business cannot occur at the same time as a trial, but Biden has suggested the Senate could “bifurcate” the process by conducting legislative business during one part of a given day and the trial during another part. Regardless, the impeachment trial will be a distraction for Biden as he tries to get his agenda going.

After four years in the political wilderness, Democrats are back in charge. Democrats have the critical opportunity to demonstrate to a beleaguered and skeptical American public that they are up to the challenges facing the nation right now. 

Confirming competent executive nominees, using the Congressional Review Act to roll back Trump’s harmful deregulatory actions, and passing a robust stimulus bill will do more to repudiate Trump’s legacy than a dozen impeachment votes. The acid test is the extent to which Republicans will recognize their own stakes in promoting a robust recovery and will cooperate (or obstruct) over the next two years. 

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