Update 436: Corona Plan Candidate Assessment
Biden’s Economic Policy Response to COVID
Far from the glare of the lights and the cameras focused on President Trump, the breathless media coverage of COVID’s progress, and our sheltered in place lives are the plans and pronouncements of a man bidin’ his time, streaming away from his famous basement.
We put Joe Biden’s economic policy response to the Corona crisis center stage today. Is a bold and transformational plan being hatched? Is it more consistent with the progressives in his Party or the moderate camp he is associated with? Below is a candid assessment of the candidate’s plan.
Vice President Joe Biden, the presumptive Democratic presidential nominee, has not stood out in the coronavirus policy debate to this point. Rather, Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer have led the Democratic effort to address the health and economic crises through legislative interventions.
Biden released his comprehensive coronavirus response plan in mid-March. He continues to roll out new policy proposals as Congress and the administration pass new spending packages. Almost all of Biden’s policies are consistent with Congressional Democratic proposals. New dials to the dashboard are not added; Biden’s economic plan modifies existing ones.
Below, we assess the key features of Biden’s plan to provide relief for individuals, small businesses, and workers.
COVID Priority: Jobs and Workers
At the center of Biden’s plan is expanding work-share programs. Under work-sharing, businesses reduce their employees’ hours while the government provides the employees with unemployment insurance benefits to make up for lost wages. These programs keep workers on payrolls, allowing them to receive their health benefits. Currently, 27 states and DC have work-share programs. The CARES Act already expanded federal assistance to state work-share programs by covering 100 percent of the cost for states with existing programs and 50 percent of costs for states that start new programs.
Biden bills his expansion of work sharing as “Employment Insurance.” The plan:
- allows businesses to reduce employees’ hours by 80 percent (states currently cap hour reductions at 40 to 60 percent)
- permanently funds 100 percent of work-share programs
- expands work-share to all 50 states through conditioned assistance and other incentives
- provides employers a refundable tax credit for the cost of providing full health insurance benefits
Biden’s proposal embraces the concept of wage continuity, which is critical for providing workers a bridge through this crisis. Keeping workers on payrolls will help smooth the transition back to normal economic activity, as firms won’t have to rehire their workforce.
Other Individual Relief Priorities
Biden’s coronavirus plan includes several other proposals for economic relief for individuals with varying degrees of detail and novelty.
- Student Loans: Biden’s attention to student debt is among the most novel of his plan’s proposals. He proposes forgiving all outstanding federal student debt for those who earn up to $125,000 annually and attended a public college, a private Historically Black College or University, or a private Minority-Serving Institution. The plan would gradually phase out for those earning more.
Biden endorsed Sen. Warren’s proposal to forgive at least $10,000 in outstanding student debt for every individual. Biden’s plan would also cancel monthly payments and eliminate interest accrual for individuals earning less than $25,000, cap payments at five percent of discretionary yearly income for individuals earning above $25,000, and forgive all outstanding student debt after 20 years.
- Premium Pay: Biden endorses Sen. Schumer’s proposal to establish a “Heroes Fund” for essential workers to compensate them for the increased risks they face. Biden also piggybacks on numerous other Congressional Democratic plans:
- twelve weeks of universal paid family and medical leave as provided by Sen. Gillibrand’s and Rep. DeLauro’s FAMILY Act
- seven days of paid sick leave as provided by Rep. DeLauro’s and Sen. Murray’s Healthy Families Act
- an additional 14 days of paid sick leave for those who are sick, exposed, or under quarantine, as provided by Rep. DeLauro’s and Sens. Gillibrand’s and Murray’s PAID Leave Act
- Social Security: The Biden plan would increase Social Security payments by $200 per month for seniors and persons with disabilities.
- Rental Assistance: Biden called for a 90-day rent freeze in late March. His plan cancels rent for “qualifying individuals,” but it is unclear what the qualifications would be. Sen. Sanders and Rep. Ilhan Omar also endorsed a national rent moratorium.
- Minimum Wage Increase: Biden’s plan raises the minimum wage to $15 per hour, like the Raise the Wage Act which passed the House last July.
Small Business: Expanding the PPP
Small businesses are especially vulnerable during this crisis. Congress appropriated $659 billion in loans to small businesses through the CARES Act’s Paycheck Protection Program (PPP). But accessing the loans has not been simple for many small businesses. The program operates on a first-come, first-served basis, which inherently favors businesses with strong existing relationships with banks. Many of the small businesses that are most in need are effectively locked out of the program.
Vice President Biden calls for enhancing the PPP with two noteworthy expansions:
- it lifts the cap on assistance by providing a guarantee that all qualifying small businesses will receive relief, effectively removing the funding cap. This measure would provide a solution to the harmful first-come, first-served structure of the program.
- it extends payroll forgiveness provisions for the duration of the crisis instead of the current insufficient eight-week limit
Biden broadly calls for “more generous loans” that would cover small businesses’ “fixed costs” in addition to payroll, though it is unclear if he intends to direct the loans toward fixed costs that count as forgivable spending as well. Such an expansion of the loan terms, paired with a guarantee of relief for every small business, would be a meaningful bridge for small businesses.
Enhanced Oversight of CARES Act
Biden recently criticized the CARES Act’s $500 billion “slush fund” in an op-ed with Senator Elizabeth Warren. Congressional Democrats negotiated some oversight and conditions on the funds, but President Trump declared that he would ignore the oversight provisions. The Biden/Warren proposal would:
- require members of Congress and those responsible for the recovery programs to be free of conflicts of interest
- bar corporations that receive funds from political spending
- prohibit the removal of Inspectors General for any reason other than “good cause”
- expand the oversight responsibilities of the Congressional Oversight Commission and give it subpoena power
These proposals for bolstering the oversight of the $500 billion fund are necessary but are inherently backward-looking. In many cases, the money is already out the door. This crisis will require another round of substantial relief and stimulus. Vice President Biden should offer a plan of distributing funds with transparent structures that does not rely on a strong inspector general to dig through millions of claims for cases of fraud.
Seize the Bully Pulpit
President Trump’s ad hoc strategy, premature exhortations for reopenings (Liberate Michigan?), and the contradictions between him and his ersatz task force have combined to create a vacuum of presidential leadership to deal with COVID-19. Speaker Pelosi and Leader Schumer are not on the ballot against Trump in November. Democrats are in an advantageous position of having a presumptive candidate six months before the election. They need to capitalize on it.
FDR did not campaign for president in 1932, in the worst of the depression, on a New Deal with any details. Economic conditions on Jan. 20, 2021 are so unknowable that a plan published today would be obsolete by inauguration day. But candidate Biden can and should weigh in on the plans of the day in the meantime, with a greater focus on macroeconomic perils and ultimate performance.