The Biden Administration has proposed the American Rescue Plan (ARP), a nominally $1.9 trillion package to address the COVID pandemic and the economic distress it is causing. This is a good plan, certainly much better than the Republican counter-proposal, which hasn’t gone anywhere.
The ARP is intended as an immediate “rescue” package, to stop the damage for now. The Administration intends to follow up at some unknown point with an as-yet undefined “recovery” package.
Here is a rough breakdown of the ARP, as proposed:
Category Allocation
(in $billions)
Rental and Small Landlord Support 30
State and Local Governments 350
Additional Unemployment Relief 350
School Funding 170
Expand Child Tax Credit 120
Support for Childcare Providers 25
Additional “Recovery Rebate” Checks 450
Vaccines & Pandemic Containment 160
Other Policy Changes 200
Total 1,855
[Source: Center for a Responsible Federal Budget, estimates from end of January 2021, via MSNBC]
The proposal also includes a provision to raise the minimum wage to $15/hour over a period of years.
What are all these things? According to Vox, these categories include substantially the following:
Rental and Small Landlord Support
“The president-elect’s plan calls for extending eviction and foreclosure moratoriums through September, directing $30 billion toward rental assistance, and $5 billion in emergency assistance to secure housing for the homeless.”
It’s not clear whether the $5 billion in assistance to the homeless is included in the $30 billion total.
State and Local Governments
“Biden’s plan calls on Congress to provide $350 billion in funds for state, local, and territorial governments. It’s framed as money that will help pay frontline workers, reopen schools, and get people vaccinated. It also requests $20 billion in relief for public transit agencies and $20 billion to support tribal governments’ pandemic response.”
The money for public transit and tribal governments is probably part of the overall total of $350 billion.
Additional Unemployment Relief
“Under the current stimulus packages, the unemployed are eligible for an additional $300 in weekly federal unemployment benefits through March 14. Biden’s plan increases that amount to $400 through September and also continues extended benefits to people who have exhausted benefits or wouldn’t normally qualify, such as contractors or freelancers.”
So, this would increase the weekly payments to those currently receiving unemployment checks to $400. It would also extend these benefits through September. It adds people, like contractors and self-employed, to those eligible.
School Funding
“Biden’s proposal calls for $130 billion to help schools reopen safely, $35 billion in funding for higher education, and $5 billion for governors to use to support educational programs for those hardest hit by Covid-19.”
This appears to mean $130 billion for K-12, $35 billion for colleges and universities, and an additional $5 billion for discretionary spending specifically to address the effects of the pandemic.
Expand Child Tax Credit
“The plan expands the child tax credit — another important one for Democrats — to $3,000 per child up to age 17 and $3,600 for children under age 6. And, it increases the earned income tax credit from about $530 to $1,500 and expands eligibility.”
This totals out to about $120 billion. But it is unclear if this is a one-year change or would continue in perpetuity.
Support for Childcare Providers
“The plan calls for a $25 billion emergency stabilization fund for child care providers and an additional $15 billion to the Child Care and Development Block Grant Program.”
The $15 billion for the block grant program is in addition to the $25 billion called out in the summary above, so this category would actually be $40 billion.
Additional “Recovery Rebate” Checks
“Biden is proposing adding $1,400 to the latest round of stimulus checks so that they total $2,000. His plan also expands eligibility for the checks to adult dependents left out of previous rounds and to mixed-immigration status households.”
This is the infamous $2,000 checks everyone talks about.
Vaccines & Pandemic Containment
“Biden is pushing to invest $20 billion in a national vaccination program in partnership with states, localities, tribes, and territories, including creating community vaccination centers and mobile vaccination units. He is also advocating for $50 billion to expand testing, including rapid tests, expanded lab capacities, and help for schools and local governments. And he is pushing for an additional $10 billion to manufacture pandemic supplies domestically, as well as $30 billion to the Disaster Relief Fund for supplies and protective gear.”
This is the only part Republicans initially agreed with. The total of this breakdown is only $110 billion vs. the $160 billion in the summary above. I think the other $50 billion comes from grants to small businesses ($15 billion) and loans for small businesses ($35 billion, which could be leveraged to as much as $175 billion, probably by using them as guarantees for private loans or maybe Fed loans).
Other Policy Changes
It’s not obvious what these other policy changes are, but Vox mentions the following that don’t fall into other categories:
- Fix health disparities and fund more healthcare workers. Increase funding for congregate settings, such as nursing homes.
- Expand sick leave. Expand emergency leave for federal workers.
- Extend the Supplemental Nutrition Assistance Program (SNAP) benefits through September and increase investment in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).
- Provide territories with nutritional assistance.
Minimum Wage
Another proposal, outside ARP, but to be passed with it (in reconciliation) is to expand the minimum wage to $15/hour (over some number of years). This provision would also ask employers to provide hazard pay (for people being exposed to COVID).
Improvements
While this is a good bill that provides much-needed relief, there are a number of provisions that should be changed.
This bill is not focused enough on pandemic relief. In particular, the one-time checks are probably inadequate to really fix the economic problem, and they are very likely ill-timed. A better time for a one-time payment would be when most people have been vaccinated and we are in a position to open the economy again. Recently, Anthony Fauci suggested this might happen in July.
The payments for children don’t appear to be related to the pandemic at all. They are just subsidies for children. This is bad public policy. Yes, there are millions of children in this country suffering from poverty, but they aren’t suffering from being children, they are suffering from poverty. We should address the poverty.
At the same time, ARP helps some people who are unemployed, but the help is hit-or-miss. Many people are unemployed because they simply are not wanted by the capitalist machine. The combination of bad trade policy, bad industrial policy, bad educational policy, and bad unemployment policy mean these people are just frozen out of the job market.
This requires a long-term solution, but if we want to help people disadvantaged by the pandemic and charge up the economy, we should consider regular payments to all unemployed people at least until the pandemic is over. This should replace the “Additional Unemployment Relief” provision with an “Unemployment Relief” provision. This would be something like $1,000 per month for each person 18 or older and under 67 years of age (or whatever the Social Security retirement age is for the current year). That monthly payment should continue at least until the economy opens up again following the pandemic.
We should also get rid of the “Expand Child Tax Credit” and the “Support for Childcare Providers” provisions. Instead, we should change the personal income tax to give everyone a credit based on the living wage in their area.
For example, the living wage in New York City is around $39.75/hour. This is roughly $87,500 per year. No one living in Manhattan should be paying federal income tax for any income less than that. (This is for a single adult with one child. We should use that standard for calculations, because it allows a person to have a child, if they want one. That should be our minimum expectation for compensation.) (From the MIT Living Wage Calculator)
In addition, instead of spending money subsidizing child care, we should look for long-term funding for pre-K school instruction. This would help young children regardless of whether their parents work outside the home, and it would have a lasting benefit for their education.
What about the minimum wage?
The target of $15/hour is too low for most of the country. For example, in Charleston, WV, the living wage for a single person with child is around $27/hour. What about a cheaper place? Maybe Biloxi, MS. Okay, $28.32/hour for person with child. Really, a minimum wage of $15/hour is only enough to keep a person alive in poor areas if they don’t have children. That’s not good enough.
But the minimum wage cannot be supported in the U.S. if companies can simply produce outside the country and sell their products here. We actually need to set an international minimum wage and require that anything made there and sold here come from an entire supply chain paying that international minimum wage. In addition, we need to fix the trade deficit, which regularly runs about a half-trillion a year. We do that by slowly and carefully increasing tariffs across the board until the deficit goes away.
So, we need to make sure people understand that a $15/hour minimum wage is only a down-payment on what we need. People like Sen. Joe Manchin, who seem resistant to voting for it, need to be reminded that it isn’t even enough to have a family in West Virginia. $15/hour leaves a person short $12/hour if they live in Charleston. If they have to pay for a child, they inevitably have to work two full-time jobs to stay out of poverty. Does he really want to face his constituents and explain why he isn’t even willing to get them that?
The other big problem with ARP is that it is gender neutral. COVID isn’t. It has resulted in a disproportionate number of women losing their jobs. This is the one group of people where we should consider a specific provision just for them. Perhaps the $1,400 check in the original proposal should be $2,100 for women. Of course, if we did the unemployment piece correctly, the bias in the layoff figures would not be a major issue.
Other Tax Changes
The relief package will have to go through reconciliation. We should not be distracted by pandemic relief and forget that we need to fix a number of other things in reconciliation. The minimum wage is only one example. Another is the colossal tax cut from the Trump Administration.
This tax cut was almost completely designed to help the rich. The provisions helping anyone else phase out after a few years. But the cuts for the very, very wealthy and major corporations will keep giving to them until we fix the problem. And the CARES Act just larded on money for the wealthy. By itself, it is estimated to have donated nearly a trillion dollars just to billionaires.
So, we need to make some adjustments. I suggest a surtax on personal income taxes for households with incomes over a quarter-million dollars a year. This should be a high enough surtax that it will eliminate the federal deficit and start paying off the national debt.
Remember that the national debt was almost entirely caused by demands from the wealthy elite. About $4-5 trillion is just from the wars in Iraq and Afghanistan. The rich in this country could have prevented the war in Iraq if they had just told George Bush “no”. But a lot of them thought they would make a profit. Much if the rest was caused by tax cuts. You got your Reagan tax cuts, and you’ve got your Bush Tax cuts, and now you’ve got your Trump tax cuts. Who do they think is going to pay the bills? Well, they think the poor will pay the bills. They intend to cut spending. And, they expect the Democrats to raise taxes, but not for the rich, oh, no. For everyone. Which means for the poor.
No. Don’t do that. Raise taxes on the rich.
The cumulative deficit for the Trump years (2017-2020) was around $3.5 trillion. It added about $4.325 trillion to our national debt. This is without figuring in the cost of COVID. So, just the Republican part of the debt increase means the average American owes around $13,000 more than before. (Closer to $13,192, if you calculate it closely.)
Each baby born tomorrow is being handed a bill of over $13,000 just because they were born into a country ruled by Republicans for four years. And their mishandling of the pandemic probably added another $3.8 trillion to that. (Source: US Budget Deficit by Year Compared to GDP, Debt Increase, and Events from The Balance, 8 October 2020 by Kimberly Amadeo.)
Make them pay. Make the rich pay off this debt. Make them pay enough that we don’t have a deficit. Yes, they will howl. Well, running a modern country is expensive. They’ve been well compensated. And they will still be rich, even if they pay their fair share.
Summary
The American Rescue Plan could be improved.
We can’t expect that from Republicans. What did Republicans propose adding to the package? ARP already has funds for vaccinations, for states and localities, for people knocked out of work, for people struggling to pay their bills. Republicans did not propose a single thing they want to address which ARP doesn’t already have. In fact, they didn’t even propose a single way to improve the effectiveness of what was already in the Democratic package.
Improvements have to come from progressives. There are plenty warranted. I suggest the following:
- Add a provision that pays something monthly to every unemployed person between 18 and 67, enough for that person to survive.
- Make those payments last until enough people have been vaccinated that it is safe to go out without a mask or social distancing.
- Change personal income tax to provide a tax credit for the cost of living that prevents people earning less than a living wage from paying any federal income tax.
- Add a surcharge to the personal income tax for households earning over $250,000 per year to eliminate the deficit and pay off the national debt.
- Eliminate the provisions for one-time payment (or time it for July).
- Eliminate the provisions that subsidize child care and eliminate the changes to the child tax credits and the earned income credits. Put this money into pre-K funding.
- Set the target for the minimum wage to at least $25/hour, phased in over perhaps ten years.
As near as I can tell, Democrats get a chance about once per decade to really get things right. This year, we get maybe a couple chances, with a couple opportunities to pass legislation through reconciliation.
If we don’t get it right, we may be waiting for a long, long time to get another chance.