The Student‘s White House Correspondents on what President Biden’s American Rescue Plan means for the US economy
With a bill widely touted as a pastiche of the New Deal, US President Joe Biden is one step closer to becoming Franklin D. Roosevelt’s spiritual successor. A bold endeavour to jolt the US economy into action, President Biden signed into law last week one of the most ambitious legislative efforts at fiscal stimulus in the post-war period.
Carrying a stiff $1.9 trillion price tag, the ‘American Rescue Plan’ gained totemic status on the campaign trail, and has been the cornerstone to the President’s legislative efforts in the past 50 days. The legislation sets aside hundreds of billions of dollars for state governments to mitigate the pandemic’s crippling impact, including $130 billion for schools, $14 billion for the distribution of the vaccine, and $12 billion for nutrition assistance and struggling businesses.
Notably, the legislation contains long-clamoured Democratic initiatives. In addition to $1,400 direct payments to Americans making under $75,000 a year, the bill also widens eligibility for the Affordable Care Act, expands child benefits by over 50 per cent, and contains a $31 billion investment in Native American infrastructure, the largest such infusion of dedicated resources to Native communities in US history.
President Biden has eyed the 4th July as ‘Independence Day’ from the pandemic, targeting the date as a proposed complete return to normality. Neither the legislation’s capacious remit nor the expected benefits should be understated. Yet, the pandemic has thrown the US economy into turmoil: analysts suggest Mr Biden should be wary of being myopic, for full economic recovery may be years away.
At 6.2 per cent, unemployment rates still soar above pre-pandemic levels, and fall sharply along racial lines. Black and Latino men and women have lost most from the economic tolls of the pandemic – nearly 10 per cent of Black American men are unemployed, a rate double that of White men. According to analysis from the non-profit Feeding America, one in five Black individuals, and one in eight American children, will likely experience food insecurity over the next year.
Mr Biden is placing a hefty bet on the poorest Americans to revitalise an economy in decay, but forecasts suggest the President’s wager will bare fruit. A study by Columbia University expects the stimulus package to cut poverty by a third, and lift more than 5 million children out of destitution, cutting child poverty by more than 56 per cent. Research from the Brookings Institute predicts the stimulus will boost economic activity by 4 per cent, outperforming pre-pandemic levels by 1 per cent.
Favourable analysis extends beyond the bill’s domestic benefits. Mr Biden’s emphasis on reconstructing the most vulnerable elements of the economy, through fiscal stimulus and funding the vaccination drive, has led the OECD to upgrade its outlook for global growth. It forecasts that the legislation will add one whole percentage point to worldwide GDP in 2021.
There’s no denying it, the American Rescue Plan represents a major victory for the Biden administration. President Biden came to office promising to turbo-charge pandemic relief and reboot the economy. With US economic growth now likely to outpace even China between April and September, the President has wasted no time enacting his pledge.
For the President, this is more than just a bill: it is representative of his entire economic agenda. Mr Biden is placing ordinary Americans at the heart of economic recovery. In distributing funds directly into the pockets of those worst-hit by the pandemic, the American Rescue Plan marks a major shift away from the Trump-era tax cuts that benefited the country’s wealthiest citizens.
Directing cheques at those struggling to make ends meet, the Biden administration is hoping to power rapid economic growth through consumer spending. The Tax Policy Centre estimates that stimulus cheques alone will increase the household incomes of America’s bottom fifth of earners by over 20 per cent. By contrast, President Trump’s tax cuts increased this same group’s earnings by less than one per cent.
Mr Biden’s focus on America’s most vulnerable is proving to be a popular move. A Pew Research Center study found 70 per cent of US adults support the legislation, while a Morning Consult poll placed Republican-voters support for the bill at 60 per cent.
However, the President is not taking the bill’s immediate popularity for granted. Learning from the mistakes of the 2010 midterm elections, the Biden administration is keen to make the benefits of the bill clear to the American electorate. Mr Biden still attributes the Democrat’s loss of the House of Representatives to President Obama’s failure to clarify the economic benefits of his stimulus bill.
At more than double the price of the 2009 stimulus bill, the Biden administration cannot afford to repeat the same mistake. On Friday he made clear that the American Rescue Plan “is about giving the backbone of this nation … a fighting chance.”
Not everyone is smiling at the bill’s passage. No Congressional Republican voted to pass the bill – an embarrassing outcome for a President who promised Congressional unity built on decades of experience on Capitol Hill. Republican Representative Marjorie Taylor Green decried the bill as a “massive, woke, progressive, Democrat wish list.”
House GOP leader Kevin McCarthy echoed Thatcher in stating “socialism will eventually run out of other people’s money.” Republicans also sought to slow the bill’s passage through delay tactics. With such unbridled partisanship, the bill has clearly defined the contours of Congressional opposition. Mr Biden will have to tread carefully if he wants to deliver his legislative agenda in its entirety.
Mr Biden’s bill doesn’t come without risks. Some economists fear such a large stimulus could trigger debilitating inflation. If the Federal Reserve was forced to slam the brakes on inflation by raising interest rates, any bill-initiated economic growth could become inconsequential. The President has certainly taken a gamble. If it fails, Mr Biden will have torpedoed his own legislative dreams. If it pays off, it’ll be celebrated as the most progressive law passed in generations.
Image: Rufus Lee-Browne