Thursday, the president-elect will unveil a pandemic relief plan worth ‘trillions of dollars’; more checks for households, more money for states
By Jacob M. Schlesinger – The Wall Street Journal.
President-elect Joe Biden says he plans to detail Thursday the first major legislation of his incoming administration: a massive new stimulus and relief package meant to address the continuing economic fallout from the Covid-19 pandemic.
Mr. Biden has called the $900 billion relief plan Congress passed three weeks ago a mere “down payment” on what is needed. Here’s what we know about the new administration’s emerging plan:
How big?
“It will be in the trillions of dollars,” Mr. Biden said Friday, arguing that more spending sooner will reduce the long-term economic damage from the shutdowns. Earlier that day, the Labor Department announced said that job creation had stalled in December and that the U.S. economy lost more than nine million jobs in 2020, the worst labor-market performance in records dating to 1939. The first broad pandemic relief plan, enacted by Congress in March, cost roughly $2 trillion.
Will there be more direct payments to households?
Mr. Biden and Democratic legislative leaders have repeatedly endorsed $2,000 direct payments to most Americans, calling the $600 checks in the December bill insufficient. The Biden plan would likely add $1,400 to the earlier payments to reach $2,000 total.
What else will be in the plan?
Mr. Biden said Friday there would be “billions of dollars” to speed up vaccine distribution, “tens of millions of dollars to help reopen our schools,” and “tens of billions of dollars” to allow state and local governments to keep paying teachers, police officers and health workers. He cited extending unemployment insurance and rent relief, and suggested he wants to modify the small-business assistance program to ensure more aid for minority-owned businesses. He also reiterated his support for raising the federal minimum wage to $15 an hour from the current $7.25, though it is unclear if that will be part of the relief package.
What about tax increases?
During the campaign, Mr. Biden endorsed a number of tax increases on companies and upper-income households. Those include higher income taxes and higher capital-gains taxes on individuals making more than $400,000 and a partial rollback of President Trump’s sharp reduction in the corporate tax rate. The aim would be to help pay for new spending and rebalance the tax code to reduce economic inequality. But Mr. Biden has also said that short-term emergency spending doesn’t require offsetting tax increases or spending cuts and can instead be funded through borrowing. So it is unlikely he will attach tax increases to his stimulus plan.
Can another stimulus package pass Congress?
With Democrats slated to control both the Senate and House, Mr. Biden has a decent chance of getting the majorities needed to pass some stimulus. And some Republicans have endorsed parts of his plan, such as the additional direct payment.
But the administration can’t afford to lose many Democratic votes. The Senate will be split 50-50, with Vice President-elect Kamala Harris breaking ties. Some moderate Democrats have expressed concern about yet another big package. West Virginia Sen. Joe Manchin has signaled skepticism about another big check for households. That could make it difficult to enact that provision unless Mr. Biden can find a way to alleviate the lawmaker’s worries, or find offsetting GOP support.
The new administration also needs to choose a legislative strategy for navigating the Byzantine rules of the Senate. Invoking a process known as “reconciliation” would mean the package would need only a simple 51-vote majority, rather than the 60-vote supermajority required to overcome a likely filibuster. Winning 51 votes is obviously easier than 60. But parliamentary experts say that any plan qualifying for that smoother path would need to be more limited, likely not including Biden priorities such as aid for state and local governments.
How fast will Congress act?
During the 2007-09 recession in 2009, a Democratic-controlled Congress passed the $787 billion American Recovery and Reinvestment Act in time for President Obama to sign it less than a month after his inauguration. But Democrats had much bigger majorities then. When George W. Bush took office in January 2001 with a 50-50 Senate, the big tax cut he urgently sought—invoking the recession triggered by the tech bubble collapse—didn’t reach his desk until June.
At the beginning of the pandemic, large bipartisan majorities in both houses passed the $2 trillion Cares Act in time for Mr. Trump to sign it on March 27, two weeks after he had declared the pandemic a national emergency. But getting a second major relief package through took months of haggling.
Will the Biden plan be one big program, or broken into pieces?
Mr. Biden described his plan as “an entire package,” but legislative strategists say it could end up being proposed to Congress in separate parts. One could focus on a quick infusion of money—additional aid, funding to accelerate Covid-19 vaccines and an extension of expiring aid for unemployed workers and small businesses—to sustain the economy until wide vaccine distribution allows it to reopen. Later legislation would emphasize more of Mr. Biden’s “Build Back Better” campaign platform, with big-ticket items such as infrastructure spending and expanded health care addressing what he says are longer-term economic and social problems exposed by the pandemic.
Does anybody still care about the budget deficit?
Mr. Biden appears to have eased his longstanding concerns, influenced by the growing body of work by left-leaning economists—including his choice for Treasury secretary, Janet Yellen —arguing that the prolonged period of historically low interest rates has reduced the dangers of red ink. “With interest rates as low as they are…every major economist thinks we should be investing in deficit spending in order to generate economic growth,” he said last week. His aides say he still believes that longer-term spending should be paid for, but he hasn’t emphasized that recently.
Some centrist Democrats remain more vocal about the deficit. The 18-member Democratic Blue Dog Coalition in the House last month urged Mr. Biden to limit new pandemic spending, saying “we must recognize that our fiscal path is unsustainable.” Republicans who played down deficit worries when enacting Mr. Trump’s 2017 tax cuts are also now warning Mr. Biden to mind the books.
Mr. Trump pledged during the 2016 campaign to eliminate the deficit and pay down the debt. But deficits rose each year of his administration, even before the pandemic. Once the coronavirus hit, the federal deficit tripled as a share of the economy, and the debt is now larger than annual economic output for the first time since World War II.
What do economists think about the Biden plan?
Many indications suggest the economy deteriorated at the end of 2020, in part due to delays by Congress and Mr. Trump in completing the latest relief package. So most economists agree a new infusion of cash is helpful. But some say the December plan may be enough to keep distressed sectors such as restaurants and hotels afloat until growth rebounds.
“I think it is very premature to be talking about another trillion-dollar-plus package,” says Michael Strain, an economist at the center-right American Enterprise Institute, who supported the earlier relief plans and helped craft some of the measures in them. He says the conventional view of forecasters is that the economy will strengthen every quarter this year. Pushing another package through, he warns, risks “stimulus fatigue” that could hamstring Mr. Biden’s future plans.
Featured article licensed from the Wall Street Journal.
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