Part two of 101PC’s look at federal policy in 2021: Notes on the rescue plan and what it includes.
Last week, Joe Biden released the first half of his comprehensive strategy to fight the pandemic and stimulate the ailing U.S. economy—the American Rescue Plan. The 19-page memo can be found here.
There’s been an abundance of analysis on the plan’s most notable items (like stimulus checks), but I wanted to provide a condensed recap of the plan in its entirety and then focus on some big and small things it includes.
Here is the recap of the plan, which will save you 14 pages of reading. Below is a list of the most notable provisions in this plan, plus some notes.
The whole plan would cost $1.9 trillion and includes:
- At least $160 billion for tackling the virus
- $1,400 stimulus checks
- Increase to unemployment boost (to $400 extra per week) and extension of this boost and the Pandemic Unemployment Assistance through September
- Expansion of tax credits for earned income, children, and child care
- Expansion of SNAP, WIC, and other food assistance programs
- Rental assistance and extension of moratorium on federally subsidized housing through September
- A suite of worker/workforce policies, including an increase to the federal minimum wage and renewal of emergency paid sick leave benefits
- Small business aid
- At least $350 billion in direct relief for state, local, and tribal governments
- $170 billion to assist schools (including colleges) in reopening safely
Notes on the Rescue Plan
Here are three buckets of notes I have for this plan, from “we need to do more” to “good job, team.”
First, we should make many of these emergency changes permanent.
More specifically, we should standardize Biden’s emergency changes to the earned income and child tax credits (EITC and CTC, respectively), unemployment insurance (UI), and the Supplemental Nutrition Assistance Program (SNAP).
The EITC is a bit of a policy darling—a tax credit meant to support low-income individuals and families while incentivizing work—but it also has a host of problems:
- The max credit for adults without eligible kids (“childless adults”) is very small compared to the credit for adults with one kid.
- The credit isn’t universally available. Those younger than 25 and older than 67 are ineligible, as are people who “make too much” (e.g., childless adults who make more than $16,000 a year).
- Research is split on determining if the credit actually helps incentivize work. To be clearer, the EITC has been shown to incentive keeping a job but not necessarily finding one or “increasing output”/being more productive at work. (The Biden plan doesn’t address this point.)
Similarly, the CTC is also a popular benefit with some concerning cutouts. It excludes those making less than $2,500 a year, and single parents making between this amount and $30,000 don’t get a full credit.
(Sources used to discuss these credits are shared at the end.)
Meanwhile, UI and SNAP before the pandemic were woefully inadequate. UI systems in many states have been bogged down by new claims since the start of the pandemic, and weekly payouts in most states (excluding the federal boost) aren’t stellar. It’s a similar story for SNAP, which averaged about $1.39 per meal for participants while meals themselves cost double that amount on average.
Proposed changes to the two tax credits and extensions of the existing ones for UI and SNAP are objectively correct moves, but they aren’t really full victories as their pre-pandemic versions were either inefficient or paltry, or both. These improvements should be made permanent.
(And this is to say nothing about the paid sick leave program included in this plan, a policy that should have been universal before the pandemic!)
Second, relief for governments, schools and transportation agencies is a mix of half-loaves and full loaves.
If you’ve read any 101PC stuff on economic stimulus, you’re fully aware of how important I find direct relief for state, local, and tribal governments to be. So when I saw $350 billion included for these governments, I said “FINALLY” loud enough to startle the neighbor’s dog.
That being said, this won’t cover the growing holes in state and local government budgets. (There’s $20 billion specifically for tribal governments. I’m not sure if this is separate from the $350 billion or included, nor am I sure if it’s enough.) After all, the National Governor’s Association asked Congress for $500 billion last year—just for state governments—while local government associations separately advocated for $250 billion for counties, municipalities, and small govs. Additionally, the AFSCME renewed its request for $1 trillion for states and local governments to avoid cuts to services and layoffs. Many of the other provisions in this rescue plan will help in addition to the direct relief, but the need for more remains clear.
Conversely, the $170 billion for schools to safely reopen seems at least closer to sufficient. Most of the money ($130 billion) will be spent on distributing PPE, making social distancing in schools and on buses easier, improving ventilation in facilities, improving access to school nurses, improving virtual access for those who can’t work or attend in person, and provide resources for large-scale summer school programs to offset educational losses from the last several months.
Additionally, the $20 billion for transportation is an obvious win for agencies and the people who rely on them. The American Public Transportation Association and its associates asked for $32 billion in assistance; between this plan and the $14 billion from the December stimulus package, that amount is reached. Without it, transportation agencies will be forced to layoff chunks of their respective workforces while making significant cuts to their services. (If you hate how long your local subway or bus route takes now, just imagine how bad it would be in the future following such cuts.)
Third, let’s hear it for these rescue plan provisions.
- A $25 billion “stabilization fund” for child care providers. With this, struggling providers can remain in business and their services can remain affordable for working parents. There’s also an additional $15 billion for the Child Care and Development Block Grant, which subsidizes child care costs for parents who work or attend school.
- Inclusion of the FEMA Empowering Essential Deliveries (FEED) Act. Originally proposed last May, it would have the federal gov connect restaurants and other suppliers with families in need of fresh and nutritious foods. Additionally, Biden’s plan would mobilize out-of-work restaurant employees to do this—basically a “food access civilian corps.”
- Resources for state work share programs. The rescue plan doesn’t specify much with this item—there’s no dollar amount included, for instance. Still, these programs are comically underused in the U.S. They would be a big help to employers in averting permanent layoffs, and otherwise preserve the existing workforces in sectors like manufacturing if they were used more widely.
Will this plan be implemented?
Passing this plan seems like a no-brainer since it (at least partially) addresses many of the concerns we’ve been hearing from experts and advocates within different policy spheres.
The same was said about the House’s HEROES Act last year, which was not passed.
Despite the political landscape changing since then and this plan being “maddeningly obvious,” it runs into several walls. To start, its inclusion of a federal minimum wage increase will 1) make it more of a target for conservative and even some moderate lawmakers in Congress, and 2) prevent it from being passed through budget reconciliation. If this particular item was taken out, then this story changes.
Then again, if Democrats are steadfast in keeping the increase, we could see the fight over the Senate’s filibuster rule—which has prevented many other large pieces of legislation from passing in the past—take place within the next few months.
In any case, get your popcorn ready.
This rescue plan acknowledges the hardships the pandemic and recession have placed on working Americans, including the disproportionate toll on low-income people, people of color, and those with children. It will undoubtedly see some changes when Congress begins pushing it through both chambers—we likely won’t see the minimum wage increase. Nevertheless, we should still expect (and demand) the bulk of the direct aid to individuals, families, businesses, and governments. And we should look forward to the second part of Biden’s stimulus strategy, which could very well include large-scale jobs programs.
Check out the previous post about broader expectations for federal policy in 2021 here.
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Sources on tax credits
- The Tax Policy Center released a paper in 2019 outlining the best ways to improve the EITC, which you can view here.