President-elect Joe Biden’s plan to “rescue” the American economy proposes $1.9 trillion in federal spending to fund a national vaccine program, boost unemployment benefits, provide additional direct payments to Americans, assist state and local governments, and more. (See more details here.)
“During this pandemic, millions of Americans, through no fault of their own, have lost the dignity and respect that comes with a job and a paycheck,” Biden said in a speech Thursday night. “The very health of our nation is at stake.”
Economists were largely supportive of the plan. Mark Zandi and Bernard Yaros of Moody’s Analytics projected that Biden’s proposal, if enacted in full, “would provide a large boost to the economy,” leading to GDP growth of nearly 8% this year and 4% next year, while restoring nearly full employment by fall 2022.
Still, analysts at Moody’s and elsewhere were skeptical that Biden’s full plan can pass, given Republican opposition, slim Democratic majorities in Congress and potential procedural hurdles. A number of analysts said they expect the final price tag will be about half of the $1.9 trillion Biden proposed. Economists at Goldman Sachs raised their projections for additional fiscal support likely to be enacted from $750 billion to $1.1 trillion and said that they expected to boost their economic forecast as well.
Here’s how some other analysts, pundits and politicians are reacting to the Biden plan.
A new fiscal era for Democrats: Centrist and liberal Democrats welcomed the proposal, with some to the left of Biden expressing relief that the plan was big, ambitious and unencumbered by concerns about increased federal borrowing. Bloomberg’s Jonathan Bernstein wrote:
“Biden’s speech drove the final nail into the coffin of mainstream liberal attempts to make Democrats the party of fiscal restraint, efforts that began in earnest after Republicans adopted big-deficit policies at the beginning of Ronald Reagan’s presidency in 1981. For almost 40 years, Democrats tried and failed to convince journalists and pundits that they were the party that cared about federal budget deficits. ... That seems over.”
A big proposal for a big problem: “This package is at the scale of the problem,” said Heidi Shierholz of the liberal Economic Policy Institute. State and local aid, unemployment insurance expansions/extensions, $400 billion to fight COVID, and more. They got the economics right. This is a very bright spot in a difficult time.”
Good bang for the buck: “Parts of President-elect Biden’s plan target constraints to faster economic recovery, including funding for vaccine rollout, testing and treatments, areas likely to have high bang for the buck,” said Andrew Husby of Bloomberg Economics. Extending unemployment benefits past the mid-March cutoff will also ease burdens on the most vulnerable parts of the population.”
Better too big than too small: “One lesson from the financial crisis is that you want to be careful about doing too little,” said Glenn Hubbard, chief economist in the George W. Bush administration.
Big Business supports – up to a point: Some traditionally conservative groups such as the U.S. Chamber of Commerce also expressed support. “[W]e applaud the President-elect’s focus on vaccinations and on economic sectors and families that continue to suffer as the pandemic rages on,” the Chamber said in a statement. “We must defeat COVID before we can restore our economy and that requires turbocharging our vaccination efforts. We look forward to working with the new administration and Congress on the details and in ensuring that any additional economic assistance is timely, targeted, and temporary.”
And at least one Republican, Sen. Marco Rubio of Florida, said he could get behind the call for $2,000 relief checks for most Americans, though not other parts of the proposal.
Some early GOP resistance: Politics being politics, though, not everyone was enthusiastic about the plan. Noted fiscal conservative and former Club for Growth president Sen. Pat Toomey (R-PA) said Friday that Biden’s proposal would be “a colossal waste and economically harmful,” and decried the recent growth in government spending. “In less than one year, Congress has spent $3.4 trillion on direct COVID relief aid and nearly doubled the entire federal budget,” Toomey said.
The Koch-backed Freedom Works advocacy group also criticized the “leftist policies” in Biden’s proposal. “The recently announced ‘American Rescue Plan’ appears to be less about rescuing American families from their current economic problems and more about using the COVID-19 crisis as an excuse to ram through a laundry list of leftist policies,” the group said.
What comes next: The comments from the right suggest that Biden may have a hard building support for the proposal among Republicans. The negotiations ahead could stretch out for weeks or months. “This is an opening bid,” Bill Hoagland of the Bipartisan Policy Center told the Associated Press. “There is a sense from Republican staff that $1.9 trillion is a little rich. But President-elect Biden is an astute student of the Senate and negotiations and I have a feeling that they would expect this to be the top and not everything would be accepted.”
If negotiations go nowhere, Democrats could try to use budget reconciliation process to pass all or part of Biden’s plan with a 50-vote margin in the Senate. Analysts at Goldman Sachs poured cold water on that option Friday.
“While Democratic leaders might use the budget reconciliation process to circumvent potential Republican opposition, there are two arguments against doing this,” the Goldman analysts wrote. “First, recent political events put a greater premium on finding areas of bipartisan support, if possible. Second, the reconciliation process has never been used before to pass discretionary spending, and it appears that around half of the proposal—state fiscal aid, education grants, public health spending, to name a few areas—falls into this category. While it is possible that congressional Democrats might find a way to do this, it looks more likely that the need to find bipartisan support might constrain the size of the package.”