Biden Willing to Limit Who Gets $1,400 Checks

Biden Willing to Limit Who Gets $1,400 Checks

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Plus, what kind of boost would Biden's plan deliver?
Wednesday, February 3, 2021

Biden Says $1,400 Checks Are a Promise He Won’t Break — but He’s Willing to Limit Who Gets Them

President Joe Biden told House Democrats Wednesday that he was open to further limiting eligibility for his proposed coronavirus payments, but that the size of the $1,400 payments was a campaign pledge he can’t break.

“I’m not going to start my administration by breaking a promise to the American people,” Biden reportedly said on a call with the House Democratic Caucus.

Biden told his fellow Democrats that he’s “not married” to a specific dollar figure for the next Covid relief package and that they could make compromises in a number of areas, but he urged his party’s lawmakers to stick together and act quickly. He also said that the $618 billion Republican counteroffer to his $1.9 trillion proposal “was not even in the cards.”

White House Press Secretary Jen Psaki on Wednesday sharply criticized the plan released this week by 10 Republican senators, saying that it doesn’t go far enough in key areas like direct payments, unemployment benefits, aid to state and local governments and eviction protections. She added that Biden and Senate Democrats were united on the need to “go big” with the next Covid relief package.

Senate Minority Leader Chuck Schumer (D-NY) also said that Democrats were in agreement on the need to “go big and bold.”

"We must not, must not, repeat the mistakes of the past and do too little, too reluctantly, and too late," he said in a speech on the Senate floor.

A split inside the White House?
Psaki also pushed back on claims from some Senate Republicans that Biden was inclined to negotiate a compromise deal with the GOP but was being kept from doing so by Democratic congressional leaders and White House staff.
Senate Minority Leader Mitch McConnell (R-KY) and a number of other GOP senators have floated that theory following Biden’s Monday meeting with the 10 Republicans behind the $618 billion plan.

“Our members who were in the meeting
felt that the president seemed to be more interested in [a compromise] than his staff did, or it seems like the Democratic leadership in the House and the Senate,” McConnell said Tuesday. In a speech on the Senate floor Wednesday, he criticized Democrats’ preparations to pass a relief package via a party-line vote, and added: “The new president talks a lot about unity, but his White House staff and Congressional leadership are working from the opposite playbook.”

In an Oval Office meeting with Schumer and Senate Democratic leaders, Biden said he thought the relief package would ultimately win some Republican backing. Psaki later told reporters that the suggestion of a split between Biden and his advisers is “ludicrous.”

What’s next:
Congressional Democrats are speeding ahead with their plans. The House voted 218-212 Wednesday evening to pass a budget resolution with reconciliation instructions for Biden’s $1.9 trillion relief package. The Senate is moving toward a “vote-a-rama” on a slew of amendments to the budget resolution and then a vote on the resolution itself later this week.

What Kind of Boost Would Biden’s Plan Provide?

As Biden pushes for his $1.9 trillion rescue package and the $1,400 payments it calls for, a new analysis by the Penn Wharton Budget Model estimates that the president’s full plan would boost GDP by 0.6% this year — much lower than some other analyses have found — and that the relief checks would largely be saved rather than spent.

The Penn Wharton report also says that the additional public debt incurred under Biden’s plan would reduce GDP by 0.2% next year and by 0.3% in 2040.

The analysis estimates that nearly all of the bottom 80% of households by income would get aid under the Biden plan, with the bottom 40% getting an average of more than $3,000. But the model finds that 73% of the $1,400 relief payments will go straight into household savings, with just 27% spent, minimizing any stimulus from those “stimulus checks.”

Psaki said the new Penn Wharton analysis was “way out of step” with most studies of Biden’s plan. “The analysis concludes that our economy is near capacity, which would be news to the millions of Americans who are out of work or facing reduced hours and reduced paychecks,” Psaki said. “So this starting place means their model is way off.”

The White House has been touting analyses from the Brookings Institution, Moody’s Analytics and J.P. Morgan, all of which have found that Biden’s plan would provide a much larger economic jolt.

The Brookings analysis, for example, found that Biden’s proposed package would boost GDP by nearly 4% as of the end of this year and 2% at the end of 2022. Moody’s economists said Biden’s plan would raise real GDP growth to nearly 8% this year and almost 4% in 2022, nearly restoring full employment by fall of next year. An analysis from S&P Global earlier this week said that Biden’s plan would restore the economy to pre-pandemic levels by summer and bring unemployment below 4% by the middle of 2023, a year earlier than it currently projects.

GOP plan wouldn’t return economy to pre-pandemic levels, Brookings study says:
A new analysis by Brookings’ Wendy Edelberg and Louise Sheiner finds that the $618 billion Senate Republican proposal would boost the economy somewhat but still leave it below its pre-pandemic path through the end of next year.

The study estimates that the GOP plan would raise GDP by 1.6% in the fourth quarter of 2021 and by 0.8% in the fourth quarter of 2022. "This would leave GDP about 0.8 percent below its pre-pandemic trajectory at the end of both 2021 and 2022," the authors say.

Biden’s plan, they write, would raise GDP by 3.6% at the end of 2021 and 2.1% at the end of 2022, lifting economic growth above its pre-pandemic path. The authors say that the faster growth “would likely put upward pressure on inflation, which the Federal Reserve has said would be welcome.” At the same time, a temporary economic surge could also create the risk of “a difficult economic period after 2021.”

Number of the Day: One in Three

About a third of small businesses in a Federal Reserve survey said that without government aid, they probably won’t make it until the end of the pandemic recession, The New York Times reported Wednesday.

The Fed survey of roughly 10,000 small businesses was conducted last fall, before Congress passed a $900 billion relief bill in December but also before another wave of business slowdowns and shutdowns this winter driven by the resurgent coronavirus.

The Paycheck Protection Program, one of the primary means for getting federal aid to small businesses, appears to have had a noticeable effect on the business owners, the survey showed, with 77% of those who received forgivable loans saying they tried to rehire employees, compared to 44% of those who were turned down for funds.

“The new data comes at a time when some economists are questioning the efficiency of the small-business loan program as a job retention tool,” the Times said. “Most of the $325 billion in small-business assistance in the relief package approved by Congress in December is earmarked for a modified version of the Paycheck Protection Program, but future small-business relief may take a different form.”

Treasury Slashes Borrowing Estimate

The federal government spent less than expected at the end of 2020, so the U.S. Treasury earlier this week sharply reduced its estimates for borrowing in the first three months of 2021.

The Treasury now estimates that it will borrow $274 billion through March, $853 billion less than the $1.1 trillion it expected to borrow in its November estimate. Officials expect to have a cash balance of $800 billion at the end of the quarter.

Last fall, the Treasury had assumed there would $1 trillion in additional relief and stimulus spending at the end of 2020, but that failed to materialize, with Congress passing a $900 billion package only in the final few days of the year. That left the Treasury with a higher-than-expected cash balance of $1.7 trillion, reducing the need to issue more debt.

The Treasury estimates do not include possible spending from another stimulus bill, and the outlook could still change significantly. “There’s just a wide range in what is being proposed in potential future legislation,” a Treasury official told reporters.

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