Democrats Go All In on $1,400 Checks

By Yuval Rosenberg

Democrats Roll Out Plan for $1,400 Relief
Payments

Democrats are moving ahead with their plans to send $1,400
coronavirus relief payments to millions of Americans. House
Democrats on Monday rolled out their proposal, which calls for
sending the full payments to individuals earning up to $75,000 and
couples making up to $150,000, rejecting calls from Republicans and
some moderates in their own party to scale back eligibility.

Democrats had debated limiting eligibility to individuals making
up to $50,000 and couples earning up to $100,000, a structure
supported by Sen. Joe Manchin (D-WV), who will be a key vote in the
evenly divided Senate as Democrats seek to pass the relief package
with a simple majority.

But as lawmakers in both parties have pushed to keep
high-earning households from receiving the payments, the new
Democratic
proposal would phase out payments to individuals
earning between $75,000 and $100,000 (and couples making twice
those amounts). Individuals making $100,000 a year and couples
making $200,000 would not get relief payments under the plan
unveiled by House Ways and Means Chairman Richard Neal (D-MA).
Unlike earlier relief payments, both children and adult dependents
would qualify.

President Joe Biden said Tuesday that he agrees with the $75,000
threshold set by House Democrats.

Why it matters: “The broadening of stimulus payment
eligibility among middle-class households is the latest sign that
Democrats are moving ahead without Republican support,” The
Washington Post’s Jeff Stein and Erica Werner
report.

Some other details from the Democrats’ aid package:
Democrats also unveiled details of an
expanded child tax credit, which we told you about
yesterday, as well as an extension of federal supplemental
unemployment benefits of $400 a week, up from the current $300,
through the end of August (one month less than Biden’s plan
initially proposed). Democrats also included a minimum wage hike to
$15 an hour and a two-year increase in
Affordable Care Act premium subsidies.

Poorest Americans Would Get Major Income Boost
From Covid Relief Bill: Report

Three anti-poverty provisions in the legislation released this
week by the House Ways and Means Committee would provide a 33%
income boost on average for the poorest 20% of Americans, according
to an
analysis by the left-leaning Institute on Taxation
and Economic Policy.

Part of the $1.9 trillion Covid relief bill currently being
drafted by Congress, the provisions would provide another round of
relief payments of $1,400 and expand both the child tax credit and
the earned income tax credit programs. Under the expanded child tax
credit, eligible families would receive $3,000 per child between
the ages of 6 and 17 and $3,600 for children under 6, paid out in
monthly installments. The expanded earned income tax credit would
provide more robust aid, especially for childless adults,
increasing payments by as much as 200%.

For households in the lowest 20% of the income distribution –
with an upper limit of $21,300 and average earnings of $10,900 per
year – the three provisions would provide more than $3,000 in aid
on average, ITEP said. Breaking it down by program, the relief
payments would provide a 20.3% boost to income on average, the
expanded child tax credit would provide 9.7%, and the earned income
tax credit would deliver another 3%.

Households higher in the income distribution would receive
smaller payments on a relative basis, with those in the middle
receiving a boost of about 6.6%.

Overall, all eligible families would receive an average payment
of $3,290 for the year, based on 2020 household data.

Charts of the Day: The US Goes Big

If signed into law, President Biden’s $1.9 trillion Covid relief
package will be “the second-largest injection of federal cash in
U.S. history,” second only to the $2.2 trillion Cares Act last
March, Bloomberg
reported Tuesday. The chart below shows increases
in deficit-financed federal spending going back to the 1930s and up
to last year’s bill, measured as a percentage of the economy.

Mark Zandi, chief economists at Moody's Analytics,
commented last week on the remarkable scale of federal
Covid-related spending, saying that if Biden’s proposal passes,
“the total amount of discretionary deficit-financed fiscal support
provided to the economy during the pandemic will come to well over
$5 trillion, equal to almost 25% of the nation’s pre-pandemic
GDP.”

As the chart below indicates, the U.S. response to the
pandemic would be the largest in the world, with only a handful of
countries spending more than 10% of GDP to address their Covid
health and economic crises. Zandi also notes that the total U.S.
fiscal response to Covid would dwarf the response to the Great
Recession, since the 2009 American Recovery and Reinvestment Act
“amounted to substantially less than 10% of the nation’s pre-crisis
GDP.”

Send your feedback to yrosenberg@thefiscaltimes.com.
Follow us on Twitter:
@yuvalrosenberg,
@mdrainey and
@TheFiscalTimes. And please tell your
friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis