The US Is About to Get a New Top Tax Break

By Yuval Rosenberg

The Next Phase in the Stimulus Fight: Public Opinion

The House is set to vote on Democrats’ $1.9 trillion Covid
rescue plan on Friday, sending the package to the Senate, where it
is expected to pass — likely with some revisions, and with zero
Republican support — before long. Democrats are planning to have
the legislation through Congress and ready for President Joe
Biden’s signature ahead of a March 14 deadline, when enhanced
unemployment benefits for millions of Americans are currently
scheduled to expire.

So the fight over this round of pandemic relief will be over
within weeks — only it is certain to live on for years to come.

As The Washington Post’s Aaron Blake
notes, Republicans appear to be taking a large
political risk by opposing a package that polling finds is broadly
popular with the American public, including among GOP voters. “That
said,” Blake says, “the passage of the bill, in many ways, is just
the beginning of the political (and electoral) fight.”

As the 2009 stimulus package and the 2017 tax cuts demonstrated
in recent years, public opinion on massive legislation can change
over time — “both demonstrate that a big bill’s polling numbers
upon passage can be oversold,” Blake writes. “In the case of
stimulus, people generally like throwing money at a major problem
they recognize, but then the task is making sure that it’s
well-spent and that people understand that. … The real test will be
how the [Biden relief] bill is perceived to have worked if it
passes.”

In pushing for the Covid package, the Biden administration has
been relying on lessons learned from the 2009 stimulus fight and
the battle over Obamacare. That extends to selling the plan to the
public, with the White House reportedly focused on building support
among state and local officials and having members of the
administration make the case for the package in appearances on more
than 70 local news stations.

“Biden and his lieutenants are pitching the giant bill to
mayors, governors, state treasurers and tribal leaders, along with
workers and the business community,” Bloomberg’s Nancy Cook and
Justin Sink
report. “The administration is focusing on roughly
13 key states -- including Ohio, Pennsylvania, West Virginia,
Arizona and Georgia.”

That outreach is meant to ensure that the relief plan can get
votes it needs in a closely divided Congress and lay the groundwork
for Biden’s next big multi-trillion-dollar economic package,
focused on infrastructure and climate change. But election politics
also play a role: “The approaching battle over Biden’s second
economic program is just one reason the public-relations effort
isn’t over,” Cook and Sink write. “With mid-term congressional
elections next year, the White House will need to keep making the
case it did the right thing with its giant $1.9 trillion
emergency-spending bill, and build credit for the recovery.”

John Podesta, a former chief of staff to President Clinton and
former adviser to President Obama, reinforced that public relations
purpose. “I don’t think the fact that you have got polling
indicating American people are supportive of the relief is, in
essence, the end of the story,” he told Bloomberg News. “They will
really have to sell the fact they are good stewards of the economy,
and they are coming behind this with another big package of
investment.”

And they’ll likely have to keep selling it at least until
November 2022.

About That $1 Trillion in Unspent Covid Relief Money

Some critics of President Biden’s $1.9 trillion relief bill
charge that it is too generous, citing among other things the
hundreds of billions of dollars that remain unspent from earlier
relief efforts.

“There's over a trillion dollars of money unspent from previous
relief bills that were bipartisan," Republican Rep. Steve Scalise
of Louisiana
said last week. “The money's still sitting in a
bank account and we're going to pass $1.9 trillion of additional
spending to bail out failed states, to raise the minimum wage?”

Donald Schneider, an analyst at market research firm Cornerstone
Macro who served as chief economist for the GOP House Committee on
Ways and Means, recently
tallied the unspent funds and came up with a total
of more than $1 trillion (see the chart below). Congress authorized
a bit more than $4 trillion in Covid relief spending in the Cares
Act and the December relief bill, but has disbursed only about $3
trillion so far.

However, the unspent funds are not quite what critics seem to
think. According to the Committee for a Responsible Federal Budget,
the nonpartisan group that provided the data Schneider used in his
analysis, “the question of how much relief money remains is a
complicated one.” Most of the money is allocated and will be spent
in the future, CRFB says,
and a small amount will likely never be spent.

CRFB’s Marc Goldwein said Wednesday that small business
assistance and Medicaid account for much of the undisbursed funds,
with the payout for medical expenses occurring over a timeframe of
several years. Referring to the Paycheck Protection Program (PPP)
and Economic Injury Disaster Loans (EIDL) for small businesses,
Goldwein
tweeted: “Lots of PPP still to issue, slow/low
demand for the EIDLs, and future Medicaid payments to states make
up a lot of what’s left available.”

The Child Tax Credit Is Set to Become the Biggest Tax Break in
the US

The Child Tax Credit started out in 1997 as a “relatively
modest” tax break for people with children, but with Democrats
pushing to expand it as part of the Covid relief package, it’s now
set to become the largest break in the tax code, Politico’s Brian
Faler
writes:

“Few tax breaks have grown like the Child Tax Credit, with
lawmakers beefing up the provision nine times since it was
created.
“Democrats’ plans would bring its total annual cost to well
over $200 billion annually, dwarfing better-known breaks like the
mortgage interest deduction and eclipsing the annual budgets of
many federal agencies.
“A big reason for the rapid growth: The credit sits in a
particularly sweet spot in politics.
“Aimed at the average American, it is perhaps the
quintessential middle-class tax break. Lawmakers in both parties
have long supported it, though they come at it from different
angles. Republicans tend to emphasize the credit as a way to reduce
the tax burden on families, while Democrats see it as a way to help
low earners, regardless of whether they make enough to pay income
taxes.
“The result, though, is the same: The Child Tax Credit is the
second-most widely claimed individual tax break, trailing only the
deduction for charitable contributions.”


Read the full story at Politico.

Jobless Claims Drop to 3-Month Low: Has the Labor Market Turned
the Corner?

New jobless claims dropped last week to the lowest level since
November, the Labor Department announced Thursday, with about
730,000 people filing for benefits in state unemployment
systems.

Another 451,000 applied for aid through the Pandemic
Unemployment Assistance program, which provides benefits for
self-employed and gig workers, bringing the total of new claims to
nearly 1.2 million.

The numbers were lower than expected, leading some analysts to
speculate the unemployment may be easing as vaccines are being
rolled out. “The drop may be signaling a turning point for labor
market conditions,” Nancy Vanden Houten of Oxford Economics

said, adding that she expects “a more sustainable
labour market recovery to take hold closer to mid-year with broader
vaccine distribution and the arrival of more fiscal support.”

Still, some economists cautioned that bad weather in large
swaths of the country may have affected last week’s numbers, and
that it is too early to declare that the crisis has reached an
inflection point.

“We would urge policymakers to approach the decline with a
grain of salt, which is generally more than was available for the
roads in Texas during its deep freeze,”
wrote Joseph Brusuelas, chief economist at the
consulting firm RSM. “Even with the weather-induced distortions,
claims at this level are extraordinarily elevated and merit further
fiscal relief, which is working its way through
Congress.”

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