Big Win for Biden: Congress Passes Historic Covid Relief Bill

By Yuval Rosenberg

Congress Passes Historic Covid Relief Bill, Delivering a Big,
Quick Win for Biden

The House passed President Joe Biden’s massive $1.9 trillion
America Rescue Plan on Wednesday, giving final approval to a
sweeping package that provides emergency pandemic aid and also
authorizes a wave of federal spending to dramatically, if
temporarily, expand anti-poverty and health care programs.

The 220-211 House vote was almost entirely along party lines, as
Republicans remained unified in their opposition to the relief
package, which they derided as wasteful and partisan. One Democrat,
Rep. Jared Golden of Maine, voted against the bill.

Democrats erupted in cheers after the package passed, and
they touted the vote as a monumental victory for the country. "This
is the most consequential legislation that any of us will ever be a
party to," House Speaker Nancy Pelosi (D-CA) said. "Who knows what
the future may bring, but nonetheless, on this day we
celebrate."

Democrats also painted Republican opposition as political,
pointing out the Republicans had supported many of the same
measures under the Trump administration. "There’s only one thing
that’s changed since we passed those first five bills," said House
Majority Leader Steny Hoyer (D-MD). "The need is there, the virus
is still with us, the economy is struggle, but now we have a
Democratic president."

Biden said in a statement that he looks forward to signing the
bill into law on Friday. "For weeks now, an overwhelming percentage
of Americans – Democrats, Independents, and Republicans – have made
it clear they support the American Rescue Plan. Today, with final
passage in the House of Representatives, their voice has been
heard," he said.

What’s in the final bill: The package provides a
third round of direct payments, with most Americans eligible to
receive payments of up to $1,400. It also extends a $300 federal
boost to weekly unemployment insurance payments and dramatically
increases tax benefits for families with children. The bill also
includes hundreds of billions of dollars in direct aid to
state, local and tribal governments; money to help K-12
schools reopen; funding for Covid-19 vaccine distribution,
testing and contact tracing; and increased subsidies for health
care coverage. It also provides more aid for small businesses and
housing assistance, and $86 billion to bail out union
pensions

You can find more details
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here.

In all, the latest bill includes $1.8 trillion in federal
spending, according to a Congressional Budget Office
estimate, and will add $.185 trillion to the
deficit over the next decade. The Committee for a Responsible
Federal Budget, a watchdog group focused on the national debt, says
that the package could ultimately cost
$3.8 trillion, or $4.1 trillion once interest
costs are factored in, if temporary tax benefits and relief
measures are extended or made permanent.

Congress has now provided almost $6 trillion for fighting
the pandemic and supporting the economy across six relief packages
passed in just over a year’s time.

The Vote May Be Over, but the Debate Is
Not

The relief package may be set to become law, but the debate over
it is far from over. That’s true both in terms of the politics and
the economics.

On the political front, the massive rescue package is
massively popular with the American public — it has higher approval
than any recent major legislation. A new CNN poll finds that 61% of
Americans support the relief bill, with 85% favoring the expanded
tax credits, 77% approving of funds for school reopening and 76%
saying the back the new round of direct payments. A new Morning
Consult/Politico poll finds even higher approval for the overall
package, with 75% of respondents saying they strongly or somewhat
favor the package, including 90% of Democrats and 59% of
Republicans.

That could still change over time, though, so the Biden
administration and Democrats will embark on a
longer-term effort to publicize the benefits of
the bill — and Republicans will try to convince Americans of their
view that the package was a liberal wish list that may do more harm
than good.

On the economic front, experts have already been debating
whether the package is precisely what is needed to address the
pandemic and lingering inequities or if it might overstimulate an
economy already showing signs of recovery and poised to benefit
from widespread vaccinations, leading to a surge in inflation or a
buildup in debt that ultimately proves dangerous.

As Politico’s Ben White
writes:

"It could be a Morning in America moment that further
turbocharges an economy already primed to pop, reduces economic
inequality and lofts Biden to the kind of economic hero status
enjoyed by the likes of Franklin Delano Roosevelt after the
Depression and Ronald Reagan in the boom-time 1980s.
"Or it could be a fiery accelerant for global markets as gas
prices surge, home prices jump, speculative assets soar and
investors increasingly fear the kind of sharp inflation spike that
can hit with remarkable speed if the government pours too much
gasoline on an already warming economy."

In a research note to clients on Wednesday, J.P. Morgan
economist Michael Feroli noted that the addition of an estimated
$1.85 trillion in debt over 10 years is enormous by any historical
comparison."

But, he added, he is less concerned that the package is too big
for the economy to handle than some other economists, including

Larry Summers, the former Treasury secretary under
President Clinton and former director of the National Economic
Council under President Obama, who has warned of a possible spike
in inflation that could result in a damaging economic downturn.

Feroli argues that the federal government won’t be spending the
newly approved money all at once. The Congressional Budget Office
estimates that the budget impact for fiscal year 2021 will be $1.16
trillion — and nearly $300 billion of that money set to go to state
and local governments will take more time to be spent. On top of
that, Americans are likely to save rather than spend much of the
relief payments they get.

Other economists have also suggested that inflation and debt
shouldn’t be immediate concerns: "Our debt is clearly on a totally
unsustainable path and we simply don’t know that rates are going to
stay this low forever," Len Burman, a Syracuse University economist
and co-founder of the Tax Policy Center, told Politico. "If markets
got the idea that the U.S. was no longer that safe of a haven,
rates could go up very quickly. That is not a ‘right now’ problem.
And it makes sense to invest in smart things right now. But it can
become a problem."

As the trillions in relief and stimulus spending work
their way through the economy, the debate is unlikely to end for
quite some time.

How the Biden Relief Bill Could Cut Poverty by a Third

The $1.9 trillion American Rescue Plan Act could cut poverty by
more than a third in 2021, according to a
new analysis from researchers at the Urban
Institute.

Without the Covid relief bill, about 44 million would be living
in poverty in the U.S. this year, the researchers estimated. But
the legislation will result in 16 million of those being pulled
above the poverty line, reducing the poverty rate from 13.7% to
8.7%. For children, the numbers are even more pronounced, with the
poverty rate falling by half in the wake of the relief bill.

The spending package is also projected to have a powerful effect
on Black and Hispanic populations. "Poverty would fall 42 percent
for Black, non-Hispanic people and 39 percent for Hispanic people
compared with 34 percent for white, non-Hispanic people, thus
reducing the disparities in poverty rates for Black, non-Hispanic
people and Hispanic people relative to white, non-Hispanic people,"
the report said.

The Urban researchers said that four provisions within the
relief bill produce the most significant poverty-reducing
effects:

Unemployment benefits: The bill extends the current $300
per week supplement to state unemployment benefits for another 25
weeks, expiring on September 6. This provision on its own is
projected to reduce the poverty rate from 13.7% to 12.6%. 

Direct payments: The legislation includes direct federal
payments of up to $1,400 per person for those who qualify, which
includes most Americans. This provision has the largest single
effect on poverty, dropping the poverty rate from 13.7% to
10.2%.

Child tax credit: The bill makes several changes to the
existing child tax credit, making it fully refundable while
increasing its value to $3,600 for children under the age of 6 and
$3,000 for those between 6 and 17. This provision is projected to
reduce the poverty rate by nearly a full percentage point.

Food assistance: The bill includes a three-month
extension of enhanced benefits through the Supplemental Nutrition
Assistance Program, also known as SNAP or food stamps. The
extension is projected to reduce the poverty rate by a tenth of a
percentage point.

All of this poverty-reducing spending comes at a time of
particularly pressing need, according to a
separate report Wednesday from the Center on
Budget and Policy Priorities. Economic hardship was at high levels
at the end of last month, CBPP said, especially for families with
children. The most recent Census data, collected in the last two
weeks of February, indicate that 14% of adults with children
reported that they hadn’t had enough food in the last week,
significantly higher than the 4% who reported the same at any point
during 2019. And 41% of adults with children reported that they had
had trouble covering household expenses such as rent and car
payments over the last week.

Chart of the Day: Exceptional Growth

In most of the world, Covid-19 will weigh on economies
throughout 2021, resulting in lower output than expected before the
pandemic hit. However, according to the latest outlook
from the Organization for Economic Co-operation and Development,
the United States is the exception to the rule: Fourth quarter GDP
is expected to be higher than pre-pandemic estimates indicated,
coming in 0.2% above the level that was projected at the end of
2019.

"Vaccine rollout, although uneven, is gaining momentum and
government stimulus, particularly in the United States, is likely
to provide a major boost to economic activity," the OECD said.
"World output is expected to reach pre-pandemic levels by mid-2021
but much will depend on the race between vaccines and emerging
variants of the virus." (h/t
Jason Furman)

Biden Orders 100 Million More Doses of JNJ Vaccine

President Biden on Wednesday directed the government to purchase
another 100 million doses of the Johnson & Johnson Covid-19
vaccine.

"There is light at the end of this dark tunnel of the past year,
but we cannot let our guard down now or assume that victory is
inevitable," Biden said, adding, "There’s real reason for hope,
folks."

Biden met Wednesday afternoon with the top executives of Johnson
& Johnson and Merck, which is helping to manufacture the Johnson &
Johnson vaccine under an agreement announced by the administration
last week.

The administration already said it had ordered enough vaccine
doses to cover every American adult by the end of May, and the
latest order, which likely won’t be ready for some time, is
intended for longer-term use. "The White House's latest vaccine
purchase is aimed at preparing for a range of longer-term
scenarios, including the need to give people second ‘booster’ shots
to guard against emerging Covid variants," Politico
reports.

Biden said Wednesday that if the U.S. has a surplus of
vaccines it will share the additional doses with the rest of the
world. "We’re not going to be ultimately safe until the world is
safe. So we’re going to start off making sure Americans are taken
care off first, but we’re then going to try to help the rest of the
world."

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