Federal Dollars Drive Huge Drop in Poverty

Reaction to the Vote to begin Debate on the Bipartisan Infrastructure Bill in the US Senate
CNP
By Yuval Rosenberg

We’ve got good news for you today
and lots of it, from the bipartisan infrastructure deal
moving ahead in Congress to growth in the economy to a big decrease
in poverty. Oh, and an
Olympic gold medal for Sunisa Lee in women’s
gymnastics provides even more to celebrate. Here’s what you need to
know.

Infrastructure Bill Moves Forward, but Bumpy Road Ahead

Step One is complete. The Senate voted 67-32 Wednesday
night to open debate on a $1 trillion infrastructure bill, with 17
Republicans joining all Democrats in voting to advance the package.
The vote puts the Senate on track to pass the bill by next week,
potentially giving President Joe Biden and a bipartisan group of 10
lawmakers on a path to secure the bipartisan achievement they’ve
pursued through weeks of up-and-down negotiations that at times
seemed on the verge of collapse.

“In the end, the unique dynamics of the group, both
personally and politically, helped make it happen,” Punchbowl News
says, noting that the band of senators that hammered out the deal
had shown a willingness to buck their own parties and work across
the aisle. “It happened from the center out. In other words, at a
time when Washington seems broken, this group of members behind me
came together, along with others, and decided we were going to do
something great for our country,” Sen. Rob Portman (R-OH), the lead
Republican negotiator, said at a celebratory press conference
Wednesday night.

The vote, for now at least, also means that the two-track
strategy adopted by Democratic leaders and the White House —
pushing for a bipartisan deal while also moving ahead with a
partisan, $3.5 trillion package comprising the rest of Biden’s
economic agenda — seems to be working, though plenty of pitfalls
remain.

“We are on track to pass both elements of the two-track
strategy before we adjourn for August recess,” Senate Majority
Leader Chuck Schumer (D-NY)
said. “It took some prodding and a few deadlines,
but it all has worked out for the better.”

Senate Minority Leader Mitch McConnell (R-KY) voted to begin
consideration of the bill Wednesday, though some other members of
his Republican Senate leadership team did not. McConnell expressed
support for the deal in remarks on the Senate floor Thursday. “It’s
guaranteed to be the kind of legislation that no member on either
side of the aisle will think is perfect. But it’s an important,
basic duty of government,” he said. “I’m glad to see these
discussions making progress and I was happy to vote to begin moving
the Senate toward what ought to be a robust, bipartisan floor
process for legislation of this magnitude.”

What could still derail the bill: The bipartisan deal now
has some momentum behind it, but despite the happy talk, it still
faces some hurdles to passage. For one thing, an official
Congressional Budget Office estimate of the spending and revenue in
the package could still swing some votes if it shows that the
proposed pay-fors are less than credible.

“Although we are confident that the Senate can pass the bill
remaining risks include a critical CBO score of the pay-for
assumptions and the potential for poison-pill amendments,” Benjamin
Salisbury, director of research at Height Capital Markets,
said in a note on Thursday morning.

Portman told reporters Wednesday night that the bipartisan group
was open to amendments but he hadn’t heard of any poison pills. “We
want to get a strong vote because we need to send it over to the
House like a torpedo, with plenty of bipartisan support,” he
said.

The House could present some more significant challenges.
Already, some Democrats — most notably Oregon Rep. Peter DeFazio,
chair of the House Committee on Transportation and Infrastructure —
have indicated that they have
significant issues with the Senate deal and won’t
vote for it unless it’s paired with a larger budget reconciliation
package funding investments in health care, child care, education
and climate — a stance that House Speaker Nancy Pelosi (D-CA) has
backed.

“Progressives have been clear from the beginning: a small and
narrow bipartisan infrastructure bill does not have a path forward
in the House of Representatives unless it has a reconciliation
package, with our priorities, alongside it,” Rep. Pramila Jayapal
(D-WA), chair of the Congressional Progressive Caucus
said. “The votes of Congressional Progressive Caucus
members are not guaranteed on any bipartisan package until we
examine the details, and until the reconciliation bill is agreed to
and passed with our priorities sufficiently funded.”

‘Multiple near-death experiences’: Those threats by
progressives may ultimately melt away under pressure from the White
House and Democrats eyeing the calendar and looking ahead to the
2022 midterm elections, but with Sen. Kyrsten Sinema (D-AZ)
insisting Wednesday that she won’t back a $3.5 trillion price tag
on the second package, Democrats will likely face some painful
intraparty fights in the coming weeks and months.

“We’re still going to face multiple near-death experiences, as
is the case with any major legislation, but we’re going to do
this,”
said Sen. Brian Schatz (D-HI).

What’s next: The text of the package was still being
finalized, but the Senate could vote Friday on a motion to proceed
and could consider amendments as soon as this weekend, with a final
vote next week.

How the Infrastructure Bill Changed From Biden’s Original
Plan

The weeks of negotiations and compromise on the bipartisan
infrastructure deal resulted in some relatively minor changes
to the original framework — and some rather large ones to the
proposed financing.

The agreement announced Wednesday provides for $550 billion in
additional federal spending over five years, some $29 billion less
than the original deal. It includes less money for public transit
and clean energy than Democrats had wanted, removes plans for a $20
billion “infrastructure bank” and strips out the $40 billion in
increased funding for the Internal Revenue Service that negotiators
had originally included as a way to raise about $100 billion in
revenue by boosting collection of unpaid taxes.

The final plan also differs significantly from the nearly $2.3
trillion plan President Biden originally proposed in March (or $2.6
trillion including tax credits). The New York Times has an
excellent interactive graphic detailing how and where Biden’s
original proposal shrank. “There were six major areas in Mr.
Biden’s original infrastructure proposal: transportation,
utilities, pollution, innovation, in-home care and buildings,” The
Times notes. “Almost all these areas were scaled back or eliminated
in the bipartisan plan, with one exception: pollution cleanup.”

The image below doesn’t do it justice, so check out the
full interactive graphic by Aatish Bhatia and Quoctrung Bui

at the Times.

Economy Roars in Second Quarter, Recovers Pandemic Losses

With another impressive period of growth in the second quarter,
the economy has recouped its recessionary losses and now exceeds
its pre-pandemic size, the
Commerce Department announced Thursday. But the
6.5% annualized growth rate reported by the agency was below many
economists’ estimates, highlighting the difficulties businesses and
consumers still face amid global supply constraints, labor
shortages and lingering fears about Covid-19 across the
country.

On the heels of 6.3% growth in the first quarter, and fueled by
another round of income support from the federal government, many
economists expected to see GDP surge by 8% or more in the second
quarter, as consumers sitting on record savings made up for lost
time by splurging on travel, entertainment and dining out. But
bottlenecks throughout the economy limited the bounce-back growth,
hitting businesses particularly hard as they struggled to provide
sufficient stock and rebuild inventories.

Consumers to the rescue: Consumer spending grew at a
blistering pace during the quarter, clocking in at an 11.8% annual
rate. The total value of goods and services produced in the U.S.
climbed to an annualized $19.36 trillion, above where it stood at
the beginning of 2020. Those results bolstered the view that
economic growth will maintain a robust pace of 6% or more for the
full year. 

“Consumers are going to continue to drive the economic train,”
Mark Zandi, chief economist at Moody’s Analytics,
told the Associated Press. “There is a lot of
excess savings, a lot of cash in people’s checking accounts.”

Vulnerabilities persist: Although the economy continues
to rebound, new outbreaks of Covid-19 could hamper the recovery.
Other factors that could weigh on growth in the coming months
include shortages of key components like microchips, rising
inflation and labor shortages, especially in the low-wage service
sector.

Still, many analysts emphasized the positive aspects of the
latest data, and the Biden administration was quick to take credit
for the solid report. Saying “America is on the move again,” White
House Press Secretary Jen Psaki reminded reporters that the outlook
has improved significantly in a relatively short period of time.
“This wasn’t preordained – in fact, just one year ago, CBO
predicted real GDP would be 3% below its pre-pandemic peak at this
time,” she said in a statement. “But, thanks to shots in arms and
checks in pockets, we’ve been able to far outstrip that and power a
recovery twice as fast as after the last recession.”

Federal Aid Drives Record Drop in Poverty

The level of poverty in the U.S. will fall by roughly half this
year, due almost entirely to the increase in government aid
provided during the Covid-19 pandemic, according to a new analysis
by a team of researchers at the Urban Institute.

Looking at the effects of the $1.9 trillion American Rescue Plan
Act, which provided a range of benefits including direct payments,
enhanced unemployment aid and refundable child tax credits, the
researchers estimate that the poverty rate will fall to 7.7% in
2021 — a huge drop from the 13.9% rate estimated for 2018, and the
largest single-year reduction on record. In raw numbers, about 20
million fewer people are living in poverty due to the programs in
the ARPA.

More broadly, the researchers estimate that without government
assistance — including “unemployment insurance (UI), government
means tested programs (either standard benefits or benefits
increased because of the pandemic), pandemic-related stimulus
payments or state payments, or the advance child tax credit” — the
poverty rate in 2021 would be 23.1%. All told, those programs are
keeping about 50 million people out of poverty.

“Wow — these are stunning findings,” the Brookings Institution’s
Bob Greenstein told The New York Times. “The policy response since
the start of the pandemic goes beyond anything we’ve ever done, and
the antipoverty effect dwarfs what most of us thought was
possible.”

Soaring costs, temporary programs: “The extraordinary
reduction in poverty has come at extraordinary cost, with annual
spending on major programs projected to rise fourfold to more than
$1 trillion,” says The New York Times’ Jason DeParle. “Yet without
further expensive new measures, millions of families may find the
escape from poverty brief. The three programs that cut poverty most
— stimulus checks, increased food stamps and expanded unemployment
insurance — have ended or are scheduled to soon revert to their
prepandemic size.”

For more, read the
Urban Institute analysis here and
DeParle’s extensive write-up here.

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