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The good and bad in Biden’s giant relief bill

Rick Newman
·Senior Columnist
·7 min read

Is President Biden’s $1.9 trillion stimulus plan a carefully targeted relief bill? Or a giant Democratic spending orgy?

It’s a mix of both. The House of Representatives is now sweeping numerous spending provisions into final legislation, with majority Democrats likely to pass a bill by the end of February. The bill will then go to the Senate, where all 50 Democrats will have to vote for the bill for it to pass, with Vice President Kamala Harris casting a tie-breaking vote. Senate Democrats have signaled they’ll use the arcane “reconciliation” rules to pass the bill, which means they won’t need the 60 votes normally needed to overcome a filibuster.

Biden’s American Rescue Plan is more controversial than four prior coronavirus relief measures Congress has passed. Republicans think it’s far too big, given that Congress has already pumped about $4 trillion in of fiscal stimulus into the economy. Some economists worry too much stimulus could “overheat” the economy, pushing inflation and interest rates beyond desirable levels. Biden and most Democrats counter that massive spending now is the best way to get unemployed Americans back to work as quickly as possible.

Here’s a breakdown of the bill’s major provisions, with cost estimates form the Congressional Budget Office and the American Action Forum think tank. The first set of measures can fairly be called stimulus or relief, since they relate more or less directly to the economic damage cause by the coronavirus pandemic. The second set of measures are closer to Democratic wish-list items that aren’t directly related to the pandemic. If Senate Democrats balk at the size of the bill, those are the portions most likely to come out.

President Joe Biden speaks about the Paycheck Protection Program during an event in the South Court Auditorium on the White House campus, Monday, Feb. 22, 2021, in Washington. (AP Photo/Evan Vucci)
President Joe Biden speaks about the Paycheck Protection Program during an event in the South Court Auditorium on the White House campus, Monday, Feb. 22, 2021, in Washington. (AP Photo/Evan Vucci)

Legitimate Relief Measures

Direct payments of $1,400 to most American families. Cost: $422 billion. Combined with the $600 checks that went out as part of the late-December HEROES Act, this would fulfill Biden’s promise to put an extra $2,000 in most workers’ pockets. Many economists would like to see aid better targeted at people who need it most, so the money doesn’t end up in a Robinhood day-trading account. But it is related to the Covid crisis, for better or worse, so it counts as relief.

Boost supplemental unemployment insurance. Cost: $163 billion. The weekly federal benefit would rise from $300 to $400, with the program’s expiration changing from the end of April to the end of September. There are fair questions about whether this benefit might prevent some workers from returning to the job market, since they might be able to earn more through a roll-up of state and federal unemployment plans. But again, it is related to the pandemic and it is set to expire.

Aid to states and cities. Cost: $350 billion. This money would offset lost tax revenue and help mayors and governors "mitigate the fiscal effects stemming from the public health emergency," according to draft legislation. it's clearly related to the pandemic, so it counts as relief, but it might also be more than states and cities need, since government revenue has held up better than expected during the last 12 months. 

Aid to small business, especially restaurants. Cost: $60 billion, with $25 billion of that for restaurants. While most big businesses are doing fine, many smaller businesses are reeling, especially in retail and hospitality. Minority-owned businesses have had a particularly difficult time getting federal aid that’s being administered by banks. This is meant to help those types of businesses.

Housing aid. Cost: $40 billion. Most of this would go toward struggling renters and homeowners behind on their bills. About $5 billion would go toward caring for the homeless. This is an urgent need for millions of at-risk Americans and it might not even be enough.

Paid leave. Cost: At least $132 billion. The Biden plan would make more workers eligible for paid leave related to Covid-19, and extend the deadline through September.

Photo by: STRF/STAR MAX/IPx 2021 2/5/21 10,000 stores are set to close in 2021 as the Coronavirus Pandemic continues to wreak havoc on retailers.
Photo by: STRF/STAR MAX/IPx 2021 2/5/21 10,000 stores are set to close in 2021 as the Coronavirus Pandemic continues to wreak havoc on retailers.

Middle-class tax breaks and child-care assistance. Cost: $180 billion. A variety of tax breaks and new aid for child-care programs would help parents struggling with the cost and inconvenience of taking care of kids as many attend school from home and the crisis upends work routines. Most of the tax breaks only last one year, and new aid for state-run child-care programs would come as one-time grants.

Aid for schools and universities. Cost: $170 billion. Local school districts would get $130 billion, while $35 billion would go to higher education and $5 billion to governors. The money is meant to offset possible cuts in education budgets due to tax revenue shortfalls, especially in poor communities. It would also help schools reopen more fully with proper pandemic protections in place.

Democratic Wish-List Items

Pension relief. Cost: $74 billion. This money would address longstanding problems at roughly 1,400 underfunded pensions covering 10 million workers and retirees, most of them belonging to unions. A government agency called the PBGC is supposed to backstop pensions that run short of money, but it, too, is drastically underfunded and poised to collapse in coming years. The money in the House bill would bail out the riskiest pensions, but it’s controversial because it’s not paired with needed reforms—and it’s not specifically related to problems caused by the pandemic. This could be one provision that doesn’t survive the Senate.

New health care benefits. Cost: $53 billion. The House bill would address a significant problem with the Affordable Care Act by eliminating income thresholds that determine eligibility for health insurance subsidies. So higher-income families would qualify for subsidies once health-insurance premiums hit 8.5% of their income. There would also be more generous subsidies for some lower-income ACA enrollees. Other provisions would expand Medicaid eligibility and subsidize insurance costs for people who lose their jobs but keep insurance through the COBRA program. These are changes Democrats have wanted to make for some time, and while there might be merit to them, they’re not directly related to the Covid downturn.

Increase the minimum wage to $15. (No direct cost.) Sen. Bernie Sanders and other progressive Democrats have been pushing for a $15 minimum wage for half a decade, and they think Biden’s relief bill may finally be the wagon they can ride to passage. But some Democrats think $15 is too high, which means there probably aren’t enough votes for it in the Senate. Democrats could include a lower minimum wage, phased in over time, but there are still technical questions as to whether this would be allowed under the Senate’s reconciliation rules. Odds are Dems will have to take this up in separate legislation.

The final bill might not have everything Biden and his fellow Democrats want, but it will still probably total at least $1.5 trillion in new spending, on many Democratic priorities. Republicans can gripe all they want about a single party dictating sloppy spending, but when they last controlled Congress they passed sweeping tax cuts without a single Democratic vote. In Washington, when you have the power to check off items on your wish list, you do it.

Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.

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