Joe Biden’s $1.9 trillion Covid-19 stimulus plan, explained
https://www.vox.com/policy-and-politics/22231808/joe-biden-economic-stimulus-proposal
Tag: stimulus
Congress has finally reached a deal on coronavirus stimulus
“After eight months of back and forth, Democratic and Republican leaders announced on Sunday that they’ve arrived at an agreement on a roughly $900 billion plan. The House of Representatives will vote on the bill Monday, according to House Majority Leader Steny Hoyer.”
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“The legislation contains much-needed coronavirus relief including a weekly $300 enhancement in unemployment insurance, a new round of $600 stimulus checks, and renewed support for small businesses.
Lawmakers in both chambers will have a chance to review the bill — which is being attached to the annual government spending package — before they take a vote.”
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“The $900 billion legislation ultimately offers far less aid than a prior $2.2 trillion proposal House Democrats had put forth, and significantly more than the narrow $550 billion bill that Senate Republicans have favored. Democrats signaled Sunday that this wasn’t the last of the relief they planned to send out.”
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“$325 billion is dedicated to small-business aid including repurposed funding for the Paycheck Protection Program, a forgivable loan program that business owners can apply for to cover payroll and operational costs. These loans are aimed at businesses that have seen revenue declines this year. For many, however, this aid comes too late — according to a Fortune report, almost 100,000 small businesses have already closed permanently during the pandemic.”
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“$25 billion in rental assistance is included as well as the establishment of a federal eviction moratorium.”
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“$13 billion for food aid to help fund a monthly 15 percent increase in individual SNAP benefits, aid for children who received food support at school, and money for other programs including Meals on Wheels and WIC (the Special Supplemental Nutrition Program for Women, Infants, and Children). Demand for such aid has spiked dramatically during the pandemic”
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“There is an extension of paid leave tax credits for businesses, which continues a policy established in the Families First Coronavirus Response Act”
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“other provisions as well, including $82 billion to help schools reopen; $15 billion in aid for airlines — which would be required to bring furloughed employees back — according to Reuters; and language that bans surprise medical bills for emergency care.
It also has new guidelines for the Federal Reserve after Republicans — led by Sen. Pat Toomey (R-PA) — demanded emergency lending programs at the Fed be canceled in any final version of the bill.
As Vox’s Emily Stewart has explained, the Fed will be forced to eliminate several emergency lending programs created with CARES Act funding in the spring, and will be barred from restarting them without congressional approval. It will also return the unused portion of the $454 billion Congress allotted it under the CARES Act to the Treasury Department, something the Fed had agreed to do in November.”
The two competing stimulus proposals, explained
“There are now two competing proposals in Congress, neither of which has garnered the support needed to move forward.
The first is a $908 billion bill that a bipartisan group of senators is working on, which has been heralded as a strong “starting point” by House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer. The second is a $916 billion offer from the White House via Treasury Secretary Steven Mnuchin, which Republican lawmakers — including Senate Majority Leader Mitch McConnell and House Minority Leader Kevin McCarthy — have rallied behind.
Both contain funding for small businesses and vaccine distribution, though they differ on a couple key points. The bipartisan proposal, for example, includes far more funding for unemployment insurance (UI), guaranteeing a weekly $300 boost to recipients for 16 weeks, on top of what they are currently receiving on the state level.
The White House offer, on the other hand, only includes $40 billion to extend expiring programs that have increased access to UI. It also contains funding for a second round of $600 stimulus checks, while the bipartisan proposal does not.
Democrats have already rejected the Mnuchin plan given its treatment of UI, while McConnell has balked at the bipartisan proposal as unnecessarily broad and favored a more targeted bill. These disagreements leave lawmakers at yet another impasse, though both Republicans and Democrats have emphasized they’d like to get something done before leaving for the holiday break, something they’re currently scheduled to do by December 21.”
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“The recurring issues that lawmakers have struggled to navigate throughout stimulus negotiations are still liability protections — a top Republican demand — and state and local aid — a top Democratic one. Earlier this week, McConnell had even suggested stripping both out of a stimulus bill in order to advance it, signaling some movement given his previous commitment to preserving liability protections.”
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“Democratic leaders have noted, however, that any package without state and local aid would be completely inadequate given huge budget cuts that regional governments are being forced to make. They’ve said, too, that state aid has support from lawmakers on both sides of the aisle. “State and local funding is bipartisan unlike the extreme corporate liability proposal Leader McConnell made which has no Democratic support,” Schumer has said.
Republicans thus far have insisted that liability protections are necessary to ensure that small businesses don’t get hit with a deluge of lawsuits for how they handled the pandemic, while Democrats counter that such shields are intended to protect corporations from accountability. Some Republicans, including McConnell, have opposed state and local aid because they claim that states could use this funding to cover other unrelated costs. Researchers, however, have emphasized that these funds are needed to address what could be up to $500 billion in shortfalls that states have accrued due to lower revenues and higher costs during the pandemic.”
‘Too sweet of a pie’: Cybercriminals steal $8B in Covid relief funds
“The Secret Service and Labor Department have been warning states for months that criminal networks are trying to steal billions of dollars in federal pandemic unemployment aid. But the overburdened and antiquated state systems that send out the checks have been unable to stop a lot of the fraud.
Using huge databases of stolen personal information, cybercriminals based everywhere from Nigeria to London have pocketed an estimated $8 billion meant for people forced out of work due to the coronavirus so far, the Labor Department’s inspector general told states last month. The IG predicts that $26 billion in the federal aid programs alone eventually could be lost to fraud.”
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“state workforce agencies, stymied by decades-old IT systems and flooded with applications, have been ill-equipped to find and prevent the fraud, which appears to be far more extensive than the usual attempts to bilk government programs.”
Democrats and the White House Were Nearing an Agreement on Renter, Homeowner Assistance. Then Trump Tweeted.
“House Democrats passed a $2.2 trillion HEROES Act, which includes $50 billion for emergency rental assistance, and $21 billion in funding for states and territories to spend assisting homeowners.
Of that $50 billion in rental assistance, at least 40 percent would have to go to tenants making 30 percent or less of their area’s median income, and 70 percent of it would have to be spent on those making less than half their area’s median income. Tenants making up to 120 percent of area median income would be eligible for assistance.
These income restrictions are identical to those found in the enlarged $3.5 trillion HEROES Act back in May, which earmarked $175 billion to renter and homeowner assistance. The $71 billion in renter and homeowner assistance proposed by Democrats now is still too rich for many congressional Republicans but is much closer to the $60 billion that Treasury Secretary Steve Mnuchin said the White House could accept.”
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“Eviction filings are below historic averages in 15 of 17 cities tracked by Princeton University’s Eviction Lab. Places like Boston and Austin—both of which have local eviction moratoriums in addition to the CDC’s policy—have seen evictions drop close to zero. The two exceptions are Columbus, Ohio, and Richmond, Virginia, where evictions are above historic averages by 48 and 300 percent respectively.
With eviction rates below historic averages in most cities and rental payment rates staying pretty steady throughout the pandemic, a massive new federal program to bail out tenants and rental property owners seems excessive.
That’s particularly true when most of the stimulus proposals on offer include expanded unemployment benefits and another round of $1,200 stimulus payments. Renters report using those types of benefits, which were included in the March coronavirus relief bill, to cover their housing costs earlier in the pandemic.
Whether the mercurial Trump will stick to his decision to walk away from stimulus talks remains to be seen. After tweeting that he was done negotiating, the president again took to Twitter to urge the passage of a bailout for the airlines and another round of stimulus checks.
It’s possible renters and homeowners will also benefit from Trump’s backtracking. If they don’t, they’ll have to wait until 2021 for more help from the feds.”
The Senate just failed to pass more stimulus for a struggling economy. Here’s why.
“The 52-47 vote, which was intended to demonstrate Republican unity and support for the stimulus while putting pressure on Democrats, was only mildly successful in that aim, with 52 Republicans supporting the bill and Sen. Rand Paul voting against it. No Democratic senators, who’ve long pushed for a more expansive stimulus package, voted in favor of it. As a result, the bill was unable to meet the 60-vote threshold it needed to advance.
Republicans’ legislation contained roughly $650 billion in aid, according to the Wall Street Journal, including funding for school reopenings, the US Postal Service, and a weekly $300 supplement to unemployment insurance. Democrats’ more expansive HEROES Act, meanwhile, contained $3 trillion in aid including money for a $600 weekly unemployment supplement, another round of $1,200 stimulus payments, and support for state and local governments, in addition to funding for schools and USPS.
Since Thursday’s vote was a strategic maneuver aimed more at sending a message than producing actual policy, it wasn’t expected to pass to begin with. Instead, it was intended to give vulnerable Republican senators something to point toward as evidence they’ve backed more aid going into the election this fall.
The vote was also a way to get Democrats “on the record” opposing stimulus, according to Senate Majority Leader Mitch McConnell — a framing that could be used to cast blame in the coming months, though it ignores the fact that the Democrat-led House passed its own stimulus package months ago.”
Why Stimulus Spending Fails
“the belief is that when the government takes a dollar out of your pocket, puts that dollar through the political process, and decides where to spend it (based on input from special interest groups), the economy will somehow return more money in growth than the money invested, even after Washington bureaucrats take their cut. It’s magic! Sadly, these arguments ignore recent empirical evidence that the costs of increased government spending far outweigh the benefits to the economy.
For starters, contrary to the claims of pro-government spending proponents, economists are far from having reached a consensus about the actual return on government spending. While some economists find that a dollar spent by the government generates more of a return than the dollar spent, others find that the return is less than one dollar. And yet others find that if you take into account the future taxes needed to pay for the dollar that’s spent, the multiplier is actually negative, and the economy takes a hit.”
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“there are narrow cases when government spending can stimulate the economy, but for that to happen, the environment in which the spending takes place is important. Work by economists Ethan Ilzetzki, Enrique Mendoza, and Carlos Vegh on the impact of government fiscal stimulus shows that it “depends on key country characteristics, including the level of development, the exchange rate regime, openness to trade, and public indebtedness.” Many other economists have found the same. Unfortunately for the proponents of fiscal stimulus, the United States has the features of a country where stimulus by spending does have an impact and, in fact, can have a negative impact on growth.”
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“even if you had a country with little debt and the right environment, implementing the spending correctly is a key to getting a multiplier that’s larger than one. As former Treasury Secretary and former Director of the National Economic Council Larry Summers has explained, stimulus spending needs to be timely, targeted, and temporary. Unfortunately, evidence from the last recession shows that it rarely is.”
We are sleepwalking toward economic catastrophe
“The Coronavirus Aid, Relief, and Economic Stability Act, or CARES Act, signed into law by President Trump in March, was an unprecedented act of fiscal policy by the US government. It entailed measures that would have once seemed unthinkable, including an extra $600 in unemployment benefits, $1,200 stimulus checks to most Americans, and billions of dollars in forgivable loans to small businesses. As Vox’s Dylan Matthews recently laid out, the Covid-19 response was larger than the stimulus policies put in place in response to the Great Recession and, from a fiscal standpoint, bigger than the New Deal.
It made a difference. Personal incomes actually went up in April thanks in large part to unemployment insurance and stimulus checks. Poverty rates didn’t increase.”
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“The stimulus bill had with it an underlying assumption that the economy would improve by the summer, and that was predicated on the country getting its outbreak under control. But the country didn’t — a series of public policy and leadership failures at the federal, state, and local levels have allowed the virus to thrive.”
The vital missing piece of the Democrats’ stimulus bill
“conspicuously absent is the policy that would do the most to guarantee — or at least support — ongoing recovery: automatic stabilizers.
The idea is simple, and backed by an array of economists. We’re in a depression. The support people need should be tied to the economic conditions they face, not arbitrary expiration dates.”
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“There are various proposals for how to do it. Rep. Don Beyer’s (D-VA) Worker Relief and Security Act is a good place to start. It groups states into tiers based on their unemployment rates, and ties both extensions and expansions of unemployment insurance to those tiers. The support doesn’t end until the economic emergency ends.”
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” Automatic stabilizers are, if anything, cheaper than the alternative. They ensure the money is spent as soon as it’s needed. “The faster you act, the more effective the relief will be at fighting the recession,””
How Much Is $2.3 Trillion? More Than Even Obama Could Imagine
“There is no more politics of fiscal prudence in America, just a competition to see who can wag the biggest firehose. While the bodies begin to pile up in New York City and elsewhere, Washington has responded with a massive course of experimental economics.”