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President Biden’s American Rescue Act

March 22, 2021

President Biden and the Democratic Party have opted to revive the American economy by passing one of the most expensive pieces of legislation in U.S. history. Their stimulus package of nearly $2 trillion focuses on the needs of middle- and working-class Americans rather than trans-national corporations. This moderate reincarnation of the politics of Roosevelt’s New Deal reverses the trickle-down policies that have been the norm since Ronald Reagan was president in the 1980s. Not a single Republican Senator or Congressperson voted for the American Rescue Act.

The broad assumption of the Biden plan is that direct aid to the public has a multiplying effect that is much faster and geographically wider than federal support of slow-moving corporations. A critical secondary benefit is that it is based on addressing economic rather than ethnic, regional, or racial issues.

President Biden and Vice-President Harris are holding town meetings to assure the public that the Democratic plan is one of investment, not giveaway welfare. The immediate goal is to address the economic and social hardships the COVID-19 pandemic has inflicted. Longer term, the measure is designed to lessen the nation’s ever-growing wealth gap.

The most obvious immediate stimulus is a $1,400 per person tax-free subsidy. That comes to $5,600 for a family of four. The working poor and unemployed will be spending their subsidies just to survive. The middle class is expected to spend more on goods and services they put off when the ending of the pandemic was less clear; they may save much of it until then rather than spend now. The effects on the economy will be statistically evident in thirty days. The stock market has already responded by hitting all-time highs.

Billions have been allotted for state and local governments. $130 billion is available to make safe opening of public schools possible. $14 billion will cover costs of vaccinations and testing. $45 billion is slated for mortgage relief and $90 billion for infrastructure. Another $30 billion is designated to aid basic services, including transit, fire, and police departments.

Additional billions will aid small businesses and small farmers. Unlike the previous assistance bill, this legislation is written in manner that does not allow fast-food chains and agri-businesses to swallow funds meant to aid small enterprises. Also protected are underfunded union pension plans that cover 10 million workers, who are now assured the pensions they worked for will be there in whole when they retire.

For the unemployed there will be $300 more per week. If one had been working at the federal minimum wage, the $300 will double what would had been a weekly salary. For those who had worked at $15 an hour, their new weekly income will be roughly 50% higher. This reality will lead some critics to charge the increases will discourage people from returning to work. There is no evidence for that, but there is considerable evidence that this tax-free income will mainly be used to pay lodging expenses, grocery bills, and health costs.

A true game changer comes in child care. Parents with a combined poverty level income of no more than $26,000 will receive $3,000 to $3,600 for each of their children up to age 17.  Economists believe this credit will cut the number of children living in poverty (13 million) in half!

Similar long-term impact is expected by providing millions of Americans free or reduced fees for Medicaid. The package also will temporarily pay for health plans lost by those who have just lost their jobs. Years of research have established such aid greatly reduces total medical costs by slashing the need for costly emergency room service and people putting off medical appointments until later stages in their illnesses.

The Democrats believe their rescue package combined with the steady reopening of the economy will create an economic boom by the end of the year. Prominent economists have speculated that the U.S. growth rate will easily best the EU nations and will be even more robust than China’s. If such expectations are realized, Biden and the Democratic will have earned considerable political credibility.

Going into the bi-elections of 2022, Biden will argue that most measures in his rescue package have a short life span. To guarantee the game-changing aspects of his agenda will become the new norm, he will ask for an increased Democratic Congressional majority, an outcome quite different from the governing party’s usual loss of seats. Given that none of the Republicans in the Senate or House voted for the American Rescue Act, they cannot claim any credit if the American economy soars as expected.

 At the moment, the Republicans generally are as hostile to Biden as they were to Obama. That stance runs the risk of their seeming to place partisan politics over economic recovery. It also ignores the findings of a recent Pew poll that shows 71% of Americans support the rescue plan, including 41% of registered Republican voters.

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