Economic Stimulus Packages
Congress passed three Covid Relief packages last year totaling $3.4 trillion. President Biden is proposing a $1.9 trillion package for the coming year; ten Senate Republicans have counter-proposed $600 billion. The Democrats have passed a budget reconciliation measure authorizing the new spending and the House is busy crafting its version of the new spending.
So what’s in the packages and what should be?
Small business relief.
Congress has already passed $904 billion in small business relief through the Paycheck Protection Program and the Economic Injury Disaster Relief Program.
· Biden proposes $50 billion in two forms: state and local small business financing programs of and grants to the hardest hit small businesses.
· Ten GOP Senators propose $50 billion in two forms: PPP and EIDL.
· My comments: the PPP program was poorly targeted such that the largest small businesses with the best banking connections scooped all the available funds while the struggling mom and pop Main St. small businesses got very little or nothing. Those quickest to get on their computers and get into and through the banks got the lion’s share of the funding. The funds should be carefully targeted to the types of small businesses —for examples leisure and hospitality and travel, or in person theater and live entertainment -- that are really hurt by Covid restrictions while those businesses that with little to no impact on their businesses need and should get no share of small business aid.
Unemployment Insurance
Congress has already passed $578 billion in UI benefits in three forms: 1) a weekly bonus of $600, which expired last summer and then was reduced to $300 in the late December compromise, 2) coverage for the gig workforce, 3) extended benefits for those whose coverage has run out. All of these expire in March and are critical for the unemployed.
· Biden proposes $300 billion and would extend all three programs through the end of September (the end of the federal fiscal year). Biden would increase the weekly bonus to $400.
· Ten GOP Senators propose $132 billion. They would keep the weekly bonus at $300 through June; they would end coverage for gig workers, and would end the extended benefits.
· My comments: This is one of the highest priorities; it is what is keeping these families and individuals from evictions, starvation and homelessness until we can get the economy really humming again; that won’t happen ‘til vaccinations are widespread and Covid infections are minimal so that life and work can return to normal.
Health Care
Congress has already passed $463 billion for vaccine and treatment development, Covid testing, reducing state Medicaid matching requirements, increased production of PPE, ventilators, CDC funds, mental health funds, community health centers and direct payments to hospitals and doctors to make up for lost revenue and increased costs due to the Covid pandemic.
· Biden proposes $252 billion for Covid testing, Covid vaccinations, Covid treatments, Covid supplies, expanded Public Health, subsidized COBRA coverage and increased and expanded premium tax credits under the ACA.
· Ten GOP Senators propose $164 billion. They include funding for Covid testing, vaccines, treatments and supplies. They provide nothing for coverage expansion, but instead would increase provider relief for the impacts of lost revenues and increased costs of caring for Covid patients.
· My comments: the key differences between them are whether to increase insurance coverage for Americans or to subsidize providers. The provider subsidies in the earlier measures were very poorly targeted and much of the funding went to well-off institutions and providers as opposed to those institutions and provider networks struggling to stay afloat among the waves of very sick patients. I’m skeptical about subsidizing expensive COBRA premiums for the unemployed when a better alternative is to increase the premium and cost sharing subsidies within the Exchanges. The advantage of COBRA is that it allows patients to stay with their existing provider networks and insurers. The advantage of the Exchanges is that coverage is more affordable and the subsidies are better targeted to those who have the greatest challenges paying for care and coverage.
Stimulus checks
The first round of stimulus checks was $1200 per person and $500 per child. They phased out beginning at $75,000 per individual and $150,000 per family. The second round of stimulus checks was $600 per person phasing out beginning at $75,000 per individual and $150,000 per family. The costs are $458 billion.
· Biden proposes at third round of stimulus checks of $1400 per person phasing out beginning at $75,000 per individual and $150,000 per family. The cost is $450 billion.
· Ten GOP Senators propose at third round of stimulus checks of $1000 per person and $500 per dependent phasing out very quickly beginning at $40,000 per individual and $80,000 per family and ending at $50,000 per individual and $100,000 per family. The cost is $220 billion.
· My comments: The stimulus checks are important to keep the economic recovery moving; however at the upper ends, the checks are going into savings, rather than consumption, so they should be better targeted. A compromise that uses the amounts proposed by the Democrats but phases them down and out far more quickly would be a better recipe for re-growing the economy after the Covid shocks.
State and local government aid
Congress passed $361 billion in aid to state and local governments. These included emergency relief for the impacts of the Covid pandemic on state and local governments, increased Medicaid match, grants for K-12 education and higher education and grants for public transit. The argument for increased state and local aid is that state and local governments must have balanced budgets, their revenues dried up due to the Covid recession and their costs have increased in caring for their local residents.
· Biden proposes $525 billion. Most of that would go for direct aid (a block grant); a large amount would be devoted to reopening schools, and a small amount for public transit systems impacted by declining ridership.
· Ten GOP Senators propose $20 billion, all of it is devoted to school re-opening. They maintain that states and local governments are mismanaged and giving them more funds simply bails them out from making the tough decisions necessary to balance their budgets.
· My comments: State and local governments are the primary lines of defense and care in the pandemic, ranging from public health, public safety and public schools. How much they need and how it should be targeted is the unanswered question. For example, should school funding be conditioned on school re-opening and teachers quickly getting back into the classrooms; should it be targeted to the necessary infrastructure improvements to make that possible. States like California with highly progressive tax systems may be less impacted by revenue losses than those states with highly regressive taxes or with tax revenues heavily dependent on tourism and entertainment where the bottoms have fallen out (e.g. Nevada). https://itep.org/whopays/ Likewise state and local governments which have been real leaders in caring for their citizens and small businesses are likely to need much more help than those whose leaders and policymakers have been in denial about the severity of Covid and have provided relatively little help to impacted individuals and businesses. https://www.crfb.org/blogs/how-much-have-states-spent-coronavirus-relief-fund States and communities have been differentially impacted by Covid. North and South Dakota, for example, had very high percentages of infections while Vermont and Maine had very low percentages of infections. https://www.statista.com/statistics/1109004/coronavirus-covid19-cases-rate-us-americans-by-state/ This funding needs to be carefully targeted and distributed to those state and local governments who are hardest hit in terms of revenue losses and expenditure increases and those who are actually spending the funds they are allocated for the purposes intended.
Business tax cuts
Congress has already passed $200 billion in business tax cuts to encourage retention of workers and help allay revenue losses and increase the deduction for business meals. Neither Biden nor the ten GOP Senators propose any further tax cuts for businesses.
Aid to individuals
Congress has already passed $172 billion in aid to individuals. This includes: food assistance, rent assistance, help for child care providers, suspension of student loan repayment and expanded tax credits.
· Biden proposes $322 billion. He would expand the child tax credit to $3,000 per child and make it refundable, provide paid sick leave, a $15 minimum wage, additional help with food, rent, mortgages and utilities, an expanded EITC and more funds for child care.
· Ten GOP Senators propose $32 billion, primarily for food stamps.
· My comments: these Biden proposals are highly consequential in helping working and unemployed individuals and families through the pandemic and thereafter. The minimum wage proposal is likely to require 60 votes in the Senate, as it does not fit within traditional budget reconciliation; at this point at least two Democratic Senators have come out in opposition to it.
Other
Congress has already passed $255 billion in other assistance to airlines, farmers, colleges and universities, disaster relief, the Post Office and local theaters.
· Biden proposes $45 billion, primarily for struggling higher education institutions which have lost enrollment due to the pandemic and have to meet fixed costs.
· Ten GOP Senators propose $0.
The House has already begun work on its version of the Biden plan. They have adopted the Biden framework with important modifications, and begun to flesh out the details.
Stimulus checks. They would be $1400 per person and phase out between $75,000 and $100,000 for individuals and phase out between $150,000 and $200,000 for families.
Unemployment Insurance. The bonuses of $400 weekly, the coverage of gig workers, and the extended coverage would end at the end of August.
Food assistance. The increase in food stamps would be extended til the end of September (instead of June).
Housing assistance: $40 billion would be allocated through state and local governments to help with rents, mortgages and utilities for individuals who have lost jobs and incomes due to the pandemic.
Child tax credit: The credit would be increased to $3600 for children under 6 and $3000 for children over 6; it would be fully refundable and payable monthly at family option.
Earned income tax credit: The amounts would be increased dramatically (tripled), and the eligibility for the credit expanded (i.e. single adults).
Education: $130 billion would be allocated to update ventilation, reduce class sizes, buy PPE, hire support staff. At least 20% must be used to remedy student’s learning loss. $40 billion would be allocated to higher education, of which half must be spent on financial aid for students. $40 billion would be allocated for child care to help families struggling to pay for child care and to help child care operators pay staff, buy PPE and operate safely.
Health coverage: States who have not expanded their Medicaid programs would get a 5% boost in their federal matching for two years if they expand to the working poor; many of these are large Southern states like Florida, Georgia and Texas. Premium assistance in the Exchanges would be increased so that individuals pay a lower share of their incomes (8.5% maximum) and the income caps (400% of FPL) are eliminated. Unemployed individuals and families would get extra federal assistance to keep their employer coverage (COBRA) or to buy coverage through the Exchanges.
Aid to states and local governments: $350 billion
Vaccines and vaccinations, testing, tracing and public health for Covid: $92 billion
Minimum wage: $15 an hour, phased in stages by 2025.
Prepared by: Lucien Wulsin
Dated: 2/17/21