Seismic Shift? The Biden Relief Bill and the State of US Liberalism

After much theatrics, including a demand last week by US Senator Ron Johnson (R-WI) for the immediate production of an audiobook version of the bill, resulting in Senate clerks spending 10 hours and 43 minutes reading its 628-page text, the coronavirus relief bill is in the final stretch and will soon be law. Despite amendments in both houses of Congress, the ultimate price tag is similar to what Biden proposed—in other words, close to $1.9 trillion. Washington Post reporter Jeff Stein writes that the relief bill’s passage marks a “seismic” shift in US politics. But where the shift lies on the policy Richter scale remains uncertain.

The Senate amendments cut spending in some areas but increased it in others. For instance, the Senate cut unemployment benefits by 25 percent (from $400 a week to $300 a week), which reduces the bill’s cost by about $60 billion, but this was offset in part by provisions to waive taxes on a portion of unemployment insurance benefits.

The other significant Senate financial cut was to limit who receives relief checks. Under the House bill, individuals who in 2019 earned between $80,000 and $100,000, single parents earning between $120,000 and $150,000, and couples earning between $150,000 and $200,000 qualified for partial payments. The Senate bill cut these, reducing the expected cost by $21.7 billion from $432.3 billion to $410.6 billion, according to the Joint Committee on Taxation. However, another provision from the Senate, this one providing full coverage for laid-off workers’ health insurance from April 1^st to September 30^th (instead of an 85-percent payment), added costs of roughly the same amount. The Senate bill also adds a provision that any student loan forgiveness between now and 2025, that is eventually approved, would be exempt from income tax.

Understandably, unemployment insurance and cash payments have gotten the most attention, but it’s worth recalling that the bills contain more than $1.2 trillion in spending that falls in neither of these two categories.

Some of the more far-reaching provisions of Biden’s original proposal did not survive the legislative process. One of these was an $84 billion provision that would have provided universal paid sick leave, a benefit that is standard in 179 countries. The House instead approved a modest $14 billion tax credit for companies offering sick leave. The House did add one significant measure not contemplated in Biden’s proposal, allocating an estimated $58 billion to reinforce a faltering federal private pension system.

A measure to raise the federal minimum wage to $15 an hour by 2025 made it through the House, but it was stripped by the Senate. This was done initially on procedural grounds, but with eight members of the Senate majority voting against its reinstatement, prospects for a federal $15 minimum wage remain highly uncertain.

These amendments aside, the law’s scope remains broad. The estimates below, based on multiple sources—draw on the bill’s text, Joint Tax Committee reports, the Washington Post, and the nonprofit Committee for a Responsible Budget.

American Rescue Plan—Main Provisions & Cost Estimates

What the Relief Bill Achieves

Despite its high price tag, the “rescue plan” legislation is essentially an economic Band-Aid, albeit an extremely large one. Still, the bill’s passage is highly significant. First of all, the scale itself is important. As NPQ noted in January, a study by two Moody’s economists estimated that government spending in the neighborhood of $2 trillion, provided the pandemic is contained by mass vaccinations, would likely reduce the length of the COVID downturn by as much as a full calendar year.

Reducing periods of potential unemployment would also bring major positive social effects. As business journalist Binyamin Appelbaum observed years ago in the New York Times, “People who lose jobs, even if they eventually find new ones, suffer lasting damage to their earnings potential, their health, and the prospects of their children. And the longer it takes to find a new job, the deeper the damage appears to be.”

The significance of the unemployment insurance and relief checks also should not be discounted. Even with Senate cuts, those $1,400-per-person payments will reach an estimated 85 percent of Americans—280 million people—and, as the Institute for Tax and Economic Policy (ITEP) observes, they will reach 100 percent of adults and children among the bottom 60 percent of households by income.

Because payment is the same for everyone who qualifies, regardless of income, low-income families disproportionately benefit, significantly reducing overall poverty. Notably, the smaller CARES Act checks of $1,200 per adult and $500 per child last year alone lifted more than eight million out of poverty. In short, the notion of universal basic income is moving further into the US political mainstream.

The bill also includes a major expansion of child tax credits. In many countries outside the US, universal child benefit policies—think of it as a universal basic income policy for families—are the norm. For instance, in Germany, as of 2012, a family with two children received an annual benefit estimated to total $5,620. Now, at least for a year, the US will try out its own quasi-universal child benefit policy.

As with the relief checks, the child tax benefit is not truly universal, but it could greatly reduce poverty. Presently, the maximum benefit per child is $2,000 up to the age of 16; families that earn too little only get $1,400 per child, and families with extremely low incomes get zero. Under the provisions that passed, these limitations end; the benefit is increased to $3,000 for children up to 17 (with an additional $600 for children under six), and half the payments will be made in advance on a monthly basis from July to December. The remainder of the credit is available at tax time, with phaseouts in place for families that earn more than $150,000. The nonprofit Center on Budget and Policy Priorities estimates the provision will lift 4.1 million children out of poverty, reducing childhood poverty by over 40 percent.

Impact for Nonprofits

For nonprofits, there are two specific provisions that are of direct assistance. One is a provision (Section 9012) that benefits nonprofits that self-insure by covering 75 percent of costs, up from 50 percent of unemployment insurance costs in the CARES bill, for a five-month period beginning April 1^st and ending August 29^th. A second provision (Section 5001) within the small business section is a $7 billion provision that enables 501c3 nonprofits with over 500 employees (or over 300 employees for “second draw”) to access Paycheck Protection Program support, provided per-location employment falls below those numbers. (That’s effectively to ensure the provision does not apply to hospitals and universities.) The section also aids digital media companies, which were excluded from a media benefit in the relief bill Congress passed last December.

Another important provision for nonprofits is the funding provided for state and local government. To date, 1.3 million employees in state and local government have lost jobs, since states and localities, unlike the federal government, face limits on how much they can borrow during downturns. The $350 billion in support—with about 55 percent headed for the states and 45 percent headed for local government, territories, and tribal nations—helps stem further cuts. Nonprofits also benefit, since they earn revenue from state and local government contracts. In 2015, for example, nonprofits earned $187 billion from these sources, four times as much as they received from private foundations.

Unanswered Questions

Because this is a relief bill, there are few structural changes, but the failure to address structural impediments could prove costly. Nowhere is this more obvious than with health insurance. As Sarah Kliff writes in the New York Times, the bill puts off such measures as a public option and instead reinforces the existing system by subsidizing employer health coverage for laid-off workers for a six-month period and increasing individual subsidies to purchase private insurance.

Kliff observes that “the healthcare industry has generally supported the changes because private health plans typically pay higher prices to doctors and hospitals.” But these measures reinforce a highly inefficient US healthcare system, which spends close to twice as much per capita on healthcare as other nations, like Canada, do.

Healthcare is not the only case where the failure to address root causes of inequality is visible. Even now, the hold of neoliberalism remains potent. This can be seen in the claim by Senator Joe Manchin (D-WV) that unemployment insurance must be kept low “to keep the economy going”—even if there is no evidence that it stalls reemployment and significant evidence that it speeds economic recovery. Similarly, the reluctance to support raising the minimum wage in the name of protecting business fails to appreciate that if a business model relies on poverty-level wages, then the business model should change. (We’ve seen similarly flawed arguments advanced by nonprofits in the recent past.) Neoliberalism’s hold is visible too in the push to limit relief payments, illustrating a failure to appreciate the value of universal benefits in reinforcing solidaristic behavior during a pandemic. Even now, the reluctance to embrace policies that reinforce, rather than undermine, social solidarity is palpable.

Will People and Movements Force a Seismic Shift?

If the tectonic plates of politics are moving, the shift is less about legislative specifics and more a reflection of polling data that shows that a bill that has squeaked through Congress is overwhelmingly popular among the general public. Stein cites some of the numbers, writing:

A Monmouth University poll taken in late February found more than 60 percent of Americans supported the $1.9 trillion measure. More than two-thirds also said they would rather the relief package include $1,400 stimulus checks than see bipartisan support for the effort, Monmouth found. Quinnipiac University found in a poll released in February that Americans supported $1,400 stimulus payments, with 78 percent in favor and only 18 percent opposed.

Poll numbers can be fleeting, but the shifts they mark can sometimes be more lasting. The novel coronavirus pandemic, which has already resulted in over 525,000 deaths in the US, is easily the most traumatic event to affect the United States since World War II. A lasting shift in popular views is certainly a conceivable outcome.

If this shift in mindset is lasting, one can expect to see social movements gaining support for action in other areas, including climate and racial justice—as well as for economic changes that address the nation’s record income and wealth inequality.

Of course, the performance of the economy will matter too. These days, the conventional wisdom is that, assuming the pandemic subsides, an economic boom may be in the offing. Among people with higher incomes, there is clearly pent-up spending demand. But this happy view ignores many imbalances that are only loosely disguised. The cash infusion from the relief bill will help, but there is, lest we forget, an estimated $57 billion residential rent backlog as of January. An estimated 400,000 businesses have closed. Not surprisingly, commercial rent collection has suffered. Unemployment for the bottom quartile of wage earners remains greater than 20 percent, according to federal reserve governor Lael Brainard.

The relief bill—by shifting more resources to those of limited means through one-time checks, supplemental unemployment insurance, and child tax credit payments will help considerably—but it is only a first step. The need, in short, to address multiple imbalances in an economy that has shifted more and more wealth and income to fewer and fewer people remains.