Last Thursday, President-Elect Joe Biden released a 19-page summary of his administration’s proposed $1.9 trillion coronavirus relief agenda, which his team has labeled the American Rescue Plan.
How much is $1.9 trillion? It works out to about $5,800 per person in the United States. Fortunately, as a recent paper by three prominent economists—former congressional budget office director Peter Orszag, former Treasury Secretary Robert Rubin, and Nobel laureate Joseph Stiglitz—documents, interest rates are at historic lows, making it considerably cheaper to borrow to meet the social needs exposed by the pandemic economy. While economic projections should never be taken for granted, current projections suggest continued “near-zero interest rates will last as far as the eye can see.”
An analysis by Moody’s chief economist Mark Zandi and his colleague Bernard Yaros explains why trillions of dollars in spending is needed. According to the two economists, Biden’s plan could reduce the length of the nation’s economic downturn by as a much as a full calendar year, meaning recovery could come in early 2022 rather than early 2023. Achieving this outcome, of course, would dramatically affect the well-being of many of the people that human services nonprofits aim to serve.
As Zandi and Yaros observe:
The pandemic…continues to ravage the finances of lower-income households and [people of color]. These groups were only beginning to recover from the financial crisis when the pandemic struck. Without substantial targeted government support like that proposed by Biden, their prospects are poor.
Indeed, as NPQ observed this past October, the COVID economic shutdown has—far more than any economic crisis before it—widened the gap between haves and have-nots, so much so that Americans in the top quartile had recovered to pre-pandemic employment levels by the end of September, even as Americans in the bottom quartile still were suffering Great Depression-levels of double-digit unemployment.
Just last week, Lael Brainard, a Governor of the Federal Reserve, reiterated this point, noting that “Federal Reserve staff analysis indicates that unemployment is likely above 20 percent for workers in the bottom wage quartile, while it has fallen below five percent for the top wage quartile.” Meanwhile, while vaccines offer hope, at present the pandemic itself continues to spread, with US fatalities now exceeding 400,000.
Breaking Down the Numbers
Providing legislation cost estimates is challenging. In some cases, there are precise numbers. But in programs with benefits (e.g., unemployment insurance), the actual cost depends on how many qualify for and claim the benefits offered. To develop the below chart, multiple sources are used, including the estimates by Zandi and Yaros, those of the Committee for a Responsible Budget, and the text of the Biden administration’s 19-page summary. Where there is a range in the estimates, that range is identified.
In broad terms, a little over half of the aid, or roughly $1 trillion, is in the form of support to individuals, whether this is in the form of direct checks, expanded unemployment insurance, rent and utility assistance, hunger alleviation, or childcare support. In addition, the bill would extend the eviction moratorium to September 30th.
Close to a quarter of the package, an estimated $415 billion, is tied directly or indirectly to addressing the pandemic. About $160 billion is tied to vaccination centers ($20 billion), expanded testing ($50 billion), vaccine manufacturing ($10 billion), emergency distribution support, like National Guard deployment ($30 billion), and international support ($11 billion). Other large items here are education funding ($170 billion), much of which ($130 billion) is geared toward improving ve