With the country experiencing a surge in COVID-19 cases and the release of December’s jobs numbers indicating an increase in new unemployment claims, some economists are calling for significant spending to address the scale of our nation’s economic challenges. With the pandemic and economy inextricably linked, economic priorities should be to get control of the spread of the virus and to ensure that households, businesses, and the government spend and invest sufficiently to reduce unemployment and boost wages.
The Economic Policy Institute estimated in December that roughly $3 trillion was needed to support the spending and investment needed to repair the labor market. The aid package passed by Congress and signed by President Trump on December 27 was less than one-third of that estimated need.
On January 14, president-elect Joe Biden announced his administration’s proposal for economic aid: the American Rescue Plan. Estimated at $1.9 trillion, this aid package focuses on addressing the coronavirus pandemic, providing direct aid to families, and supporting communities. The plan is focused not only on short-term relief but also on long-term recovery.
The country has been struggling with public health and economic crises for nearly a year. Biden’s plan seeks to address both issues.
It proposes additional investments to specifically address the public health crisis, including increased testing and tracing, development of a national vaccination program, support for high-quality medical treatments, and paid sick leave to contain the spread of the virus. Provisions include addressing the health disparities of COVID-19 and ensuring the availability of personal protective equipment. One key goal of these investments is to allow for the safe re-opening of schools.
The plan proposes immediate, direct relief to families affected by the pandemic, devoting about $1 trillion towards economic recovery for individuals and families. This proposed relief consists of direct payments, expanded unemployment benefits, and increased spending on rental assistance and food programs. Researchers at Columbia University’s Center on Poverty & Social Policy estimate that this plan could cut child poverty in half in 2021.
In an effort to bolster financial security the plan includes a $1,400 per-person payment, as well as one-year expansions of key supports for low-income workers including the Child Tax Credit, the Earned Income Tax Credit, Temporary Assistance for Needy Families (TANF), and expanded unemployment assistance.
Using traditional, conservative measures, it’s estimated that more than 10 million workers are currently unemployed as a result of COVID-19, with more than 4 million out of work for a year or longer. Unemployment has impacted Communities of Color disproportionately. In Communities of Color, 1 in 10 Black workers and 1 in 11 Latino workers are unemployed. The American Rescue Plan proposes extending and expanding unemployment benefits. A study by the Economic Policy Institute estimates that extending pandemic unemployment insurance programs through 2021 could create or save nearly five million jobs.
In addition to virus mitigation and direct assistance, this plan also includes support for communities by providing aid to small businesses, protecting first responders and other essential workers from lay-offs, ensuring critical infrastructure such as public transit remains available, and providing emergency funding to state, local, and territorial governments.
Some of the provisions contained in this proposal were sticking points during negotiations for the December aid package. It remains to be seen if the new administration will be able to foster the bipartisan support required to meet its ambitious goals.
Amid the uncertainty, however, it’s clear that the needs are great and the Biden administration’s proposals are focused on helping Americans in the immediate-term while also investing in long-term economic recovery.