The Second Relief Package Wave
Part VI: Yes, Now is the Perfect Time to Talk Economic Recovery in America
Note: This post is one part of my series, Yes, Now is the Perfect Time to Talk Economic Recovery in America, which provides an in-depth look at the current economic crisis and how the United States will climb out of it. Click the link or scroll to the bottom to check out the other posts in the series.
After an initial flurry of spending packages, legislative action went dormant.
The embers of an anxious time turned ablaze with the murder of George Floyd in May. The viral video of his death pierced the public at its core. It coalesced with a fervent frustration toward a justice system and economic system needing reform. Peaceful protests and riots swept the nation.
The backlash was significant. Cultural wars ignited over “opening up” versus “staying closed” and enforcing public health measures versus protecting civil liberties. A late summer coronavirus spike deafened hope for a speedy conclusion. The impending 2020 presidential election burned bright above it all.
A year of strife, argument, and debate, froze relief measures for an incomprehensible amount of time. The sheer economic damage and ruin permeated for months on end; the federal government stood idle. The unemployment rate plateaued.
Finally, only mere days before the calendar flipped, Congress sent a bill to President Trump’s desk. After balking and calling for $2,000 direct cash payments at the eleventh hour, much to the chagrin of his party, President Trump signed it into law. It would be the last major bill of his presidency.
December 27, 2020
Consolidated Appropriations Act, Stimulus #2
On the heels of the new year, Congress included an $868 billion stimulus package as part of its annual appropriations bill. This relief package would look familiar. It added funding to a series of programs and initiatives created by the April CARES Act.
The largest component, about $300 billion, replenished the Paycheck Protection Program (PPP) for small businesses. This would be the third iteration of PPP funding, which at this point, had come under intense scrutiny.
The first two rounds of PPP loans were imbalanced. Many of the hardest hit sectors, which had to abide by strict in-person restrictions, received a disproportionately minimal amount of funds. In particular, the restaurant industry took the brunt.
The next component, totaling close to $165 billion, went toward direct cash payments. These stimulus checks, which maxed at $600 per individual, were half the size of the first round.
Stimulus checks were sent to all individuals earning up to $75,000 but with prorated amounts for those earning up to $80,000.
Further unemployment benefits were included too. Nearly $120 billion went toward insurance protections set to expire. Unemployment checks would now increase by $300 per week and extend for a maximum of close to a year.
Lastly, the government spent on aid packages for schools, health care services, and additional research. It would also include assistance to lower-income individuals and those struggling in extreme circumstances. These measures were intended to get the country through a long winter. The pandemic raged on. The human toll steeply rose and economic anguish mounted.
March 11, 2021
American Rescue Plan Act, Stimulus #3
After the election, President Biden publicly advocated for another, sizable relief package. He repeatedly stated the risk is “not going too big, it is going too small.” His Treasury Secretary, former Federal Reserve Chair Janet Yellen, echoed this sentiment. She warned that without substantial stimulus there would be long-term economic scarring.
Unlike previous COVID-19 recession relief bills, this act would not be bipartisan. After brief negotiation overtures, the Biden Administration and Democratic Congress pursued a path without any Republican support. They deemed that the two sides were too far apart given the urgency of the situation. For better or worse, the Democrats completely own this package.
Totaling $1.9 trillion, this relief package blends the old with the new.
Approximately $411 billion will fund economic impact payments otherwise known as stimulus checks.
Like before, these payments will be disbursed to all individuals making $75,000 and prorated for those making up to $80,000. They are not any more targeted. These $1,400 checks, which are based on 2019 and 2020 tax returns, will complete the $2,000 amount previously advocated by both Democrats and President Trump. The bill also continues and increases tax credits based on earned income, dependent care, employee retention, and employer-provided paid leave.
Unlike before, these direct payments will be coupled with a child tax credit. Each family will now receive $300 per month per child. This credit maxes at $3,000 per child under 17, $3,600 per child under 6, and phases out for parents earning more than $75,000.
About 20% of the package, or $360 billion, will go to state and local governments. These funds are intended to both provide relief from the past year and stability in the future. Congress anticipates economic shockwaves in the coming years. This money can be used for COVID-19 emergency and economic efforts, premium pay for essential workers, and investments in cleaner utilities and advanced technology.
Congress allocated about $200 billion for unemployment benefit expansion. Unemployed individuals can continue to receive $300 in federal benefits now for an additional 29 weeks. It also provides subsidies for employers who fund unemployment benefits.
Next, public health and educational support received about $170 billion a piece. This spending continues funding for vaccine distribution, coronavirus testing, contact tracing, and getting life back on track. It also provides funding to schools so that they can open and operate safely. The money is intended to go toward repairing ventilation systems, hire support staff with smaller class sizes, and purchase more personal protective equipment.
Lastly, the package provides about $300 billion for various programs such as food aid, small business support, emergency rental assistance, and relief for homelessness.
The Bottom Line
According to The Committee for a Responsible Federal Budget, which is a bipartisan nonprofit directed by former House and Senate Budget Committee members, Congress has approved about $6 trillion to combat the COVID-19 recession.
By comparison, Congress spent about $1.8 trillion in fiscal stimulus to fight the Great Recession. Accounting for inflation, the price tag would be about $2.2 trillion.
To date, the United States has spent three times as much on the COVID-19 Recession as the Great Recession. The cost disparity is significant. Its effectiveness is unclear. One note is certain — the return on investment will be the subject of vigorous debate for years to come.
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