The House is expected to approve a $ 1.9 trillion Covid-19 stimulus package on Friday and send President Joe Biden’s relief plan to the Senate.
Both chambers intend to pass the bill and send it to the Biden counter before March 14, when key programs that help millions of unemployed Americans expire. Traps await the Senate, where a Democratic vote against the plan would sink it and a decision banning lawmakers from including a minimum wage of $ 15 an hour threw a spanner in the process.
Democrats, with tight control of Congress, chose to pass legislation through budget conciliation. The process allows them to pass the bill without Republican votes in the Senate, but it also restricts what lawmakers can include.
The plan contains:
- An unemployment insurance supplement of $ 400 a week and an extension of programs that extend unemployment benefits to millions more Americans through Aug. 29
- Direct payments of $ 1,400 to most Americans and the same amount for dependents
- $ 20 billion for a national vaccination program against Covid-19 and $ 50 billion for testing
- $ 350 billion for state, local and tribal government aid
- Payments to families of up to $ 3,600 per child for one year
- $ 170 billion to K-12 schools and higher education institutions to cover reopening costs and student aid
- An increase in the federal minimum wage to $ 15 per hour in 2025
While economists tend to agree that an additional stimulus would provide workers with a strong safety net as the economy recovers (not to mention accelerating GDP growth), they disagree on the need of a bill of up to $ 1.9 trillion.
The case of going big
Proponents of spending argue that the U.S. economy is still in a precarious position, with millions of Americans still out of work thanks to pandemic-era layoffs and forced government closures.
While the Department of Labor’s most recent report on unemployment claims showed a decline in first-time unemployment benefit applicants, it also found that more than 19 million Americans were still enrolled in some form of unemployment benefit. ‘assistance from 6 February.
Earlier this month, Treasury Secretary Janet Yellen told CNBC that Biden’s plan could push the economy to full employment before the end of 2021.
He stressed the human toll the virus has suffered over the past year on households still struggling to buy groceries and stay ahead of rent payments.
“We think it ‘s very important to have a great package [that] it addresses the pain this has caused: 15 million Americans with their rent, 24 million adults and 12 million children who do not have enough food, small businesses fail, ”Yellen said on February 18.
The potential risks
Economists critical of the plan tend to focus on the size of the legislation and the potential benefits of a bill better tailored to meet the needs of businesses and workers in industries that continue to suffer the most. of the Covid-19, such as airlines, food service and hospitality.
The most shocking criticism was of Biden’s fellow Democrat and former Treasury Secretary Larry Summers, who in a Feb. 4 opinion warned that the bill could bring up a rebound in inflation after a decade of mostly stagnant prices. .
“Given the commitments the Fed has made, the dismissal of government officials even from the possibility of inflation and the difficulties in mobilizing congressional support to raise taxes or reduce spending, there is the risk that inflation expectations will rise sharply, “he wrote in The Washington Publication.
Although inflation throughout the economy has not reached the Federal Reserve’s 2% target for the vast majority of the last decade, investors are beginning to feel uneasy about the potential for a price jump.
Nathan Sheets, chief economist at PGIM Fixed Income, said that while he values these concerns, he is not too worried.
“While I see a real risk of rising inflation over the summer and falling as growing demand outstrips the recovery in supply, I expect this rise to be transitory,” he wrote in an email on Wednesday. .
Sheets, who also served as undersecretary of the Treasury for international affairs under former President Barack Obama, added that the more stimulating potential economic benefits appear to outweigh the potential risks.
“The job market remains sunk in a deep hole,” he wrote. “Recovering those 10 million jobs will require sustained economic growth, especially considering that about half of the job losses are for people who have left the workforce.”
Many Republicans have questioned the need to send more aid beyond the money needed to accelerate the vaccination effort against Covid-19 and strengthen the health care system.
On Wednesday, House Minority Leader Kevin McCarthy, R-California, characterized much of the spending as “waste or a wish list of progressives.”
A group of more centrist Senate Republicans previously offered Biden a $ 600 billion plan that included vaccine distribution funds, lower direct payments to fewer people than Democrats were looking for, and an unemployment supplement that expired earlier. of what their counterparts wanted. The president said he would rather pass the extended package with only Democratic votes than spend weeks negotiating a smaller bill with the Republican Party.
Cliff benefits and minimum wage
Democrats were keen to exceed the March 14 deadline, when some 19 million Americans receiving unemployment benefits would lose a $ 300-a-week payment. Many unemployed people would lose insurance if two programs expand eligibility and increase the number of benefit weeks next month.
Congress let similar provisions expire last summer and did not renew them until December, which contributed to millions falling into poverty and seeking food aid.
The push to pass legislation had problems Thursday night. Senate MP Elizabeth MacDonough ruled that lawmakers could not include a minimum wage of $ 15 per hour in the budget conciliation proposal.
Democrats included a provision in their bill to gradually raise the federal wage to $ 15 in 2025. The House did not remove it from legislation after the MP’s opinion, according to President Nancy Pelosi, that Democrats in the US Chamber “believe that a rise in the minimum wage is needed.”
The United States last raised the minimum wage to $ 7.25 per hour in 2009.
Maintaining the salary increase in the bill means that the Senate is likely to pass legislation different from what the House does. Representatives are expected to meet again to pass a bill a second time, likely in March.
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