Joe Biden’s $ 1.9 billion stimulus bill mainly aims to accelerate the American exit from the pandemic. But it has a secondary goal: to make the world’s largest economy fairer.
The huge new spending injection from the U.S. government, involving large-scale transfers directly targeted to low- and middle-income families, marks the White House’s first attempt to reduce income inequality and poverty – ingrained issues that have been exacerbated since the coronavirus struck.
Biden has put an effort to create a more balanced, stronger economy at the heart of his agenda since last year’s campaign, when he criticized the uneven ‘K-shaped recovery’ taking place under Donald’s watch. Trump.
Even before that, tackling economic disparities was an unfulfilled goal for Democratic politicians and left-wing economists since the global financial crisis.
“This package is designed to stem the challenges in the here and now so that, as we move towards recovery, we will not have such a disparity,” said Heather Boushey, member of the council of economic advisers at the White House. the Financial Times.
“As this pandemic made its way through our economy and our society, many people at the top fared well. . . while for the people at the bottom, what you see are only real needs and intense challenges, ”she added.
The main provisions of the Biden stimulus are aimed at immediately relieving large swathes of American society with less income and less wealth to absorb the shock of the crisis. Aid to businesses and markets is limited.
Direct payments of $ 1,400 per person are available for Americans earning less than $ 75,000 per year. But these are quickly phased out to $ 80,000, with no money going to the richest 1 percent of households.
An increase in the child tax credit is expected to reduce the number of children living in poverty by 50%, while an emergency top-up to unemployment benefits worth $ 300 per week will be extended until September. Additional funds for reopening schools and rolling out vaccines are expected to be particularly helpful in low-income neighborhoods, where both have fallen behind. Even Bernie Sanders, the left-wing senator from Vermont who challenged Biden for the Democratic presidential nomination last year, applauded him.
“[This] is the most important law for the benefit of working families in the modern history of this country, ”Sanders said after voting for the package on Saturday. “The American people are suffering, and this comprehensive plan goes a long way in addressing the myriad of crises we face,” he added.
The impact of Biden’s stimulus bill will only be temporary, as its main features will gradually ease later in the year and into 2022 – lawmakers and economists say it will take a lot more to fundamentally change the structure of the US economy to reduce it. unequal.
During his campaign, Biden promised a series of measures that would help tackle economic inequality, including tax increases on Americans and wealthier businesses, but it’s unclear how far the White House will push them in its next economic plan, which should focus on infrastructure spending. Biden’s campaign platform also included massive investments in education and child care, and low-income communities, which are also designed to reduce entrenched inequalities, including racial disparity.
“[This stimulus bill] A lot of it is about making sure we don’t end up with more inequality because of Covid, ”said Claudia Sahm, a former Federal Reserve economist. “We have to come back to February 2020, then we can build. And you know, build bridges to a better place with less inequality, a stronger safety net, and more opportunity for all Americans, especially children. This is the next package, ”she said.
Although opinion polls indicate Biden’s stimulus package is popular, Republicans have rejected any suggestion it could have a positive impact.
“The Senate has never spent $ 2 billion more haphazardly or less rigorously,” said Senate Republican Minority Leader Mitch McConnell on Saturday, calling “this colossal missed opportunity for our nation.”
Other economists worried that Biden’s stimulus could trigger an unwarranted rise in inflation – well beyond the average 2% target sought by the Federal Reserve – and was excessive at this point in the cycle. .
“Looks like we’re spending all that money at the wrong time now. We’re already in the recovery phase, ”said Price Fishback, an economist at the University of Arizona. “What Democrats are doing is trying to match what the social protection system in Europe looks like,” he said.
But in the White House, there is little doubt that the government stimulus to the economy must be significant – and will be in vain if the benefits are not widely shared.
“We’ve learned a lot in the last decade – from the Great Recession – and one of the lessons is that if we don’t nip these recessions in the bud and do what you need to do, the scarring effects persist for some. months and even for a lifetime, ”said Boushey. “When the pandemic struck, we saw how inequalities created fragility, in our society and in our economy. And that made us all more vulnerable. “