On Thursday, Joe Biden signed the $1.9 Trillion relief bill into law. Despite the absence of the intensely debated minimum wage increase to $15/hour (which we will examine later here), the bill is a remarkable first achievement for the Biden administration. Before we look at the implications of the bill, let’s take a look at some of the major provisions in it, as per the New York Times:
$1400 Stimulus Checks: Individuals making under $75,000 and married couples making under $150,000 will receive direct payments of $1,400 per person. The bill will also provide $1,400 per dependent.
The payments will gradually decrease above those income levels and disappear entirely above an income cap: $80,000 for individuals and $160,000 for married couples.
Continuation of $300 Per Week Unemployment Checks: The Senate bill extends the COVID-19 unemployment program through early September, including the $300-per-week federal supplement provided in the last stimulus plan passed in December.
The Biden administration had originally sought $400-per-week. As a trade off to settling at $300, the bill also waives federal income taxes for the first $10,200 of unemployment benefits received in 2020 for households earning under $150,000.
Significant Increase in the Child Tax Credit: The bill will temporarily expand the child tax credit, which is currently worth up to $2,000 per child under 17. The tax credit will increase to $3,600 for children up to age 5 and as much as $3,000 for children 6 to 17.
Additional Funding to Fight the COVID-19 Pandemic and Aid to State & Local Governments, Schools: The bill will provide funding for vaccine distribution, coronavirus testing, contact tracing and genomic sequencing.
It will provide $350 billion for states, local governments, territories and tribal governments. It also contains $130 billion for schools, and includes funding for colleges and universities, transit agencies, housing aid, child care providers and food assistance.
In addition, the bill contains funding to help targeted businesses, including restaurants and live venues.
Additional Support to the Affordable Care Act: The bill will increase subsidies temporarily for people purchasing health insurance through the Affordable Care Act’s marketplaces. It includes billions of dollars for public health programs and veterans’ health care.
It also helps those who have lost jobs keep the health insurance coverage they had through their employer, covering the full cost of premiums through a federal program called COBRA through September.
Bailout for failing employer pension plans: Additionally, the bill includes an $86 billion bailoutfor 185 failing employer union pension plans. According to The NY Times, without the rescue, more than a million retired truck drivers, retail clerks, builders and others could be forced to forgo retirement income. Here’s an excerpt from the Times:
The bailout targets multiemployer pension plans, which bring groups of companies together with a union to provide guaranteed benefits. All told, about 1,400 of the plans cover about 10.7 million active and retired workers, often in fields like construction or entertainment where the workers move from job to job.
Both the House and Senate stimulus measures would give the weakest plans enough money to pay hundreds of thousands of retirees — a number that will grow in the future — their full pensions for the next 30 years.
What are the early reviews on the implications of the bill?
The bottom line is overall this bill is significant victory for the Biden administration, Democrats, and the American people as a whole, but most prominently those who are poor and the middle class. From the New York Times:
“Millions of people out of work through no fault of their own,” the president said moments after the relief act passed the Senate over the weekend. “I want to emphasize that: through no fault of their own. Food bank lines stretching for miles. Did any of you ever think you’d see that in America, in cities all across this country?”
Among the lessons Democrats say they have learned from the political backlash in 2010 to their handling of the economic crisis in 2009 is that they were not aggressive enough in selling the benefits of their stimulus package to voters a decade ago. It is not a mistake they intend to make again.
Even CNBC agrees that this bill is a game changer for the poor and middle class, when compared to the 2017 TJCA bill passed by President Trump and Republicans:
The $1.9 trillion pandemic aid bill as passed by the Senate will raise after-tax income by about 20% on average for households making $25,000 or less, or the bottom 20% of earners, according to Tax Policy Center estimates released Monday. The typical first-year tax cut for those households under the 2017 Republican plan was 0.4%.
The two plans will have vastly different effects on the highest earners, the analysis found. Average after-tax income for households making more than $3.4 million, or the top 0.1%, would not rise under the coronavirus relief bill. It increased by 2.7% under the GOP law.
Here are some of the boosts to the middle class as well, as per the New York Times;
Marc Goldwein, the senior policy director for the Committee for a Responsible Federal Budget, estimated that a family of five with household income of $150,000 could receive about $10,000 from the federal government this year, suggesting that the stimulus package would do much more than alleviate poverty.
Many economists argue that directing aid to the poorest will have the biggest benefit because they are most likely to quickly turn around and spend the money on groceries, rent and other necessities, stimulating the economy. However, after a year of avoiding travel and dining, middle-class families are also likely to splurge as the pandemic subsides.
This bill is simply a game changer for many children in poverty, with some estimates forecasting that it could ultimately cut child poverty in half. Here’s an excerpt from the New York Times:
Obscured by other parts of President Biden’s $1.9 trillion stimulus package, which won Senate approval on Saturday, the child benefit has the makings of a policy revolution. Though framed in technocratic terms as an expansion of an existing tax credit, it is essentially a guaranteed income for families with children, akin to children’s allowances that are common in other rich countries.
More than 93 percent of children — 69 million — would receive benefits under the plan, at a one-year cost of more than $100 billion.
We project that the poverty rate for individuals in households that experienced a job loss because of the pandemic recession would decline by more than half, while the poverty rate for households that did not experience job loss would decline by almost one-third.
The policies would reduce poverty by more than half for children and for people in households experiencing job loss. Poverty would fall about 42 percent for Black, non-Hispanic people, 39 percent for Hispanic people, and 34 percent for white, non-Hispanic people, reducing the disparities in poverty rates for Black, non-Hispanic people and Hispanic people relative to white, non-Hispanic people.
The bill does not, however, come without some controversy in progressive circles, as it does not contain the long desired federal minimum wage increase of any kind, much less the $15/hour level that many had sought. That’s a battle to be waged in the near future but not one to be cast aside for long. Over at the EPI, an important recent study have concluded that raising the federal minimum wage to $15/hour would raise wages for up to 32mm workers, or 21% of the entire workforce, among many other important findings:
In 1968, a minimum wage worker earned $10.59 per hour in inflation-adjusted terms, 46% more than today’s $7.25 federal minimum wage. The minimum wage today would be over $22 per hour had it tracked productivity increases over the last five decades.
On average, an affected worker who works year round would see an annual pay increase of about $3,300. In total, a $15 minimum wage would provide over $108 billion in additional wages in 2025 to affected workers.
Raising the minimum wage to $15 would help ensure that more low-wage workers are paid enough to cover basic living expenses, i.e., a wage providing a modest yet adequate standard of living. As of 2021, in virtually all urban and rural areas of the country, a single adult without children working full time must earn more than $15 per hour to have enough to pay for housing and other basic living expenses. For individuals with children, year-round work at a $15 wage in 2025 will still be inadequate to achieve basic economic security.
Minimum wage increases have not led to significant job losses. Despite claims that raising the minimum wage would reduce job opportunities for vulnerable groups of workers, the best evidence shows little to no job losses in the wake of minimum wage increases and a net wage gain even if job losses have occurred. These benefits explain why surveys show that the people most likely to support a minimum wage increase are unemployed people, people of color, and women.
It will be imperative that Dems tackle this issue while they still have political momentum before the 2022 midterm elections.