Joe Biden Wants an Early 2021 Stimulus Package

The proposal is scheduled to be formally unveiled this week. Here's what we know so far.

The plan will almost certainly include a provision to increase the amount of the second round of direct payments (that is, stimulus checks) from $600 to $2,000, though it’s not yet clear if the eligibility requirements for the larger payments will change.

It will also include more state and local aid (a provision that was left out of the most recent $900 billion package in the wake of vehement objections from the GOP), Bloomberg reported, as well as a further expansion of enhanced federal unemployment benefits.

There will also be more money for vaccine distribution, schools, rental assistance, small business aid and tax credits, Bloomberg reported, with provisions pulled from a $3.4 trillion bill the House of Representatives passed in May that the Republican run Senate never even considered.

Link

It's passage faces tough pressure from the GOP and... cough... Joe Manchin. Margins are razor thin in the Senate. There will also be some wrangling over what in it can be passed via reconciliation.

The success of large parts of Biden’s plan (those eligible under a process called budget reconciliation) will hinge on the full support of every Democratic senator after last week’s runoff elections in Georgia—with control of the Senate now split 50-50 (and Vice President-elect Kamala Harris casting the tie-breaker vote), Biden cannot afford to lose even one Democratic vote on a massive spending plan that almost all, if not all, Republicans are sure to oppose.

The push for $2,000 checks is already facing some pushback from Sen. Joe Manchin (D-W.Va.), a conservative Democrat whose vote will be critical and who signaled last week that he might be opposed to the larger checks if they are not more narrowly targeted to those who have actually lost jobs and income.

It’s also not clear that all of the big-ticket items that Biden and Democrats want—including the state and local aid they say is critical for recovery—would fall under the reconciliation umbrella, meaning that 60 votes and some Republican support may be necessary for those provisions to pass.

The timing would be decent if a little late, as the recovery is sputtering.

I'll update this once the full proposal is available.

Edit: Details have now been released. I'm happy to see UI extended and some assistance for state and local governments, both of which were sorely needed.

• Direct payments of $1,400 to most Americans, bringing the total relief to $2,000, including December's $600 payments
• Increasing the federal, per-week unemployment benefit to $400 and extending it through the end of September
• Increasing the federal minimum wage to $15 per hour
• Extending the eviction and foreclosure moratoriums until the end of September
• $350 billion in state and local government aid
• $170 billion for K-12 schools and institutions of higher education
• $50 billion toward Covid-19 testing
• $20 billion toward a national vaccine program in partnership with states, localities and tribes
• Making the Child Tax Credit fully refundable for the year and increasing the credit to $3,000 per child ($3,600 for a child under age 6)

I expect Manchin to kill it unless some Reps vote for it.

Is that the plan biden eluded to during every political ad leading up to the election?

I don't watch political ads, so I'm not sure what you're referring to.

Here in a battleground state his ads usually mentioned of a C19 plan though he never expounded on specifics.

Never saw one of those here...........

You are from PA, yes? It got to the point where I thought perhaps trump ran out of money or just said screw it because biden vastly outnumbered him in political advertising during EVERY commercial break even outside of local television. Night time programming on The Travel Channel (on demand) was insane for ads. Now Joe Biden has made way for Captain Marvel and her Nissan ads.

Yep. PA but didn't see any commercial like that. Then again I don't see Captain Marvel and Nissan either.

There’s a slight problem with another stimulus package, the US exceeded 127% debt-to-GDP in October last year.

From memory the world bank thinks 60-70% debt-to-GDP causes weaker or negative growth. So this will need to be paid back fairly quickly.

Where will Biden raise revenue in 2022? And with that amount of debt, he’s going to struggle with his fiscal plans that he previously talked about.

He plans on raising taxes on the wealthy.

@LJS9502_basic: That won’t be sufficient even if he does it Saudi style.

Almost 10% of the annual US government budget is spent just on debt interest payments, not even repayment of the loans.

There’s simply no way Biden will be able to use fiscal policy in any meaningful manner without accepting increasing debt. It’s already a record high since October last year.

I also remember Trump et al proclaiming a V-shaped recovery...well that didn’t happen either.

It's going to take awhile thanks to the republicans again.

@LJS9502_basic: So the Republicans are the only ones who waste money? Lol, you guys are so predictable and brainwashed at this point it's no longer even cute or funny.

Has been the pattern since Reagan. Facts win.

@LJS9502_basic: Hence, how can Biden use fiscal policy to stimulate the economy given the record high debts?

Monetary policy would be extremely hard given the already near zero interest. QE will add to the national debt further.

So, more stimulus packages for the US is really difficult.

@kadin_kai: It's really not. They key figures telling us so are interest rates and comparative debt ratios. And also the fact that no one considers this an issue when the stimulus is intended for the rich and powerful.

"Yeah but the deficit so no." Every GOP'er out there, probably.

@mattbbpl: Ha! Record high 127% debt-to-GDP (Oct19) isn’t really an issue?

Plus no interest rate space for maneuver isn’t an issue either.

So the two most powerful tools to stimulate an economy are boxed in... yep not an issue...just keep on borrowing, keep raising the debt ceiling!

Unfortunately the IMF and World bank appear to disagree...

"127% debt-to-GDP (Oct19) isn’t really an issue?"

Tell me why it is.

"Plus no interest rate space for maneuver isn’t an issue either."

That's not an argument against stimulus. If anything it's an argument for fiscal stimulus as the monetary policy is near the zero lower bound.

Can you provide a source for your IMF claim, because at least as recently as October they've been arguing for US fiscal stimulus.

@mattbbpl: Its a few days old, but still relevant:

The problem was never getting 50 Senators on board. The problem was always just getting a vote in the first place. But of course, the 2k checks are going to happen, (we'll see) it's just a matter of how they package it. Biden, Ossoff and Warnock directly promised it. The Democratic party isn't going to throw away Georgia for West Virginia.

Edit: Tax season is almost here, so its hard to tell what's gonna happen in a few months.

Some of the tools US had 20 years ago are used. Interest rates are close to 0 or already negative many places. Debt is high. With high and increasing debt it will more and more difficult to increase the interest rates as the economy improves. Even with low interest rates, debt payment takes a bigger part of the budget. If the long term goal is to lower the debt again, it is becoming more and more difficult to do so.

Granted the way the western world has operated the last decade might point to a new monetary theory.

Not against stimulus package, however it has to be designed to reach the people and not the shareholders imo.

@horgen: Yep, I think we agree unless I'm missing something.

Also QE doesn't add to the debt, at least in a direct way. The fed is a monetary authority, not a fiscal one.

@mattbbpl: 127% debt-to-GDP ratio is a problem because the US economy is smaller than its debt pile.

The government needs to pay interest on those debts and it’s almost 10% of the government budget in interest payments alone.

That’s money away from social programmes, schools, pavements, hospitals, or funding for the next war.

The lack of interest rate manuverability means the FED can’t reduce rates further to boost economic activity, a key tool to stimulate the economy.

Economic activity brings in tax revenues for the government to spend.

Therefore for the US government to issue this stimulus to Americans it needs money. It will need to borrow money because tax revenues are low.

If tax revenues were not low, then the US wouldn’t be in so much debt!

You may not think it’s bad because the pandemic and Trump is in the headlines.

@HoolaHoopMan: Yes QE adds to debt!

"127% debt-to-GDP ratio is a problem because the US economy is smaller than its debt pile. The government needs to pay interest on those debts and it’s almost 10% of the government budget in interest payments alone."

That doesn't mean it's a problem necessary to avoid stimulating the economy when necessary (such as during the current recession). The means there's a cost associated with it (I agree completely with this). The question then becomes does it outweigh the cost incurred with deepening and lengthening the recession? I'd argue no, particularly given that current rates are less than long term inflation rates.

"The lack of interest rate manuverability means the FED can’t reduce rates further to boost economic activity, a key tool to stimulate the economy."

Agreed! That's why fiscal stimulus is more important right now - because there's almost no room for monetary stimulus. This isn't an argument AGAINST fiscal stimulus, it's an argument FOR fiscal stimulus.

"Economic activity brings in tax revenues for the government to spend."

Agreed. This lowers the cost of the stimulus package because some of it will be recovered by the economic growth (or in this case making the recession shallower and shorter).

"Therefore for the US government to issue this stimulus to Americans it needs money. It will need to borrow money because tax revenues are low."

Agreed. At a rate lower than long run inflation. That's not a bad win, in real terms.

To conclude, we have learned repeatedly through history that the time for austerity is NOT during a recession. It deepens it and lengthens it causing needless pain. The time for austerity is when the economy is chugging along steadily and you can lower your debt load without going into negative GDP growth.

As an alternative, we have plenty of slack in the effective tax rate. We could simply fund the proposed stimulus with tax increases, effectively trading a low multiplier expenditure for a higher one. That could provide a stimulus without an additional debt load, although it would obviously be smaller and less effective overall because the stimulus total would rely entirely on the higher multiplier rather than a direct injection of cash.

Edit: I'm also disappointed that you didn't comment on the fact that the IMF was calling for US stimulus after having just referred to them for support of your argument. Are they no longer an authority you wish to rely on?

@kadin_kai:I think there may be a misunderstanding for most people concerning QE with respect to debt. If we're defining national debt as 'US treasury notes held by entities other than our government', it does not increase it. The government is essentially just buying it's own bonds back from the non-government sector, which is technically reducing it (assuming the prior definition). The impact to the fed is that they're simply switching bonds and reserves back and forth depending on whether or not they're expanding the balance sheet or contracting it. And this differentiation tells us if they're pulling money out or pushing it into the economy.

These distinctions are important as it differs from what people can do. You can't sell yourself stuff, then pay yourself back with interest, then buy more of that stuff from the interest it generated, etc.

@mattbbpl: Austerity or not is a different matter. There are competing schools of thought, some spend their way out of recession others choose austerity.

My point is, the US and some others are in a very difficult situation wouldn’t you agree?

More fiscal spending now will inevitably mean more borrowing, more debt and higher interest payments. Since the money has to come from somewhere.

I am not saying it’s an entirely bad idea to borrow now and pay it back in future.

But given the size of the debt, 127% and likely to be even higher when accounting for the entire 2020, isn’t that a problem?

Consider the US and UK’s response to the pandemic. Wouldn’t you say part of the reluctance to lockdown by Trump and Johnson is partly caused by the extremely high levels of debt?

The problem with the US and some others countries is that you spend far beyond your means.

Regarding the IMF, no I do not disregard their analysis, but I do not always agree with them either. But they like the World Bank do advise counties not to exceed around 70% debt-to-GDP.

I also recall how the sovereignty of Greece was eroded by the IMF in the previous recession.

Details have now been released. These serve as the starting point for negotiations.

• Direct payments of $1,400 to most Americans, bringing the total relief to $2,000, including December's $600 payments
• Increasing the federal, per-week unemployment benefit to $400 and extending it through the end of September
• Increasing the federal minimum wage to $15 per hour
• Extending the eviction and foreclosure moratoriums until the end of September
• $350 billion in state and local government aid
• $170 billion for K-12 schools and institutions of higher education
• $50 billion toward Covid-19 testing
• $20 billion toward a national vaccine program in partnership with states, localities and tribes
• Making the Child Tax Credit fully refundable for the year and increasing the credit to $3,000 per child ($3,600 for a child under age 6)

@mattbbpl: That 15 dollar minimum wage is dead on arrival.

@HoolaHoopMan: Oh, totally.

Also, it seems that it also includes getting rid of the 'tipped' minimum wage as a loop hole for servers. I'm def in favor of that (and $15 min in general).

I'm wondering how much of this can be put through via reconciliation.

I just saw something about that earlier. Let me try to find it.

Edit: Sorry, I can no longer find what I was looking for.

Edit 2: But I did find this. God damn it, Joe. Note that this is his broader plan rather than specifically this stimulus measure, but it's not a great sign.

Lets help small businesses get back on their feet by imposing a 15 dollar minimum wage, seems like a great idea. ROFLMAO!

I swear the left is trying their best to kill small businesses through this pandemic and now lets raise minimum wage on top of that. That should help them right? Only a 100,000 businesses went out of business last year no big deal.

https://fortune.com/2020/09/28/covid-buisnesses-shut-down-closed/

Must be helping their corporate overloads.

That should help all of them small business restaurants get back on their feet. At least I will stop tipping if this happens which will be nice!

@mattbbpl: Getting bipartisan support in numbers he needs is impossible. They need to push it through reconciliation in it's current form. The GOP has already shown that it's willing to f*ck over anyone and everyone to deny democrats political gain. Just look at 2009 onwards during the recession.

That, or they nuke the filibuster.

Every time we raise the minimum wage we hear the same fear mongering that it'll shutter small businesses, and every time it never materializes.

Say that to the 100,000 that already shutdown and their is still a shit ton to go. We never raised minimum wage right after a pandemic either! NOW HAVE WE?

How about those businesses that have been paying their staff throughout this pandemic? How do you think they are going to keep making it. Also get ready for the prices at restaurants to raise substantially if they have to pay 15 bucks, but at least I will nto have to tip anymore so that is a bonus. BTW I am a great tipper.

To be fair, it's been a while. How do we know that it will turn out the same way now as it did in the before time?

The questions I am asking have we ever more than double minimum wage at one time and right after a pandemic? Sorry it is not a smart thing to do right now.

But I know the left would love to destroy the middle class and small businesses.

Damn, how'd you figure out our nefarious plot to destroy us and our families?! We've really got to be more subtle,

https://www.cbsnews.com/news/minimum-wage-no-increases-11-years/

Somehow this seems out of whack.

Last minimum wage increase 2009. Cost of living increase since 2009, 20%

I am not totally against raising minimum wage but more then double and giving waiters/waitresses 15.00 is a little much all at once. Maybe hit right at 10 dollars an hour would be a more proper amount.

Also do you think teenagers working at grocery stores, fast food places, and places like that really deserve 15 dollars an hour?

Also it is right after a pandemic and small businesses are hurting more then ever. Do you think this is the right time to more then double minimum wage? Most restaurants lost there biggest sale month in Decembers, but now when they can finally open can you imagine having to pay waiters/waitresses 15 dollars an hour now. I guarantee prices in restaurants will go way up, but I wont mind because I will not have to tip.

Seriously think this through and it doesn't make sense at this moment and should be discussed more after we get everything open and rocking again.

People should have wages that enable them to live. Cost is passed on to consumers anyway.

I'm perfectly fine telling them that they should probably be paying their employees more. And if businesses decide to place 100% of this increase into their products rather then restructuring costs, I can decidedly take my business elsewhere. The cost of an employee doesn't need to be 100% offset by the retail price of said good or service. That's a pretty disingenuous false dichotomy.

There existed a time when the minimum wage held much larger purchasing power and we prospered all the way through it. The narrative that it'll cause a bust on small businesses en masse is largely fear mongering. At most it'll weed out business with predatory employment practices and sh*tty top heavy business models.

This is also ignoring any potential boon due to increased consumer spending with take home wage increases. Where do you think that extra cash is going to go? Sit in a mattress collecting dust? Poor people spend nearly 100% of their paychecks due to necessity, and it's guaranteed that any cash inflow to the lower economic levels of the US will be immediately recycled into the economy via consumer spending. However, no one ever has the ability to see past their nose and tend ignore any downstream impacts. It's almost like people forget that in order to buy a service or good, people need to be able to afford it.

I'm not very sold on the argument to be honest. If anything I believe the magnitude of change to be the larger argument against it, not the time element. We're talking about a 100% increase, at least in some states.

The impact would be felt differently on a state, county, city, level depending on their local minimum wage. Places where there's no minimum or the state minimum is below federal would feel the impact harder obviously. However, I'm of the opinion that a net amount of good would probably come of the increase. If the sudden jolt is too much they should just implement it in phases.

The bigger problem today is income inequality. Everyone is so myopic and over fetishizes the unemployment rate numbers, never contextualizing them. Cost of living is far outpacing wages for the lower class and isn't sustainable. What good will a $7.25 an hour job be if it can't even pay rent? I guess we can be proud of our unemployment numbers while ignoring our poverty and homelessness numbers.

My response above was meant to dripping in sarcasm, but I'm horrible at conveying that through text.

I know what you're saying, and I'm with you. Here's a graph that I think illustrates your point well.

If cost is passed onto the consumer do you really make much more? Those people have to buy stuff still. Also you never answered is doing this right after a pandemic a smart move when small businesses are hardly making it? Do you think a teenager working deserves 15 bucks an hour workings? Do you think waiters/waitresses would rather have a flat fee paid with no tips or with tips. Because I know for a fact if I know a waiter/waitress is getting paid 15 bucks an hour I will not tip m 30%-50%. No way in hell!

Also raising waiters/waitress to these levels will cause a huge burden on restaurants just trying to get out of the pandemic. The main part of the the staff is that and to raise their salary 3 to 5 times what restaurants pay now guess what will happen to prices.

BTW. this will hurt the middle class. As all of these people get 100%+ raises, the middle class will not. As prices go up the only one taking a hit is the middle class on this.

Price is also offset by demand. If the business raises the price too high they lose demand and have to lower it. They also have to stay competitive. Any small business that isn't paying a living wage to their employees shouldn't be in business anyway.

Still not answering the question. Small businesses are going out of business left and right with 100,000 of them last year. Nearly all of them are suffering because of the pandemic and most have just lost their most profitable month of December.Why the hell would you then throw on top of that a double to minimum wage when things are not even open yet.

You don't think this increase RIGHT now is going to hurt small businesses even more? I guess you are for an even greater transfer of wealth to corporations. I always thought the left was against it, but as I see these policies and the timing I think you all love corporations and the transfer of wealth.