Money

Biden's big stimulus: what's in the $1.9T proposal, and what it means for the economy

Tuesday, January 19, 2021 by Snacks
_The Stimulus Reloaded (blue pill edition)_

The Stimulus Reloaded (blue pill edition)

If stimulus packages were superheroes... Enter: “The American Rescue Plan" — Biden's $1.9T proposal to save the US economy. It’s nearly as big as the first stimulus we got when Covid/lockdowns hit in March and the US lost 22M jobs. It's more than twice as big as the 2009 financial crisis recovery package, and the $900B stimulus that Congress passed last month. Some of what's included:

  • $1.4K direct payments to most Americans, bringing the total relief to $2K (including December’s $600 deposits).
  • $400 extra in weekly unemployment benefits, extended through September.
  • $350B in state and local government aid, to help pay for teachers, firefighters, police, vaccine distribution, and other public services.
  • $20B for a national vaccination program. The rollout so far has been... underwhelming.
  • $15/hour federal minimum wage — more than double the current minimum.

Part I... This is the first of two big spending initiatives Biden plans to seek during his early days as prez. These proposals align with Democrats’ “bottom-up” economic policy. A quick refresher:

  • Democrats tend to favor more government spending and taxation to fund public programs that make society more equitable by expanding the social safety net. Think: the healthcare reform and financial regulation passed during the Obama admin in 2009/2010.
  • Republicans generally look to private sector innovation and tax cuts to support economic growth, job creation, and higher wages. Think: the sweeping tax reform Republicans passed in 2017/2018, which slashed taxes for corporations and lowered individual tax rates.

Channeling Schoolhouse Rock... Biden’s proposals still have to be turned into bills and passed by Congress to actually happen. Democrats' slimmest possible majority in the Senate could mean compromises — most legislation needs 60 Senate votes to pass.

THE TAKEAWAY

This could happen... but the package might be much smaller. Both Dems and Republicans believe more aid is needed: 10M+ Americans are still unemployed, and the US started losing jobs again in December. But some GOP lawmakers are uncomfortable with the $4T+ already spent in response to the pandemic. The national debt increased by almost $7.8T under President Trump, clocking in at $27.8T — larger than the size of the US economy. The Fed has been increasing the money supply to keep interest rates low so that America can keep borrowing $$$. But with interest rates ticking up again, some are concerned about inflation + higher taxes down the line.

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