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President Biden has now been in office for 100 days. Okay, technically 104 days. In that time, presidential tweets have gotten way more boring, but the federal government’s plans to intervene in the economy have gotten way more interesting.
In his joint address to Congress last week, Biden called for a multitrillion-dollar agenda that could fundamentally transform the economy. And it now seems like the man conservatives called “Sleepy Joe” has been pounding Red Bulls and is ready to tax and spend like no president in generations.
Here’s a brief overview of some of President Biden’s biggest economic initiatives.
The American Rescue Plan
By far, the most consequential thing President Biden has done for the economy is the $1.9 trillion American Rescue Plan, which he signed into law on March 11th. It includes:
- A new social safety net for kids that, according to a Columbia University study, could cut child poverty in more than half. It does this by boosting the federal child tax credit to $3,600 per child under six and $3,000 for kids ages six to 18, allowing the IRS to send monthly checks to parents, and making the credit fully refundable (so American parents who pay little in federal taxes still get it). The program is only approved for a year, but the White House wants to make it permanent.
- Lots of money to help Americans recover from the pandemic, including $1,400 checks for Americans making under $75,000, a $300 boost to weekly unemployment benefits, and a 15 percent increase in food stamp (SNAP) benefits. Both the unemployment and food stamp provisions are set to sunset in September.
- Lots of money to help Americans with housing, including $21.6 billion to help people pay their rent, $5 billion to help the homeless, and about $10 billion to help homeowners pay off their mortgages.
- More than $50 billion to help defeat the spread of COVID-19
- $31 billion to help Native Americans. Congressional Democrats have called it “the single largest infusion of dedicated resources to Native communities in U.S. history.”
- $28.6 billion in grants to save restaurants.
- About $250 billion dollars to help K-12 schools, union pension funds, and child care providers.
- $40 billion for higher education.
- $350 billion to help states and cities recover from the pandemic, mostly as they see fit. However, the bill specifically says this money can’t be used to lower taxes.
Biden initially wanted to include a national $15 minimum wage in this legislation, but it was scrapped after fierce lobbying from industry groups, conservatives and moderate Democrats opposing it, and a ruling by the Senate Parliamentarian that such legislation could not be passed with a simple majority because of bizarre and complicated Senate rules.
The American Jobs Plan
The American Jobs Plan, touted as an infrastructure plan, uses a definition of “infrastructure” to mean something much bigger than just fixing roads and bridges. We’re talking investments to combat climate change, transform our energy economy, strike a blow against racial inequities and turbocharge American innovation and manufacturing to create millions of good-paying jobs.
President Biden wants to pay for all of this by increasing the tax rate on corporations, from 21% to 28%, for 15 years. By doing this, he would partially reverse one of President Trump’s signature policies (before Trump, the corporate tax rate was 35%). Biden also wants to impose a 21% “global minimum tax,” where the government calculates what corporations pay on a country-by-country basis and then taxes them to make sure “it hits profits in tax havens.” He also wants to step up IRS audits in the corporate sector.
The White House hopes to pass this package over the summer, but with a 50-50 split in the Senate, it will have to herd cats — and likely rely on VP Kamala Harris’ tie-breaking vote — to get it done.
The American Families Plan
Last week, President Biden unveiled The American Families Plan. This one weighs in at $1.8 trillion — $800 billion in tax credits and $1 trillion in spending on an array of welfare, education, and child care programs. Here are some of the plan’s big pillars:
- $225 billion for paid family and medical leave. The plan would provide Americans up to $4,000 a week for 12 weeks if they have kids or need to deal with a family illness.
- $225 billion for child care. The White House says the plan would save the average family $14,800 a year in child care expenses. It would make some of the temporary measures passed in The American Rescue Plan permanent.
- $200 billion for two years of universal preschool. Giving free preschool to three and four-year-olds, the White House says, will save the average family $13,000 during the two years they’re in school.
- $109 billion for two years of free community college. This includes $80 billion in extra funding for Pell Grants and $46 billion for historically Black colleges and universities.
The White House proposes we pay for most of this by increasing IRS enforcement and raising taxes on the wealthy. They want to raise the top income tax bracket from 37% to 39.6% and tax capital gains at the same rate as wages.
If passing the American Jobs Plan with a 50-50 Senate is like herding cats, then passing the American Families Plan will be akin to herding cats through a field of catnip, mice, and landmines. It will be tough.
But Will All This Cause Inflation?
The federal government has already spent between three and four trillion dollars over the past year to clean up the mess created by COVID. That’s about a quarter of America’s GDP. If that amount of money alone were the GDP of a nation, that nation would have the fourth or fifth largest economy in the world this past year. And that’s not including efforts by the Federal Reserve, which is also pumping money into the system.
With so many dollars sloshing around the economy — and trillions more being proposed — inflation hawks are squawking. But they’ve been warning about runaway inflation for decades — and it has yet to materialize. Could all this spending push us over the inflationary edge? We’ll all be watching consumer prices in the coming months.
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