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National review
Joe Biden’s pandemic bill is a mess
At the onset of the pandemic, the government embarked on a deliberate effort to curb economic activity in what was widely seen as necessary to slow the spread of COVID-19. While most recessions call for policy that stimulates the economy, the COVID-19 recession has called for the opposite – measures that would allow workers and businesses to take a break until a vaccine or a drug is widely available. Now that the vaccines are administered, policymakers face a different challenge: not to keep Americans indoors, but to get them back to work as quickly as possible. Against this backdrop, President-elect Biden’s $ 1.9 trillion stimulus package misses the mark. The proposal nods to public health – with $ 20 billion allocated for vaccine distribution, $ 50 billion for testing and $ 40 billion for medical supplies and emergency response teams – but fails to overcome the most urgent obstacles to COVID-19 immunity. Vaccines go unused not for lack of funding, but because of hard rules that determine which patients can receive vaccines and which doctors can administer them. Additional spending to speed up vaccine distribution is welcome, but its effects will be mitigated if bureaucratic hurdles remain in place. Even if the public health arrangements were to succeed in reopening the economy, much of the rest of Biden’s plan ensures he will reopen more weakly. On the one hand, an expanded UI supplement of $ 400 per week would mean that over 40% of UI recipients would earn more work than work at least until September, and possibly longer. . The restaurant and retail sectors hardest hit by the pandemic will experience the greatest labor shortages, exacerbating the challenges they have faced over the past year. Increased unemployment may have been reasonable when we wanted workers to stay home, but it is catastrophic when we want them to return to work. Meanwhile, Biden’s proposed minimum wage increase to $ 15 nationwide would wipe out an estimated 1.3 million jobs, hitting low-income states hardest. In Mississippi, where the median wage is $ 15, up to half of the state’s workers are said to be at risk. Raising the minimum wage may be a top Democrat priority, but it is not part of an emergency relief bill. The Biden plan is not all democratic priorities, however. He took a page from Trump’s book and offered $ 1,400 checks to households, bringing the second round total to $ 2,000. With household income now 8 percent above the pre-pandemic trend, additional checks would do little more than supplement savings accounts. In fact, 80% of the recipients of last year’s checks invested the money in saving or paying down debt, not consumption. The flagship element of Biden’s plan would do little to stimulate economic growth, even on Keynesian assumptions. The same goes for state and local aid, for which Biden is seeking $ 370 billion in addition to the $ 170 billion in state subsidies to education. The total of $ 540 billion far exceeds the roughly $ 50 billion affected last year by state and local tax revenues. As we wrote in December, states and cities are slow to spend federal grants, so the lion’s share of this stimulus won’t appear until 2023. Rather than trying to stimulate the economy, Biden hopes to whitewash bailouts from Democratic states poached by COVID -19 for relief. Other parts of the bill – the expansion of labor income tax credits and child tax credits – are defensible long-term structural reforms, but as emergency measures of one year, they will have the same mitigated effect as direct controls. By including a slew of proposals unrelated to the pandemic, Biden has weakened his hand in negotiations and made it less likely that urgent action will be taken quickly. In the depths of the COVID-19 pandemic, economic decision makers seized the opportunity. Following an unprecedented external shock, the US economy emerged in relatively good health, with less unemployment and less bankruptcy than feared. But the policies implemented to curb COVID-19 are not suited to what will begin to become, during this year, a post-pandemic economy. Biden may have campaigned during a recession, but he takes office during a recovery. He should rule accordingly.
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