The American Rescue Plan: Historically Large Appropriations Bill Contains COVID Relief and More

Today Congress took final action on the sweeping American Rescue Plan, passing President Biden’s $1.9 trillion proposal on a party-line basis. The bill, the second largest appropriations bill in U.S. history, provides new and extended economic relief to address the COVID-19 pandemic. Many argue that it does so haphazardly, without efficiently targeting funds where they are most needed: ending the health crisis, providing income protections, and driving economic recovery. Some big-ticket items in the bill surely go beyond the scope of Pandemic relief (i.e.: $86 billion in pension bailouts), and others may be Pandemic relief for problems that don’t exist.  

The bill traveled through both houses of Congress with party-line votes, with the narrow Democrat majority using the reconciliation process to move it along. Among the many hotly-debated provisions is $350 billion in aid to state and local governments. The Tax Foundation estimates that this amount is 116 times more than actual losses suffered by states, and notes that it is in addition to the more than $200 billion in federal COVID-response aid that has already been provided to local governments. According to the Tax Foundation, Louisiana did suffer over $514 million in revenue losses in 2020 as compared to 2019, but is expected to receive more than $5 billion in federal aid, or 628% of the total loss.  

One failed attempt at policy change that prompted hours of Senate debate was an amendment to dramatically increase the federal minimum wage by Senator Bernie Sanders. There are proposals to increase the federal minimum wage on both sides of the political aisle, but per Senate rules, they will need to be addressed separately and will require a 60-vote majority in that body.  

Although only a small percentage of the total spending, given the impact the vaccine has and will continue to have on economic recovery, the crucial provisions of the bill may be the $14 billion for COVID-19 vaccines and therapeutics, and approximately $50 billion for COVID-19 testing, contact tracing, and spread mitigation. 

Some other key pieces of the American Rescue Plan include:  

For Businesses 

  • $10 billion to restart the Small Business Credit Initiative, which provides funding to states for programs that lend to or invest in small businesses.  
  • $7.3 billion for the Paycheck Protection Program and provisions to expand eligibility.  
  • $15 billion for the Targeted Economic Injury Disaster Loan program.  
  • $25 billion for aid to restaurants and other food and drinking establishments.  
  • $1.3 billion for the SBA Shuttered Venue Operators Grant Program.  

For Individuals 

  • An extension of the CARES Act’s $300-per-week federal unemployment benefits until September 6 (formerly set to expire March 14).  
  • A new round of $1,400 stimulus checks for single Americans making less than $75,000 per year or married couples making less than a combined $150,000 per year, plus an additional $1,400 for each dependent. Individuals making up to $80,000 per year or married couples making up to $160,000 combined are eligible for reduced amounts.  
  • Tens of billions of dollars to subsidize health insurance premiums, defray housing costs, increase food stamp benefits, and more. 
  • A fully-refundable one-year expansion of the Child Tax Credit from $2,000 per child to $3,000 per child ($3,600 if the child is under six years old). The legislation raises the age cap by one year as well, making 17-year-old children eligible.  
  • Expansion of the Earned Income Tax Credit to temporarily broaden the eligible age range for taxpayers without dependents to 19 to 64-year-olds and increasing the maximum credit for such taxpayers. 

For Governments 

  • $350 billion for state and local governments to help them balance their budgets after being hit by revenue shortfalls over the past year. 
  • $130 billion for K-12 schools, meant to help them make the health and safety adjustments necessary to reopen for in-person learning, which Capital Region schools have already done. 
  • $40 billion for higher education institutions.  

As the vaccinations continue to roll out across Louisiana and the nation, economic recovery is expected to pick up pace. While some economic indicators look good, the need to create jobs and increase the labor participation rate is urgent. Continued relaxation of Pandemic-related limitations on economic activity will drive job recovery in battered industries, and the aid provided directly to individuals and businesses by the American Rescue Plan will help bridge the gap. What remains to be seen is the long-term economic impact of the massive level of federal spending that has taken place over the last 12 months. These vital short-term solutions will have lasting economic consequences for businesses and individuals that must be taken into consideration when federal economic policy changes, such as an increased minimum wage, are proposed in the future.  

Liz Smith

As BRAC’s senior vice president of economic competitiveness, Liz leads the organization’s public policy advocacy, strategy, research, and reform activities aimed at advancing the quality of life and economic competitiveness of the Baton Rouge Region.

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