First 100: American Rescue Plan Gets Surprisingly Little Pushback

Plus, where is the economy headed?

by

It’s February 23, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.

The Chief

Yesterday the House Budget Committee advanced the American Rescue Plan, Joe Biden’s $1.9 trillion effort to end the coronavirus pandemic and revive the economy. We have a bill. And it should pass the House this week, provided that nearly every Democrat votes for it. Speaker Pelosi only has five votes to spare, and there’s little expectation that any Republican will take the leap and vote for the bill.

Section 2101, raising the federal minimum wage to $15 an hour by 2025, is in the House bill. The fate in the Senate is up in the air. There are two issues. First, the Senate parliamentarian has to rule on whether the minimum wage increase is eligible to be included in the reconciliation bill under the “Byrd rule,” whereby all elements must have a direct budget impact. (CBO scored the bill as costing $54 billion over 10 years, but just that score isn’t enough, because reconciliation is a dumb system and let’s just eliminate the filibuster already.) That ruling could take place as soon as Wednesday. Senate Budget Committee chair Bernie Sanders (I-VT) expressed confidence that the measure will be ruled in order.

There’s also the matter of at least two Senate Democrats not supporting the wage increase, for different reasons. Sen. Joe Manchin (D-WV) is actively trying to reduce the wage hike to $11 an hour; he said he would offer that as an amendment. There’s some support for a lower wage if that placates Manchin and gets something passed; Democrats have also talked about adding small business tax relief to alleviate concerns that they wouldn’t be able to afford the higher wages. (Which is odd, because all their competitors have to deal with it too, and it’s likely to be passed to consumers.) But Sen. Kyrsten Sinema (D-AZ) appears to be opposed to the very notion of including the wage increase in the relief package, regardless of the dollar amount.

It seems like this fight is just being delayed until the parliamentarian makes her decision. That decision can always be overruled, so it’s not really a barrier. But Manchin has said he would never overrule the parliamentarian, and Democrats would rather deal with the issue once they know the procedural terrain.

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What’s interesting is that the minimum wage issue is not just the most contentious, but practically the only contentious element of a huge bill that needs practically every Democrat in Congress in order to pass. There are certainly other things that might flare up. The House Ways and Means Committee pared back the unemployment extension by one month (it now expires in August instead of September) to “pay for” a fix to millions of multiemployer pensions. Instead of building in cushion to the $1.9 trillion figure for things like this, Democrats put that number in their reconciliation instructions, and now have this cap to deal with. So once CBO scores the whole bill, there may need to be changes and even tax increases or closed loopholes in the bill. And there are other measures that belong, like waiving taxes on expanded unemployment benefits to prevent surprise tax bills, or relief for the 1.6 million student loan borrowers who are ineligible for the current payment pause.

One thing unlikely to change at this point is the $1,400 checks. Yesterday Janet Yellen correctly made the point that “there are pockets of pain that go beyond what can be reached in highly-targeted ways,” shutting down the effort to limit the checks beyond what’s been done in previous bills. Claudia Sahm has a more technical case against deeper targeting. But that argument has been muted for now.

And so has almost everything else. Republicans have not found an angle to derail this very popular bill. The best they can do is say “of course giving money to people is popular.” Well, yes. Especially during what has become an enduring economic crisis for too many people in America. About the best argument you can make is that Democrats should have moved on this sooner, but people will remember the relief they got, not the timing of the calendar. Save for a couple pieces, Joe Biden looks like he’s going to get the bill that he wanted, and we’ll see how it works.   

Boom or Bust?

There’s certainly tension between Biden and the party’s left flank, and there always will be because that’s the left flank’s role, to push Democratic leaders to do better. But we should pause to marvel at the quiet audacity of the relief package, the size and scope of which represents a real departure from the free market dominance of the past. And the debate over whether this is all too much and will lead to crushing inflation depends on whether you think the economy is already poised for success or whether you think widespread public need in the country requires a rescue.

Fortunately, our age of expansive inequality allows everyone to pick and choose their focus. Yes, everyone’s getting packages delivered and the rich are buying houses, so you can stress a blue-collar revolution in construction and warehousing. Yes, spending statistics put the economy on track for a boom, with growth unlike we’ve seen since the “morning in America” days of the mid-1980s. (Of course, that’s only true because of building in the fiscal boost from the recovery plan.) Yes, you could even talk about demand outstripping factory production, creating shortages that could lead to scarcity and inflation.

But there’s another story where lower-skill jobs requiring less education are imperiled. Restaurant, retail, and hospitality jobs are going to be particularly hard-hit, according to Bureau of Labor Statistics projections. The travel industry is going to be sour for a long time. These happen to be large sectors of the economy concentrated in the low-wage sector. And this puts them even further behind for retirement, a particular problem with lower net-worth Black Americans.

In other words, it’s a big country and both things can be true. We can have robust growth that leaves millions behind in a painful transition accelerated by the pandemic. We haven’t figured out how to deal with that, but more fiscal spending is a good bridge.

What Day of Biden’s Presidency Is It?

Day 35.

Today I Learned

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