House to Pass $ 1.9 Trillion Biden Emergency

The House is expected to approve a $ 1.9 trillion Covid-19 stimulus package later Friday and send President Joe Biden’s contingency plan to the Senate.

Both chambers aim to approve the bill and send it to Biden’s office by March 14, when major programs encouraging millions of unemployed Americans expire. Pitfalls await in the Senate, where a single Democratic vote against the plan would sink the plan and a decision banning lawmakers from setting a minimum wage of $ 15 an hour threw a wrench into the process.

Democrats, who had strict control over Congress, chose to pass the legislation through budget reconciliation. The process allows them to pass the bill without Republican votes in the Senate, but also limits what lawmakers can include in it.

The plan includes:

• An unemployment insurance benefit of $ 400 per week and an extension of programs that extend unemployment benefits to millions more Americans through August 29
• $ 1,400 direct payments to most Americans and the same amount to dependents
• $ 20 billion for a national Covid-19 vaccination program and $ 50 billion for testing
• $ 350 billion in aid from the state, local and tribal governments
• Payments to families of up to $ 3,600 per child for one year
• $ 170 billion in elementary and higher education institutions to cover the costs of reopening and student aid
• An increase in the federal minimum wage to $ 15 an hour by 2025

While economists agree that additional stimulus measures would provide workers with a robust safety net as the economy recovers – not to mention accelerated GDP growth – they disagree on the need for a bill of as much as 1 , 9 trillion dollars.

Those in favor of the spending argue that the US economy is still in a precarious place with millions of Americans still out of work thanks to pandemic-era layoffs and forced government closures.

While the Labor Department’s most recent report on unemployment benefits showed a decrease in the number of new claimants for unemployment benefits, it also found that more than 19 million Americans were still receiving some form of welfare on Feb. 6.

Earlier this month, Treasury Secretary Janet Yellen told CNBC that Biden’s plan could push the economy back to full employment by the end of 2021.

She underscored the human toll the virus has taken over the past year on households still struggling to run errands and stay ahead of rent.

“We think it is very important to have a large package [that] tackles the pain this has caused – 15 million Americans are behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses going bankrupt, “Yellen said on Feb. 18.

Economists who are critical of the plan tend to focus on the scope of the legislation and the potential benefits of a bill better suited to the needs of businesses and workers in industries still suffering the most from Covid -19, such as airlines and food service. and hospitality.

The most notable criticism came from Biden’s fellow Democrat and former Treasury Secretary Larry Summers, who warned in a Feb. 4 op-ed that the bill could trigger a revival in inflation after a decade of largely stagnant prices.

“Given the commitments made by the Fed, the rejection of government officials even of the possibility of inflation, and the difficulties of mobilizing congressional support for tax increases or austerity, there is a risk that inflation expectations will soar,” he wrote in The Washington. Post.

While inflation across the economy has missed the Federal Reserve’s 2% target for the vast majority of the past decade, investors are starting to feel uncomfortable about the potential for a price hike.

Nathan Sheets, chief economist at PGIM Fixed Income, said that while he appreciates those concerns, he’s not overly concerned.

“While I see a real risk of rising inflation during the summer and fall, as rising demand is greater than the recovery in supply, I would expect this increase to be transient,” he wrote in an e-mail Wednesday. -mail.

Sheets, who also served as the Treasury’s Undersecretary for International Affairs under former President Barack Obama, added that the potential economic benefits of more stimulus measures outweigh the potential risks.

“The job market is still in a deep hole,” he wrote. “To regain those 10 million jobs, sustained economic growth is needed, especially given that about half of the job losses correspond to people who have left the workforce.”

Many Republicans have questioned the need to send more aid than the money needed to speed up the vaccination effort against Covid-19 and strengthen the health care system.

On Wednesday, House Minority Leader Kevin McCarthy, R-Calif., Characterized much of the spending as “wasted or a progressive wish list.”

A group of the most centrist Senate Republicans previously offered Biden a $ 600 billion plan that included vaccination distribution funds, smaller direct payments to fewer people than the Democrats were seeking and an unemployment benefit that expired earlier than their counterparts wanted. The president said he would rather pass the sprawling package with democratic votes only than spend weeks negotiating a smaller bill with the GOP.

Democrats wanted to hit the March 14 deadline, when about 19 million Americans on unemployment benefits would lose benefits of $ 300 a week. Many unemployed people would lose their insurance if two programs expire next month that qualify entitlement and increase the number of benefit weeks.

Congress expired similar provisions last summer and did not renew them until December, leaving millions of people in poverty and seeking food aid.

The pressure to pass the legislation ran into problems on Thursday evening. Senate MP Elizabeth MacDonough ruled that lawmakers could not include a minimum wage of $ 15 an hour in the budget reconciliation proposal.

Democrats included a provision in their bill to gradually increase the federal wage floor to $ 15 by 2025. “

The US last raised the minimum wage to $ 7.25 an hour in 2009.

By factoring in the pay rise, the Senate will likely pass different legislation than the House. Representatives would then have to meet again to pass a bill a second time, probably in March.

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