House Sends $1.9 Trillion Stimulus Bill to Biden

President Joe Biden’s $1.9 trillion Covid-19 relief bill cleared its final congressional hurdle Wednesday, with the House passing the bill on an 220 to 211 vote, sending it to the president for his signature.

The vote caps a nearly two-month sprint from the time Biden first unveiled his American Rescue Plan through tough negotiations in the Senate to its final approval largely in the form it was first proposed. Biden plans to sign the legislation on Friday.

The bill is a major political victory for the new president, displaying his influence over a Democratic Party in control of Congress by the thinnest of margins. At the same time, the partisan divide over the bill foreshadows the difficulty Biden will have in enacting the multi-trillion dollar, longer-term economic program he wants later this year.

Most Americans will be receiving direct payments of $1,400, with checks going out within days. The bill provides new health-insurance subsidies and child-tax credits, while extending $300 per week supplemental unemployment benefits into September.

There’s also $360 billion for state and local governments, a bailout for troubled union pensions, and funds to ramp up vaccinations and school reopenings.

“Tomorrow the world will mark one year since Covid-19 was officially declared a global pandemic by the World Health Organization,” House Speaker Nancy Pelosi said as debate concluded. “Since that day, nearly 30 million Americans have become infected. Over half a million Americans have died—more lives than were lost in combat in all of America’s wars against foreign enemies combined.

“This legislation puts nearly $1 trillion in the pockets of the American people,” she said. “We join President Biden in his promise that, at last, help is on the way.”

White House press secretary Jen Psaki said the administration will be “moving full speed ahead on the implementation of the bill.”

The legislation passed without a single Republican vote in either the House or Senate, in sharp contrast to the five previous bipartisan Covid-19 bills enacted under President Donald Trump, before the pandemic began retreating amid the current vaccination drive. Representative Jared Golden of Maine was the lone Democratic “no” vote. He also had voted against the version that passed the House earlier.

Republicans blasted Biden, Pelosi, and Senate Majority Leader Chuck Schumer for rejecting more modest proposals. With the economy already on the rebound, they said, the aid bill is excessive and will escalate financial risks. “You can’t just keep adding mountains of debt at hundreds of billions at a time” without consequence, said Steve Scalise of Louisiana, the number-two House Republican. “When you look at the priorities of Speaker Pelosi, it’s to spend as much money as quickly as possible on her socialist agenda.”

A group of 11 Republican senators said they could support a $650 billion stimulus bill, with more narrowly targeted benefits and a focus on virus efforts. Biden hosted most of them at the Oval Office, only to conclude the gulf between them was too large to try to bridge.

Potential Growth Impact

The bill is far bigger than initial Wall Street expectations of what could be accomplished in a closely divided Congress. Economists this week were upping their projections for growth to incorporate the impact. Morgan Stanley on Tuesday raised their 2021 forecast for U.S. economic growth to 7.3 percent, a pace unsurpassed since the Korean War boom in 1951.

The nonpartisan Congressional Budget Office (CBO) estimated that $1.1 trillion of spending under the relief bill would go out this year, with a further $476 billion coming in 2022. Treasury Secretary Janet Yellen said in an MSNBC interview this week that the labor market would return to prepandemic levels by the end of 2022, in line with many major analyst forecasts.

Help is targeted toward the lowest-earning Americans. A study from the Tax Policy Center found that incomes of the lowest fifth of earners will jump 20 percent, the highest among income groups. That will help accelerate the infusion of money into the economy, as those in the lowest brackets spend more of their budgets on basic household needs, including health care, food, and clothing.

About one-third of Americans plan to save their stimulus checks, according to a survey by Morning Consult commissioned by Bloomberg News—a much higher proportion than in the prior stimulus efforts. Around the same proportion said they’d purchase food, and one-quarter cited housing payments.

“This will probably hit accounts before the end of the month,” said Aneta Markowska, chief economist at Jefferies LLC. She upgraded forecasts from mid-February that put the U.S. on track to reach full employment by summer next year. “Not only does this get paid out quickly—it actually gets spent very quickly.”

The bill provides a template for a potential longer-term expansion of an American social safety net that has long been much smaller than its European counterparts.

Democrats say the nearly $110 billion temporary expansion of the child tax credit will help cut child poverty in half, while tax forgiveness on jobless benefits and student-debt relief will give help to millions more. “This legislation represents the boldest action taken on behalf of the American people since the Great Depression,” Democratic House Caucus Vice-Chairman Pete Aguilar of California said.

Next Item on Biden’s Agenda

The heated politics around the stimulus bill could jeopardize Biden’s hopes for a bipartisan infrastructure program, along with increasing challenges to his plans for an immigration bill, voting reform, war powers reform, or gun-safety measures. Such legislation is likely to be ineligible for the fast-track Senate procedure, known as budget reconciliation, that was used to bypass a Republican filibuster on the stimulus package.

“It’s a bad start, and it’s going to make it much more difficult to get things done,” said veteran Republican lawmaker Tom Cole of Oklahoma, who claimed that GOP members could have ended up backing up to $900 billion in relief. “I would hope we can find common ground, but I just look at the legislation they keep bringing up.”

Democrats counter that Republicans are dusting off their playbook from more than a decade ago, when blasting the Obama administration over deficit spending, along with a lackluster recovery, helped win control of the House in 2010.

“Partisanship is at a high level within the congressional chamber because Republicans have chosen obstruction over cooperation,” said Hakeem Jeffries of New York, the number-four House Democrat.

The popularity of the stimulus bill, and especially the direct payments that were first championed by Trump, are being employed by Democrats in their bid to defy historical trends during midterm elections by holding onto the House in the 2022.

While 2021 will prove memorable as a phase of “proactive fiscal expansion,” it’s far from clear this will last, Morgan Stanley analysts led by Michael Zezas wrote in a report dated March 10. “We would not conclude this is the beginning of a long-term trend, as a change in power in the midterm elections and/or a resurgence of popular concern regarding deficits could derail the trend beyond this year,” the Morgan Stanley team wrote.

 

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