Why the 1st big bill of the Biden era is such a 'BFD'

The $1.9 trillion US stimulus bill approved by the U.S. House of Representatives Wednesday, the first major law passed in the Biden era, makes a big bet: that Americans want a broader safety net. It expands social programs, cuts poverty and pours rocket fuel on an already heating economy that will affect non-Americans, too.

$1.9 trillion US stimulus bill passed Wednesday expands safety net, heats up economy but comes with a catch

U.S. President Joe Biden signed his first major law Thursday, a sprawling stimulus bill that will have economic and social consequences, after it passed both chambers of Congress. (Tom Brenner/Reuters)

Joe Biden has signed into law the first major legislation adopted during his presidency, a sprawling $1.9 trillion US stimulus package. It is, to paraphrase his most famous impromptu quote, a big freaking deal, although Biden's original quote included a memorably timed F-bomb.

This big freaking deal is a sweeping one-year experiment with a broader social-safety net in the United States.

It is, indeed, one of the largest expansions of federal social support in decades, a significant piece of progressive legislation affecting tens of millions of people. 

Depending on whether its programs are extended, key provisions will either last one year — or many years. 

So consider this a test of the new safety net.

And it's an expensive test. Ostensibly a pandemic-relief bill, the American Rescue Plan touches a broad range of areas in American life at a cost equivalent to about $5,800 for every U.S. resident.

Those sums, which will add another 10 per cent to an already ballooning national debt, will help the millions of Americans who have lost jobs with the country still potentially years away from fully restoring its pre-pandemic employment.

On the macro level, however, the country is already rebounding, and that's of consequence to every nation affected by the U.S. economy, including Canada.

The effect of all these measures — federal checks, tax credits and transfers to states — is akin to pouring molten lava over an already heating economy. 

According to estimates from Moody's Analytics and others, this package will double projected U.S. GDP growth this year to eight per cent, a scorching level by historical standards.

There's a catch

But there's a catch, a considerable one, for those tens of millions of Americans who will benefit from subsidized access to health care, as well as help with rent, child care and food.

It could all disappear.

That's because the plan was passed under a legislative shortcut known as the annual budget reconciliation process, with its key provisions lasting one year and no guarantee they'll be extended again.

Child poverty has surged during the pandemic, sending families to food banks like this one in Los Angeles. Advocates of this bill say it will cut child poverty in half, through benefits inspired in part by what other countries, including Canada, have done. (Bing Guan/Reuters)

For now, though: 

  • Child poverty will decline by about half, according to several estimates, including one from the Center For Poverty And Social Policy at Columbia University.

  • Two-and-a-half million more Americans will be able to afford health insurance over three years (out of 30 million uninsured), according to the Congressional Budget Office.

  • The Obamacare health system will be on a more stable footing.

  • Stimulus cheques worth $1,400 will go to people earning under $75,000.

Plus many, many other provisions will snap into place through a law that has more than 200 sections in it.

Take the child-poverty provisions.

Advocates for these measures included doctors, in Boston, who, despite working in one of the wealthiest cities in one of the wealthiest nations on Earth, described seeing underweight babies that meet the World Health Organization definition of malnutrition.

A researcher who works with these doctors says they literally notice babies' weights fluctuating with the rise and fall in federal support programs.

Child poverty measures

That researcher, Allison Bovell-Ammon, said the success of Canada's child benefit became a rallying cry for anti-poverty advocates like her, a director of policy strategy at Children's HealthWatch, a Boston-based research organization.

She testified before Congress on the need for more generous family allowances in the U.S. — and that's what this bill delivers with, among other measures, a child-tax credit that has nearly doubled to $3,600 a year and been expanded to the poorest families who previously didn't qualify because they had too little taxable income.   

"I'm very excited," she said in an interview. "I think this is a huge step forward in our fight against childhood poverty."

Yet trouble spots loom over the horizon.

If anything, this legislative fight underscored how difficult it could be to pass substantive laws in the Biden era, which will require Republican votes on most issues.

There was not an iota of bipartisan co-operation, this despite the bill's sky-high popularity with the public and support from Republican voters in a way some of Biden's other priorities aren't.

50-49 vote spells trouble

The sharp partisan split has quickly cast doubt on the new president's oft-stated confidence in his own ability to strike bipartisan deals based on his decades in the Senate.

Democrats quickly gave up on negotiating with Republicans and used the temporary shortcut measure to get it through the Senate on a 50-49 vote.

It's anyone's guess what that means for Biden's plans for longer-term, substantive legislative change on health care, poverty, immigration and green infrastructure, as most permanent legislative changes require 60 votes.

Republicans derided this rescue bill as a ticking time bomb that will, in their estimation, inevitably explode someday. 

The bill just passed by the U.S. Congress, the American Rescue Plan, spans more than 600 pages, and its many provisions include subsidized access that could help millions get health coverage. (Tom Brenner/Reuters)

One Louisiana Republican joked that the Department of the Treasury would someday have to be renamed the Department of Debt. And Ben Sasse of Nebraska noted that the bill spends about as much as Canada's entire annual GDP, with most of it not explicitly COVID-related. 

'We should've just bought Canada'

In a statement, Sasse quipped: "We should've just bought Canada, too."

Democrats are quick to call hypocrisy.

Republicans seemed less concerned about the debt, their opponents argue, when it bloated under their watch, and Republicans cut taxes in the 1980s, 2000s and again with a 2017 tax law that will add similar amounts to the debt.

Yet some friendlier analysts are also fretting about the bill.

A former official in the Clinton and Obama White Houses, Lawrence Summers, has written that this bill spends three times more than the current damage to the economy caused by COVID; he fears that pumping out what he calls Second World War-level stimulus now might cause the economy to overheat and trigger inflation.

Another Washington budget analyst, Marc Goldwein, says he's less worried about inflation and more worried about a slow-rolling effect.

He says the U.S. could have achieved the same economic bounce by spending one-third or half this amount and says the $1,400 cheques, for instance, could have been targeted to those most in need.

'It's going to result in some pain later'

He worries about future debt-servicing costs that might be a long-term drag on the country, and about how the U.S. economy responds when the sugar high of stimulus runs out.

"It's going to result in some pain later," said Goldwein, senior vice-president and senior policy director at the Committee for a Responsible Federal Budget, in a panel discussion last week at the Tax Policy Center.

There are certain things the country could use, he said — perhaps a long-term child benefit; as well as infrastructure improvements, especially green infrastructure — but said they should be paid for with small tax increases.

Biden will now try getting that green-infrastructure deal and other legislation passed. Success is far from assured.

In the meantime, for many Americans, this is going to be a better year.


Alexander Panetta is a Washington-based correspondent for CBC News who has covered American politics and Canada-U.S. issues since 2013. He previously worked in Ottawa, Quebec City and internationally, reporting on politics, conflict, disaster and the Montreal Expos.

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