The Biden administration recently proposed the implementation of a $1.9 trillion stimulus package to address the ongoing COVID-19 pandemic.
An analysis of the package will reveal that it is to be split into four categories:
- COVID-19 relief → $750 billion
This category includes both state and local aid, the funding for vaccine distribution, testing, case studies, as well as support for reopening schools.
- Direct aid to households → $600 billion
This includes the $1400 stimulus checks to millions of Americans earning below a certain income, and an increase in the child tax credit program.
- Aid to financially vulnerable households → $400 billion
This category includes an additional $400 per week in unemployment benefits, and an extension of the pandemic unemployment programs.
- Aid to businesses → $150 billion
This includes loans and grants to small businesses, as well as sick leave for employees.
Although the future of our economy is under a great deal of uncertainty, we can make an educated guess about what kind of impact it will make.
With the $1.9 trillion package, it is projected that the GDP (gross domestic product) between 2020 and 2023 would return to its pre-pandemic state. This is due to the speculation that over the next two years households and businesses would make up for the economic activity we went without during the pandemic. This will drive inflation rates upward, which the Federal Reserve says will be beneficial.
When those who receive federal aid increase their purchases due to the increased availability of money, businesses can increase production and hire more workers than they otherwise would. This will put upward pressure on prices, allowing those businesses to flourish.
Though many argue the downsides of excessive federal spending, one must address the importance of this stimulus package to millions of households in America, as well as to the economy as a whole.
Poverty Alleviation
The $1.9 trillion plan would raise the Child Tax Credit to $3,000 per child and make it fully refundable for one year. According to an analysis by Columbia University’s Center on Poverty and Social Policy, these tax policy changes along with the other components of Biden’s proposal, could cut child poverty by half.
Opening Schools
During his campaign, Biden prioritized reopening schools, which he mentioned will ease the pressure on households with two earners where one has dropped out of the workforce to take care of children at home.
Small Businesses
The Biden plan continues the Paycheck Protection Program and has allocated money for loans to small businesses. Previously under the PPP program, there were many issues, including unequal access to those funds, which the Biden administration hopes to solve.
In a recent press conference, President Biden stated that the stimulus package came at a high price, but it was a necessary decision. “The very health of our nation is at stake,” Mr. Biden said, adding that it “does not come cheaply, but failure to do so will cost us dearly.”
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