Biden Begins With Big Economic Plans, Big Opposition
President Joe Biden took office Wednesday with an ambitious economic agenda aimed at not only righting the damage of the raging pandemic, but tackling reforms that progressives sought long before COVID-19.
- Biden took office with an ambitious economic agenda addressing both the financial hardships of the pandemic and other long-standing issues like raising the federal minimum wage.
- His success largely depends on the Senate, where Democrats hold the slimmest of advantages.
- He may have the best chance of getting $1,400 stimulus checks and extended unemployment benefits through Congress, some economists say.
- Raising the minimum wage to $15 an hour will be a hard sell in a Senate with 50 Republicans.
Biden’s administration said he would sign a series of executive orders on his first day, including asking the Department of Education to extend a freeze on student loan payments through at least Sept. 30 and other federal officials to lengthen the current bans on foreclosures and evictions until at least March 31.
But many of the Democrat’s initiatives—things like distributing an additional $1,400 per taxpayer in stimulus, boosting and lengthening a federal supplement to unemployment benefits, increasing the federal minimum wage to $15 an hour, and making tuition at public colleges free depending on income—would have to make it through a highly partisan Congress first. And some ideas, including some not directly related to the pandemic, could be especially controversial.
Biden’s success will rest largely in getting the cooperation of the Senate, where Democrats, while buoyed by wins in both Georgia Senate runoff elections this month, still have only the slimmest possible advantage over Republicans wary of government spending. One of his first concrete proposals, the “American Rescue Plan” unveiled last week, has a $1.9 trillion price tag—more than twice the cost of the bipartisan rescue package enacted in December.
“Anybody that claims they know what’s going to happen in the next couple of weeks is either wrong or not telling the truth,” said Glenn MacDonald, a professor of economics and strategy at Washington University in St. Louis, who is critical of Biden’s willingness to spend. “It’s very hard to say whether any of this stuff is going to get anywhere.”
$15 Minimum Wage
Indeed, although the dire state of the pandemic gives another large spending bill more legitimacy on both sides of the aisle, some things in Biden’s latest relief plan are “going to be highly contentious,” said Joe Minarik, director of research for the Committee for Economic Development at The Conference Board and former chief economist for the Office of Management and Budget during Bill Clinton’s presidency.
Among those contentious proposals: the $15 minimum wage, which would lift wages for an estimated 33.5 million workers—more than a fifth of the workforce, according to one 2019 analysis.
Not only is it “not really a pandemic issue,” Minarik said, but Republicans would likely balk at more than doubling the current minimum wage, particularly since such a dramatic increase could have the unintended effect of making jobs more scarce in states that don’t already have a state minimum wage higher than $7.25.
In fact, though a minimum wage hike is long overdue, the proposal might end up being dropped in order to get some form of relief package passed, according to James Galbraith, a professor of government at the University of Texas at Austin.
Another potentially controversial proposal is the $350 billion that Biden’s rescue plan earmarks for state and local government emergency funding, Minarik said, noting that sending help to Democrat-run states with generous pension programs has been offensive to Republicans in the past.
Still, Republican senators may be reluctant to reject aid proposals if it means laying off police officers, firefighters, and teachers in their home states, Minarik said, noting the change in the balance of power. Before now, senators haven’t had to face such tough votes because Republican Senate Majority Leader Mitch McConnell blocked bills involving state funding before they could come to a vote, Minarik said.
The options for getting more controversial items through a narrowly divided Senate are complicated, with passage by a simple majority being enough only for certain kinds of budget-related laws, and most others vulnerable to being torpedoed by opponents using a filibuster—a blockade that can only be broken with the agreement of 60 out of the Senate’s 100 members.
But some of Biden’s agenda items might be popular enough to pass even if 60 votes are required, Minarik said, citing the $1,400 stimulus checks and extended unemployment benefits outlined in the rescue plan.
Biden is pushing to increase a federal supplement on unemployment benefits to $400 a week (from $300 now). He also wants to extend existing pandemic unemployment programs that serve people who have exhausted their regular unemployment benefits as well as self-employed people who don’t normally qualify. These programs are currently set to expire on March 14, and Biden has proposed Sept. 30 instead.
Given that the recovery in the labor market ground to a halt in December—the economy actually lost jobs for the first month since April—these unemployment provisions could be an easier sell, economists said.
But will Republicans be tempted to use their power in the Senate to prevent the entire agenda, similar to when they unabashedly obstructed Democratic President Barack Obama after the 2008 financial crisis?
Unlikely, Galbraith said. In the Obama years, despite the crisis, there was a general consensus that things would get back to normal eventually, and this allowed politicians to entrench themselves in their own agendas. But with the harsh realities of the pandemic, that approach is less politically viable. Plus, the right wing is dealing with its own internal divisions after a tumultuous four years with Republican President Donald Trump.
“The Republican party is basically split between pro-Trump fanatics and some faction of realists, which is probably growing as people want to be rid of the incubus,” Galbraith said.
Biden’s success will largely depend on how willing Republicans are to increase government spending when the fiscal year 2020 budget deficit was a record $3.1 trillion, a “staggering amount of money,” MacDonald said. As a percentage of projected gross domestic product, the deficit is the government’s highest since World War II, according to the Committee for a Responsible Federal Budget, a nonpartisan group.
“The most significant thing that will determine whether any or all of this comes to pass is how Republicans are feeling right now about spending a lot of money,” MacDonald said.
Components of Biden’s American Rescue Plan
- Additional stimulus payments of $1,400 per person
- $400 weekly supplement to unemployment benefits through September (the current $300 a week expires in March)
- Extension through September of special pandemic unemployment programs for those who have exhausted their normal benefits and for independent contractors and gig workers who do not normally receive them
- Federal minimum wage of $15 an hour (up from $7.25 now)
- Extension of moratoriums on evictions and foreclosures and forbearance on federally-backed mortgages through Sept. 30
- $25 billion more for rental assistance, plus $5 billion for utility bills
- $350 billion in funding to state, local, and territorial governments to keep front-line workers on the job
- Free vaccines for all
- $25 billion to hard-hit child care providers
- $5 billion to help those who are homeless or at risk of being homeless
- $130 billion to fund safe school reopenings
Other Biden Campaign Trail Pledges
- Raise taxes on corporations and wealthy individuals, repealing some of President Trump’s tax cuts
- Expand tax credits for people with lower incomes
- Make public colleges and universities tuition-free for families making less than $125,000
- Forgive at least $10,000 in federal student loans per borrower
- Strengthen labor unions through the PRO Act
- Create a public health insurance option similar to Medicare and expand Medicaid