To help the people who have struggled the most during COVID-19, the US Treasury Department announced a $9 billion investment on Thursday in programs to support low-income and minority communities.
The Treasury Department opened applications for the Emergency Capital Investment Program, which, according to a press release, is designed to help communities traditionally excluded from the financial system gain access to COVID-19 relief. To do so, the Program will invest $9 billion in Community Development Financial Institutions (CDFI) and minority depository institutions (MDI) to support the provision of grants and loans in low-income and minority areas.
“America has always had financial services deserts, places where it’s very difficult for people to get their hands on capital so they can, for example, start a business. But the pandemic has made these deserts even more inhospitable,” Treasury Secretary Janet Yellen said in a statement. “The Emergency Capital Investment Program will help these places that the financial sector hasn’t typically served well. It will allow people to access capital, especially in communities of color and rural areas.”
According to the press release, the ECIP will set aside $2 billion for those with less than $500 million in assets, and an additional $2 billion for those with less than $2 billion in assets.
The Program also includes:
Incentivized lending with no dividends or interest payable or accruing during the first 24 months;
Maximized Program effectiveness by ensuring stock investments under the ECIP qualify for beneficial capital treatment;
And tools to strengthen CDFIs and MDIs for the long-term.
The $900 billion stimulus package which Congress passed in December included $12 billion for CDFIs and MDIs, and the $9 billion allocated on Thursday is part of that funding.
Along with the ECIP, the press release said two other complementary programs are being implemented: the CDFI Rapid Response Program, which allocated $1.25 billion for CDFIs to respond to the pandemic’s economic impact, and the Emergency Support and Minority Lending Program, which allocated $1.75 billion to expand lending in low-income, minority communities.
The CDFI Rapid Response Program opened on February 25.
This new funding is part of President Joe Biden’s efforts to ensure equity in aid distribution during COVID-19. On February 22, he announced changes to the Paycheck Protection Program to ensure those who had previously been left out of it could receive aid, and the president’s American Rescue Plan includes funding for underserved communities in the forms of small business aid, housing aid, and more.
“Taken together, these three programs, created under the Consolidated Appropriations Act, 2021, enable Treasury to take aggressive action to address the impacts of the ongoing COVID-19 pandemic, and to promote an equitable economic recovery,” the press release said. “These historic investments are intended to provide catalytic growth for institutions and communities that have traditionally been underserved by the financial sector.”
Democrats are pushing forward with President Joe Biden’s fiscal stimulus proposal, with Senate Democrats advancing the bill today. Parents are set to be among the biggest beneficiaries.
The president’s $1.9 trillion relief package is meant to accelerate the US economy’s rebound from the coronavirus recession. The legislation’s most-talked-about elements include $1,400 direct payments and an expansion of federal unemployment benefits, but the package could help American families, too.
The CARES Act, enacted last March, helped parents with direct payments for children, but Democrats are looking to further alleviate families’ economic pressures.
Biden has indicated he aims to pass the measure with bipartisan support, but congressional Democrats have taken steps to pass it through budget reconciliation, a process that allows the Senate to pass bills with a simple majority.
Should all 50 Senate Democrats line up in support of the package, Vice President Kamala Harris would cast the tie-breaking vote, approving the measure without any Republican backing.
Here’s how Biden and congressional Democrats plan to support parents through the coronavirus recession, from an expanded child tax credit to new aid for childcare providers.
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1. At least $3,000 in direct annual payments
Congressional Democrats proposed that the American Family Act form a critical part of Biden’s rescue package. Biden told House Democrats on Wednesday he supports making the temporary beefed-up child tax credit permanent, Insider’s Joseph Zeballos-Roig reported, the first time the president has indicated such support.
The child-tax-credit program would, over the course of 2021, provide families $3,600 per child 5 and under, and $3,000 per child between 6 and 17. That would be up to $300 in monthly cash benefits per child for American families.
The initiative would be set up as a one-year emergency federal program, with the IRS doling out monthly benefits beginning July 1 to ease childcare costs and assist families who lost income during the pandemic. Some experts have deemed the timeline ambitious, considering tax season and the pandemic.
Nina Olson, the former head of the Office of the Taxpayer Advocate, noted that the IRS spent years building a framework for Obamacare’s premium tax credit.
“It is fine to authorize the payments, but there needs to be at least 18 months’ lead time, and even that is a stretch,” Olson told Politico. “Otherwise you just get something that is tacked on to mid-20th-century technology that is completely inflexible.”
One of the legislation’s sponsors, Rep. Rosa DeLauro of Connecticut, the chair of the House Appropriations Committee, has insisted a monthly rollout is better. “Nobody pays their bills once a year – you pay your bills each month,” she said at a virtual news briefing on the plan. “The design makes more sense and helps families make ends meet through difficult months.”
The payments could start phasing out for individuals earning $75,000 and for couples making $150,000, though this could change in the coming weeks as committees draft the legislation. The credit would be refundable, meaning lower-income families could see higher tax refunds.
Researchers at Columbia University projected that the plan could cut the child poverty rate in half. The Biden administration has indicated support, and Democrats said they’d likely press for a permanent extension later this year.
2. ‘Baby bonds’
Democrats also unveiled a plan to create $1,000 savings accounts for every American child that become accessible when they turn 18. The measure, backed by Sen. Cory Booker of New Jersey and Rep. Ayanna Pressley of Massachusetts, would add up to $2,000 to each child’s account every year.
Pressley said that introducing this so-called baby bond as a birthright would combat racial and economic injustice and set Americans up for brighter futures.
“Our bill will provide every child an opportunity to pursue higher education, purchase a home, and build wealth for generations to come,” she said in a statement.
The interest-accruing accounts would be managed by the Treasury Department. Holders could tap the account once they reach 18, and the funds could be used for only specific kinds of purchases, a 2018 press release unveiling the proposal said. Some of those are buying a home, paying for higher education, or opening a business – taking some pressure off parents who might have had to shoulder those costs.
The measure isn’t included in Biden’s proposal, but it has garnered support from influential party members including Senate Majority Leader Chuck Schumer and Sen. Bernie Sanders, the chair of the Senate Budget Committee.
Booker has said the program’s $60 billion-a-year price tag could be easily offset by lifting estate taxes and eliminating tax breaks for the wealthy. While some federal policies have exacerbated the income gap, baby bonds could start to “level the playing field,” he said.
These funds are designed to help make schools a safe space during the pandemic, Biden’s website said. The proposal outlines reduced class sizes, modified spaces for social distancing, improved ventilation, provisions for personal protective equipment, and increased transportation to provide for social distancing on buses. Some of the funds would be allocated toward support for students’ academic, social, and emotional needs through things like extended learning time and counselors.
The aid is intended to close the digital divide that has deepened the socioeconomic gap. Some of the money would go to a COVID-19 Educational Equity Gap Challenge Grant for underserved communities and schools.
Public education, including community colleges and historically Black colleges, would get $45 billion, and $5 billion would go to governors to use for educational programs for both K-12 and higher-education students significantly affected by the pandemic.
“The COVID-19 pandemic created unprecedented challenges for K-12 schools and institutions of higher education, and the students and parents they serve,” Biden said in a statement in January when he first pitched the plan. “School closures have disproportionately impacted the learning of Black and Hispanic students, as well as students with disabilities and English language learners.”
4. Childcare assistance
Childcare would form a $40 billion chunk of the package, with $25 billion earmarked for an emergency stabilization fund for care providers.
“No one can go back to work in other industries if their children aren’t in safe, healthy settings,” said Ami Gadhia, the chief of policy, research, and programs at Child Care Aware.
Another $15 billion investment would expand childcare assistance to millions of families and parents who experienced job interruption due to the pandemic. The relief aims to help the disproportionate number of women who were forced to exit the workforce and become family caregivers.
The plan also seeks to provide a tax credit for as much as half of parents’ spending on childcare for children under 13. The credit could reach up to $4,000 for one child or $8,000 for two children. The full 50% reimbursement would start to phase out for families making more than $125,000 a year.
President Joe Biden wants to pump billions of federal stimulus into state and local governments as part of his $1.9 trillion package. But state tax revenues for 2020 were surprisingly healthy.
A JP Morgan survey called 2020 “virtually flat” with 2019 with regard to tax revenues for 47 states that reported their earnings, with revenues only falling by 0.12% on average. And while states expected to be hit hard financially when the pandemic began, the previous stimulus, including $600 weekly unemployment benefits, on top of the already allocated state benefits, allowed Americans to continue spending.
The results of the survey seem to support the conservative argument that states don’t need some or all of the funding in Biden’s relief package given that their revenues look fairly unscathed by the pandemic.
The White House has pushed back on such criticism, saying it’s not in line with reality.
“I think our objective is to focus on not JP Morgan reports, but what state, local governments and others are telling us they need to ensure that the people in their districts, the resources in their districts, the people who are making government function in their districts have the funding and resources they need,” White House Press Secretary Jen Psaki said during a February 1 press conference.
But while states haven’t yet appeared to take significant hits in tax revenue, experts suggest that the worst is yet to come.
The argument for state aid
Biden’s $1.9 trillion stimulus plan includes $350 billion in emergency funding for state, local, and territorial governments “to ensure that they are in a position to keep front line public workers on the job and paid, while also effectively distributing the vaccine, scaling testing, reopening schools, and maintaining other vital services,” according to a White House fact sheet.
This would be in addition to $150 billion of similar aid from last March’s CARES Act, Democratic state treasurers said in a letter that more aid is needed for long-term economic recovery.
“Congress has the power – and the responsibility – to step in and fill the gap during this emergency,” the treasurers wrote.
Some states badly need the aid already. According to the Urban-Brookings Tax Policy Center, states such as Alaska, Hawaii, and Nevada suffered the greatest revenue losses at 42.5%, 17%, and 11.8%, respectively, because of the lack of tourism during the pandemic. But some other states saw a gain in revenue, like Idaho, up 10.4%, and Utah, up 8%.
And growing evidence suggests a big hit to tax revenues is coming, because of the ripple effect that mass working from home has had on commercial real estate.
Unnamed government finance officials told The New York Times that cities heavily reliant on property taxes could face revenue losses of as much as 10% in 2021 due to empty facilities during COVID-19. The Urban Institute found in 2017 that although property taxes account for roughly 1% of state tax revenues, they can add up to 30% or more of the taxes that cities take in to fund local services, so further aid through Biden’s plan will be necessary to prevent mass municipal layoffs.
The argument against state aid
Since Biden introduced his stimulus package, Republican lawmakers have taken issue with its costly price tag, and 10 Republican Senators even came up with their own $618 billion stimulus plan. That proposal was notable for completely cutting out aid to state and local governments.
“I think the biggest gap between the president’s proposal and the Republican proposal relates to [$350 billion] or so going to states and localities,” Sen. Mitt Romney of Utah told reporters. “That kind of number just makes no sense at all.”
“Unfortunately, the White House seems wedded to a figure that really can’t be justified …” Sen. Susan Collins of Maine, who led the GOP stimulus plan, told reporters on February 23. “So what we’re looking at now is whether there are changes that we could make.”
As Insider’s Joseph Zeballos-Roig reported, moderate senators on the Democratic side think some of the state aid in Biden’s plan could be used for needs other than pandemic relief, such as broadband and healthcare.
The US is currently administering, on average, 1.7 million COVID-19 vaccines per day. But budget experts say that is not enough to prompt the economic recovery the country truly needs.
In a report released on Monday by Penn Wharton Budget Model – a nonpartisan economic research organization at the University of Pennsylvania – it found that if the US increased daily vaccine doses to 3 million, then 2 million more people would find themselves employed. Also, 3 million daily doses would boost real gross domestic product by about 1% over the summer, with smaller effects later in the year.
“The COVID-19 pandemic and resulting widespread adoption of social distancing in March of 2020 led to the deepest recession on record – the continuation of the pandemic and social distancing represents the most significant drag on the economy in 2021,” the report said. “The pace of the economic recovery this year is therefore closely tied to the evolution of the pandemic, which in turn depends on the pace of vaccinations.”
John Ricco, a Penn Wharton Budget Model senior analyst and one of the authors of the report, told Insider that increasing the number of shots now will prevent an increase in COVID-19 cases in the summer.
“If you were able to get up to 3 million doses per day, you could really prevent that summer wave, and in response, the economy would look a lot better because our model tracks the interrelationship between the course of the pandemic and the economic recovery,” Ricco said. “So if the pandemic squares in the summer, then that means that you’re going to have fewer jobs and lower GDP.”
3 million daily vaccines would raise GDP by a percentage point in the third quarter
The report projected a total of 26.5 million COVID-19 cases in 2021 if 1.5 million vaccines continue to be administered daily in the US. However, if 3 million daily doses are distributed over the next few months, the report said, the total number of COVID-19 cases would drop to 24.5 million.
Here are the main findings on economic recovery in the report:
At the pace of 1.5 million vaccinations per day, employment would rise to 152 million in July with 5% GDP growth in the third quarter;
3 million vaccinations per day would boost employment by 2 million – to 154 million – in July, raising GDP growth by a percentage point in the third quarter;
Averaging over a full year, raising the daily vaccination rate to 3 million would increase employment in 2021 by nearly 1 million and GDP growth by a third of a percentage point.
The report noted that in the second half of the year, differences between the alternative vaccination rates will diminish because most people will be vaccinated by late fall, so the differences will be most noticeable in the summer.
Increasing vaccination rates has been a primary focus of President Joe Biden, who made a goal of administering 100 million shots in his first 100 days. And his $1.9 trillion stimulus plan, which is now under consideration in the Senate, includes funding for a more robust pandemic response, along with extended unemployment aid.
The pace of economic recovery is dependent on the pace of vaccinations, the report said, and with the country’s high unemployment rate, administering vaccines will be all the more urgent from a health and economic standpoint.
According to a report released on Monday from the Center on Budget and Policy Priorities, private and government employers have 10 million fewer jobs than they did in 2020, and economic recovery through pandemic relief will help restore the labor market.
“The relief package enacted at the end of the year provides important but temporary help to unemployed workers and others struggling to make ends meet,” the CBPP report said. “It should help strengthen the recovery, according to the Congressional Budget Office and other forecasters. But robust additional measures, such as those in the economic relief bill now working its way through Congress, are critical for relieving the widespread hardship among families and achieving a full, equitable recovery as quickly as possible.”
The Johnson & Johnson vaccine, which was approved by the Food and Drug Administration on February 27, will likely speed up vaccination efforts, Ricco said, and it has received support from experts who commend its single-dose usage.
Gary Gensler, the nominee to be the next head of the Securities and Exchange Commission said the agency under his watch would review issues surrounding protection and fairness for retail investors.
There’s been a “gamification” in trading for retail investors, and in recent months there has been “unprecedented volatility” in many stocks. This has been seen most notably in video-game retailer GameStop, said Senator Sherrod Brown of Ohio, the ranking member of the Senate Banking Committee during a virtual confirmation hearing on Tuesday.
Gensler, who was nominated by President Joe Biden to be the new head of the SEC, said the agency should review, among others, a practice by some trading firms to pay third-party brokers to execute customer orders.
The SEC should examine questions over “how to ensure that customers still get best execution in the face of payment for order flow,” Gensler said during a Tuesday virtual confirmation hearing held by the Senate Banking Committee.
Payment for order flow refers to a practice of compensating brokerage firms to route trading orders from their customers to certain market makers to execute the trades rather than directly to an exchange. The practice has raised questions over if it creates a potential conflict of interest and if it might lead to sub-par execution for customers.
Payment for order flow was thrust into the spotlight this year after Robinhood in late January placed trading restrictions temporarily on some popular stocks, including GameStop.
After a massive short squeeze on GameStop that sent its share price soaring, trading app Robinhood temporarily restricted trading in a handful of volatile stocks at the center of the Reddit-driven frenzy.
Public interest in market structure and payment for order flow has been “reignited” by the recent trading in GameStop shares, Senator Mark Warner from Virginia said during the hearing.
Last month, the House Financial Services Committee held a hearing on January’s short-squeeze episode. Legislators heard testimonies from Robinhood CEO Vlad Tenev, famed GameStop retail investor Keith “Roaring Kitty” Gill, and Citadel CEO Ken Griffin.
The United States has one of the highest child poverty rates of developed countries, which reflects one simple fact: our investment in children systemically fails to match our society’s collective rhetoric about them, something the pandemic has made painfully clear. Our inordinately high rates of child poverty are the result of our political priorities – currently less than 10% of the federal budget is spent on children.
Children have been among the most harshly impacted by COVID-19 with more than 4 in 10 children living in a household struggling to meet its basic needs. Even before the pandemic, more than 10 million children in the US lived in poverty – a condition which has disastrous downstream consequences.
Adverse effects of child poverty
Child poverty leaves devastating and lasting harm. Growing up in poverty hinders kids’ ability to learn in school, fundamentally reshapes their physical brain composition, and leads to long-term earnings losses years later as adults. What’s more is that our current safety net doesn’t protect children who were born poor through no fault of their own.
In fact, a recent study found that low-income students score lower on the SAT – and are less likely to go to college – when they take the test in the back-half of the monthly food stamp cycle compared to the first-half of the month.
The pandemic has exacerbated the effects of child poverty. Free school lunch is a vital source of nutrition for 2.1 million students in New York who rely on that benefit for food security. During my campaign for Congress, we spoke to countless families who were food stressed by the removal of a single meal at school, which forced New York to issue supplemental emergency SNAP benefits last May to 750,000 families. More than 100,000 New York public school students lack permanent housing – when school is conducted via Zoom at home, these students fall even further behind for lack of a safe place to attend class. This is a disgrace.
When I ran for Congress, I proposed a wildly popular universal child dividend
Our underinvestment in children is immoral, and it’s bad economics because programs targeted at children generally pay for themselves or even have a positive return on investment. For every dollar spent on addressing programs tailored towards children, $7 is saved down the line.
When I ran for Congress last year, I wrote and championed a policy centered on replacing our Rube Goldberg system of complicated child support policy with a single Universal Child Dividend. This policy would provide families with $500 every month for each child under five years old, and $350 for children ages 6-17. We felt it was possible to build a left/right coalition around centering the family and child poverty with government efficiency. This intervention would halve child poverty in the first year alone.
And, it proved immensely popular across all income brackets in my district, New York’s 12th – which is both the richest and most unequal in the country.
Throughout my campaign, we spoke with countless parents about what an extra $500 per month could mean for them. For one father, it was the difference between getting an after-school tutor for his child or paying for groceries. For another, it meant transportation freedom – the extra money needed to get to a better paying job.
With 40% of American families unable to shoulder a $500 emergency, an extra $500 per month meant the difference between taking one child to speech therapy or caring for an elderly parent. Families in New York and across America make hard choices every day – a direct cash transfer is a non-paternalistic way of letting families decide what they need for their kids. The idea that waste and drug abuse could accompany direct payments has been thoroughly debunked.
Congress now has the chance to pass a program to reduce child poverty
Parents, whether Republican or Democrat, know that a little help for the uncompensated work of raising children can go a long way towards providing much needed financial stability.
And now the time has come to address child poverty. Programs proposed by President Joe Biden and Senator Mitt Romney would each send monthly checks worth several hundred dollars to families with children. Such a program needs to be enacted now.
Both the Biden and Romney plans would provide similar (albeit less generous) benefits than the policy I proposed: Biden’s plan would overhaul the Child Tax Credit by providing up to $300 per child to most families, and Romney’s would create a new program – essentially Social Security for kids – to provide up to $350 per child to most families.
Whatever plan is passed by Congress, it should reflect a few basic principles. The benefit should be simple to access, and should arrive monthly so that it is in sync with families’ bills. It should be made permanent to last beyond the COVID-19 pandemic, and it should be age-conscious to provide extra help to families raising the youngest children.
And finally, the program must be ambitious. The extenuating circumstances of the pandemic have torn up old political constraints and dogmas, and revealed the simple practical appeal of the government sending cash to families. President Donald Trump and Republicans in Congress over-performed expectations in the 2020 election in part because Americans received – and appreciated – the CARES Act’s stimulus checks.
Democratic Senators Raphael Warnock and Jon Ossoff won contentious run-off elections in Georgia by centering $2,000 relief checks as their closing pitch. As Jamelle Bouie wrote in the New York Times, the political lesson from the 2020 election is: “It’s the money, stupid.”
The plans under consideration would provide transformational help for millions of families. But they could have a bigger anti-poverty impact by raising the benefits to the level proposed in my Universal Child Dividend – $500 for young children, $350 for older children.
As Sen. Sherrod Brown has proposed, this money could be deposited instantaneously into new individual bank accounts run by the Federal Reserve, so no one has to wait on checks to be mailed or direct deposits to clear.
The pandemic has torn through an America that was already weakened by a host of preexisting conditions, including massive economic inequality and child poverty. But it has also created the political space for our leaders to be bold. There is no worthier cause to boldly pursue than the basic principle that no child deserves to grow up poor.
Adopting a structure – like the Universal Child Dividend – that would meet the magnitude of our current crisis and provide assistance to all without the need to navigate administrative burdens is the best way to help our future generations thrive.
The world’s largest economy looks to be set for a “gangbuster” pace of expansion through next year but US officials should be cautious about unleashing too much fiscal stimulus into the system, said JPMorgan CEO Jamie Dimon said Monday.
“There’s a very good chance you’re going to have a gangbuster economy for the rest of this year and easily into 2022,” said Dimon during an interview with Bloomberg TV. “And the question is, ‘does that overheat everything?’ and we just don’t know yet,” he said.
In terms of that risk, Dimon said, “I wouldn’t worry too much about it, but I would suspect there’s a pretty good chance that you’re going to see rates going up and people starting to worry about that at one point.”
Dimon quickly added: “I’ve been very clear: I would not buy 10-year Treasuries, just so you know.”
Before his prediction of strong economic growth for this year and next, Dimon said there are ‘”legitimate complaints” that the current stimulus bill contains items “that have nothing to do with COVID,” but that many Americans do need financial assistance to cope with the pandemic.
“Unemployed, they definitely need help. Small businesses, they definitely need help,” the JPMorgan chief said.
“I don’t know if you know this but [in] half the states, revenues went up. They didn’t go down. Do they need help? Are we just throwing money at people at one point?”
He urged officials in his remarks to “try not to overdue it too much.”
Democrats did poorly among rural voters in the 2020 election.
To reconnect with rural America, lawmakers can spur economic growth with local renewable energy projects.
Communities are already on board, and the investment would create millions of jobs and slow the effects of climate change.
Brandon Presley is Public Service Commissioner for the Northern District of Mississippi.
Jeff Cramer is executive director for the Coalition for Community Solar Access, a national trade association representing innovative businesses and nonprofits working to expand customer choice and access to solar for all American households and businesses through community solar.
Jigar Shah is president and co-founder of Generate Capital.
This is an opinion column. The thoughts expressed are those of the authors.
President Joe Biden may have won the 2020 election by the largest margin against an incumbent since 1932, but more than 74 million Americans – close to half of all the people who cast a ballot – voted for the incumbent.
Nowhere is this disconnect between the Democratic Party and voters more stark than among rural Americans. As Biden won in cities and towns, former President Donald Trump dominated in the rural regions.
Even as COVID raged – and rages – with the death toll soaring past 280,000 in 2020, rural voters’ chief concern, as the election neared, shifted from the coronavirus to the economy. And the Republican Party has effectively and steadfastly homed in on these fiscal concerns.
Local renewable energy projects can strengthen rural communities
Democrats now have a singular opportunity to offer a clear economic vision for rural America. With the start of a new administration and an urgent need for broad economic stimulus, lawmakers – and the nation as a whole – not only have the opportunity to rebuild the nation, from its bridges to its transmission grids, they also have the chance to reconnect with rural voters by reinvigorating local economies and putting America’s rural counties first.
Lawmakers can achieve this with a clean energy “Marshall Plan” that will empower rural communities with local renewable power, millions of new jobs, billions of dollars in economic activity, slashed health costs, and, yes, help slow climate change.
Take the Samson Solar Center in Texas as an example: This $1.6 billion project in Lamar, Red River, and Franklin counties, announced in November, will support up to 600 jobs through its three-year construction period. What’s more, the project promises more than $250 million in payments to local landowners, and another $200 million in property-tax payments to local communities over the lifetime of the project.
This utility-scale project – once built, the biggest in the US – is just one type of rural clean-energy investment. Thousands of smaller ones can be built across rural America – not top-down from big corporations or the federal government, but built locally from the ground-up by the nation’s rural electric co-ops.
Rural co-ops once revolutionized American energy, bringing electricity to the communities too small or isolated for the big utilities to bother with. Decades since that effort, they’ve become saddled with the most expensive coal-fired power plants in the country, costing families an extra billion dollars a year while imposing enormous health costs from the pollution.
But due to innovative local leadership, rural electric co-ops have, with little fanfare, become hotbeds of innovation in America’s energy economy – creating millions of local jobs in the process. In Mississippi, for example, the Public Service Commission has steadilyexpanded solar generation – not only with large, utility-scale projects like the one in Texas, but with smaller, locally managed solar farms.
This locally-managed effort has catapulted the Magnolia State, with its deep-red bona fides, into the top ranks of green energy generation. In fact, more than 500 rural co-ops in 43 states have started implementing solar power. With access to cheap land, plummeting costs for solar, and subsidized loans from the federal government to convert all of their electricity generation to renewable energy, this transition is accelerating.
Many communities are already on board
This shouldn’t be surprising. We’ve long known that conservative and liberal voters alike broadly support clean energy investment – Democrats largely for the environmental reasons, Republicans for the cost savings and energy independence that solar delivers.
Community and rooftop solar or “local solar” projects, like the kind implemented in Mississippi, enhance these benefits – especially when paired with batteries to provide around-the-clock power. Local solar systems, for example, can save consumers a half a trillion dollars over the next three decades. And that’s before even including so-called “indirect” benefits like job growth, economic investment, and the health, social, and environmental benefits of less pollution.
State lawmakers, of both parties, are finally starting to catch on. In Pennsylvania, for example, Republican lawmakers, with support from the state farm bureau, backed a bill for community solar. The legislation didn’t quite make it to the governor’s office, but momentum is growing.
Rural co-ops have far less red tape than traditional utilities and grid operators, allowing them to move more quickly and at lower cost. It’s of course far easier to build infrastructure in less densely populated areas. The electricity these resources generate is cheaper than coal, gas, or oil, saving money for local landowners. And the projects are locally sited, empowering communities to make the pragmatic choices that are best for them. That’s a win-win-win-win.
The Biden administration entered office pledging to Build Back Better, at the plan’s centerpiece a $2 trillion clean energy roadmap. But energy, like politics, is local. To best succeed, and reestablish a long lost connection with rural voters, lawmakers must harness the work and innovation in America’s rural communities, and empower them to lead the way.
But Biden’s plans for rebuilding the nation’s roads, highways, and bridges could have a much bigger price tag. As a candidate, Biden proposed a 10-year, $1.3 trillion investment.
“Our nation’s infrastructure is literally crumbling,” the plan said. It continued: “It is unacceptable that one in five miles of our highways are in ‘poor condition,’ that tens of millions of Americans lack access to high-speed broadband, and that our public schools have repeatedly earned a D+ grade from the American Society of Civil Engineers.”
Biden’s team has used this month’s harsh winter storm in Texas, where millions lost access to power or water, as an opportunity to begin talks about his plans, per AP. That storm reportedly may have caused as much as $50 billion in damages.
Earlier this month, Elizabeth Sherwood-Randall, Homeland Security advisor, told members of the press the federal government and states would need to work together to prepare the country’s infrastructure for future challenges, including storms.
“That’s going to require the kind of technology, innovation, and close collaboration among the federal government, states, communities, and the private sector that enables us to incentivize the kinds of actions that need to be taken to build critically – to build the kind of resilient infrastructure that we will depend on in the future,” Sherwood-Randall said.
Vaccines are rolling out and picking up speed. There’s finally a light at the end of America’s long coronavirus tunnel as massive advances in public health provide reason to be optimistic about 2021.
But the world that reopens won’t be the same one that shut down nearly a year ago, and the good news could go beyond a return to “normalcy:” the American economy of the 2020s could be the best in decades, with real optimism about enough jobs being created to put 10 million-plus Americans back to work.
The pandemic has already transformed the personal and professional worlds in ways that will have long-lasting repercussions.
First, the Biden administration wants to “go big” on a $1.9 trillion stimulus that could supercharge the economy when the world comes out of lockdown (without overheating it), following more than $3 trillion of stimulus spending in 2020. Second, regulatory actions announced at the end of the Trump era have the potential to reshape the tech sector that dominated the first two decades of the 21st century and still dominates the stock market.
And finally, the world of work was changed to a largely remote one, with ripple effects for both worker productivity and across the housing market. With office workers doing their jobs from home, the era of the “superstar city,” where New York and San Francisco hoovered up the best jobs and talent, may have ended in 2020.
President Joe Biden promised in mid-February that big stimulus spending would bring the economy “roaring back” but all of these changes may add up to more than just a new “roaring twenties,” but a whole new economic era.
Because of prior stimulus, American consumers are sitting on approximately $1.6 trillion of pent-up spending after 11 months of solitary leisure activities, according to Commerce Dept. figures released on Friday.
In other words, the boom is coming. And based on the three drivers outlined below, the ensuing recovery could usher in a wholly unique era of American economic prosperity.
(1) Wall Street sees stimulus sparking a boom
As momentum gathered for Democratic passage of Biden’s stimulus in February, Wall Street banks began to upgrade their projections for economic growth, factoring in expectations of a successful vaccine rollout.
A team of JPMorgan strategists led by John Normand wrote on February 12 that the economic expansion over the next year “will be much stronger than average” on account of pent-up demand, augmented incomes through stimulus, and support from the Federal Reserve including quantitative easing. US strategists at the bank believe the consumer’s recovery will be the dominant theme for 2021 with “blowout expectations for the rest of the year.”
Bank of America strategists led by Candace Browning Platt wrote that the service sector is “like a coiled spring waiting to be let loose,” with a reopened economy not just meeting demand repressed by the pandemic but also boosting employment since some services sectors account for an outsized share of jobs.
BofA’s Michelle Meyer agreed, writing that it was time to “fasten your seatbelts” as evidence pours in to support the view of strong economic growth in 2021 – in fact, “the strongest in nearly four decades.” Rather than a coiled spring, she wrote of a “rubber-band” cycle, with a big decline leading to just as fast a snapback.
The recovery should avoid the sluggishness of the post-2008 decade, according to Meyer, because of healthy household savings and aggressive stimulus, two interrelated factors. Finally, BofA’s Ethan Harris wrote that while the 2010-2019 recovery was the slowest in history, the 2021 recovery may be among the fastest.
The Commerce Dept. data from January show consumer finances are strong, as the $900 billion stimulus passed in December boosted spending by 2.4% and personal household income by 10% – the second highest on record.
(2) A tech breakup could create (a lot) more jobs
The FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks drove 40% of the stock market rebound in July 2020, per BofA Research, but what if they get broken up in the 2020s?
As the Trump administration drew to a close in 2020, the Dept. of Justice and Federal Trade Commission launched respective actions against Google and Facebook. The case against Facebook, in particular, seeks a true break-up including the forced separation of Instagram and WhatsApp. These cases wouldn’t reach the trial stage until well into the new decade, but they have the potential to transform the economy.
Scott Galloway, professor of marketing at NYU and well-known tech industry pundit, told Insider that Facebook, WhatsApp, and Instagram could be worth more if they were forced to break up into three separate companies – and this could translate into more jobs for workers, more opportunities for entrepreneurs, and more value for investors.
As independent companies, Instagram and WhatsApp could engage in aggressive hiring that they previously couldn’t do under Facebook, he said. What’s more, with Facebook and other monopolies weakened, investors would be more willing to allocate more funds to more companies that challenge these big tech players.
“Consider that two years after the federal government broke up Rockefeller’s Standard Oil into 34 separate firms, their combined value had doubled,” Galloway added. “The companies spun out of the breakup of AT&T in 1983 outperformed the S&P 500 for the next decade. We’ll see the same thing in big tech.”
A 2018 report by anti-monopoly think tank Open Markets Institute, called “America’s Concentration Crisis,” revealed just how many industries have come to be dominated by certain power players in recent years. Three companies hold 85% of social networking site market share – Facebook comprises 70% of that share alone. It’s a similar story for the search engine industry, where the two largest firms own 97% of the market share, with Alphabet leading the way at 91%.
Matt Stoller, director of American Economic Liberties Project and author of “Goliath,” a 100-year history of antitrust policy, also said that a tech break-up would benefit the economy.
“Facebook is suppressing the growth of new and vital sectors of the economy by refusing to allow anyone else to create innovations within the social networking space,” he told Insider. “It’s similar to IBM, which blocked the creation of a software industry until the antitrust case of the late 1960s forced the company to unbundle its hardware from its software.”
(3) The work-from-home revolution could bolster new cities
Around the 1990s, the “superstar effect” became a feature of the American economy. The concept explains the vast difference in earnings between a star and a superstar in the same field. Think: Michael Jordan, Bill Gates, and New York City.
But there’s another word for the dynamic when a superstar gobbles up most of the gains: monopoly. Stoller has argued for years that a shift in antitrust regulation since the 1970s has allowed for the rise of more monopolies across the economy, resulting in less competition and greater inequality. Starting in the 1970s, Stoller wrote for Vice in 2019, regional inequality widened as a result of airlines cutting routes to the rural, small, and medium-sized cities they no longer needed to serve in a more concentrated economy.
New York City, the country’s media and finance hub, had 10.1 million employees in its metropolitan area in November 2019, and Los Angeles, center of the entertainment industry, had 6.2 million employees. San Francisco, the heart of tech, has 2.5 million employees, although that doesn’t account for the millions more in the Bay Area’s other cities: Oakland and San Jose. These three superstar cities house more jobs than some entire states have alone: Consider Alabama’s 2 million employees in the same time period.
Such job concentration leads to a higher cost of living. The median home value in the US is $266,104, but that jumps to $512,941 in the NYC metro area and $1.3 million in San Francisco.
But when it comes to cities, the pandemic may have snapped that thread, freeing up remote work for white-collar employees on a massive scale. So what happens when the workers that were locked for decades into superstar cities – especially San Francisco and New York – are free to fan out around the country? The answer could well be a new era of more broadly shared prosperity and a correction to decades of increasing regional inequality.
The labor and real-estate markets both still have underlying inequities. Service workers still have to physically report to their jobs while remote workers don’t, and some of those who have fled expensive addresses have endured salary cuts. Meanwhile, the housing market got so expensive in 2020 that it’s discouraged many from the dream of homeownership for good.
“I have long said that we will see the rise of the rest, given the incredible expensiveness and affordability of existing superstar cities,” he said. “But it’s not going to be the rise of everywhere. It’s going to be the rise of a dozen or two dozen places.” These places will consequently attract new talent, changing economic development.
Florida doesn’t see bigger cities going away, though, predicting a resurgence as we inch closer to widespread vaccination, even if remote work is likely here to stay. He did predict that post-pandemic cities will be reshaped and revived by a newfound focus on interpersonal interaction that facilitates creativity and spontaneity.
“Even as offices decline, the community or the neighborhood or the city itself will take on more of the functions of an office,” he said. “People will gravitate to places where they can meet and interact with others outside of the home and outside of the office.”
Insider’s Josh Barro has already argued that 2021 should be great for the economy in general. Indeed, markets hit record highs at the turn of the year, seemingly pricing in a vaccine-led recovery. Just a few months later, it’s beginning to look like the biggest boomtime for the US economy in a generation. Some experts have even floated the idea of a new “Roaring ’20s,” with animal spirits unleashed after roughly 18 months of isolation, as pent-up capitalist energy explodes when lockdown finally lifts.
Instead of flappers and a jazz revolution, we’ll have digital nomads and zoom concerts, but one thing is certain: increased competition among cities and technology companies, if done right, has the potential to improve life for all Americans over the next decade.