As a growing number of Democrats are pushing for recurring stimulus checks beyond the three that Americans have already received, the Boston Herald found 1.2 million people still haven’t spent their first $1,200 check, from all the way back in March 2020.
Under the CARES Act passed that month, most Americans received a $1,200 stimulus check to help ease the financial pain of the pandemic. The Herald reported on Sunday that 1.2 million people have yet to spend those checks, citing records obtained from the Internal Revenue Service (IRS). The records show that California leads the country with 123,265 unspent stimulus checks, followed by Florida with 92,018 unspent checks.
The IRS told the Herald that the figures reflect “the number of people who either refused to accept, paid back or not cashed the stimulus checks they received from the IRS as a result of the CARES Act that was signed into law on March 27, 2020” by President Donald Trump.
Unspent COVID-19 relief money supports Republican lawmakers’ arguments that more money should not be spent on things like infrastructure until money already allocated from pandemic relief bills gets put to use. For example, House Republican Whip Steve Scalise cited in February the Committee for a Responsible Federal Budget’s COVID Money Tracker that found $1 trillion of pandemic relief funds are unspent.
“There’s over a trillion dollars of money unspent from previous relief bills that were bipartisan,” Scalise said Feb. 21 on ABC’s This Week.
However, the CRFB noted that figuring out how much money is actually unspent is complicated because much of it is already allocated and scheduled to be spent.
More recently, a growing number of GOP-led states have moved to cut off $300 weekly unemployment benefits early, and Sen. Shelley Moore Capito has suggested using those unspent funds to fund infrastructure.
“I think there’s all kinds of different ways that we’re looking at. Certainly repurposing some of those covid dollars,” she told Bloomberg. “I’ve been looking at those 21 states that are no longer paying the enhanced unemployment – why don’t we repurpose those dollars to help those folks coming off unemployment get work in an infrastructure plan.” The White House has dismissed such suggestions.
Even though 1.2 million stimulus checks remain uncashed, a growing number of Democrats are pushing for checks to be recurring, along with extended unemployment benefits, to sustain economic recovery. A recent report from the Economic Security Project found that sending two more rounds of stimulus checks could keep 12 million more Americans out of poverty, which is why in March, 21 senators wrote a letter to Biden advocating for recurring direct payments. Last week, seven House Democrats wrote a similar letter pushing for the same thing.
“The pandemic has served as a stark reminder that families and workers need certainty in a crisis,” the House Democrats wrote. “They deserve to know they can put food on the table and keep a roof over their heads. They should not be at the mercy of constantly shifting legislative timelines and ad hoc solutions.”
In some ways, the April jobs report resembled an optical illusion, with people making differing observations from a dataset that didn’t fit into a clean narrative.
In this case, Democrats and Republicans came to opposite conclusions about the report and what it means for the way forward in healing an economy battered by the pandemic.
The Friday report showed the economy recovered 266,000 jobs, a smaller amount defying expectations of a massive job surge on the back of government stimulus dollars, increased vaccinations, and easing restrictions. Economists had forecasted at least 1 million regained jobs.
In response, the GOP is demanding to end parts of President Joe Biden’s stimulus and calling for the government to slam the brakes on its spending. Democrats instead urged the passage of Biden’s $4 trillion infrastructure plans, viewing the lackluster report as another pillar in their argument that more spending, in part on childcare, would accelerate the recovery.
It sets the stage between the parties for a multitrillion-dollar fight on infrastructure, jobs, and families that will take up much of the White House’s time over the next few months.
The president argued for patience with his economic agenda on Friday. He said “more help is needed” and mounted a robust defense of his $1.9 trillion stimulus, which provided $1,400 direct payments and a $300-per-week federal unemployment benefit.
“When we passed the American Rescue Plan, I want to remind everybody, it was designed to help us over the course of a year – not 60 days – a year,” Biden said. “We never thought that after the first 50 or 60 days, everything would be fine.”
He flatly rejected the argument from Republicans and business groups that federal jobless aid has been sidelining people from the workforce, saying that was “nothing measurable.”
“We’re still digging out of an economic collapse that cost us 22 million jobs,” Biden said. “Let’s keep our eye on the ball.”
“The evidence is clear that the economy demands urgent action, and Congress will not be deterred or delayed from delivering transformational investments,” she said in a statement.
Republicans had already lined up against Biden’s plans, criticizing the proposed tax hikes on large firms and wealthy Americans as a future anchor on the economy. They pounced on the report in a fresh sign of their hardening resistance.
The GOP swung at Biden’s handling of the economy, arguing that the jobless aid was disincentivizing people from searching for a new job.
“This is a stunning economic setback, and unequivocal proof that President Biden is sabotaging our jobs recovery with promises of higher taxes and regulation on local businesses that discourage hiring and drive jobs overseas,” Rep. Kevin Brady, ranking Republican on the House Ways and Means Committee, said in a statement.
He also contended that jobless aid was disincentivizing people from returning to work. The argument mirrored one made by the Chamber of Commerce, an influential business group which on Friday called for an end to the $300 federal unemployment benefit.
Many economists have long disputed that federal jobless aid has kept people from returning to work. Unemployment claims has steadily fallen over the past month. They tend to cite other factors like the lack of available childcare and school closures.
Those burdens have fallen more on women, causing 2 million women to leave the workforce in the past year. Still, experts say the US will regain its economic footing eventually, though the nation faces a rocky path ahead.
“We’re gonna see pockets of strength, pockets of weakness, areas of overheating, areas where it is uncool – it’s going to be complicated and messy,” Jason Furman, a former top economist to President Barack Obama, told Insider in an interview. “But I think hopefully all moving in the right direction.”
Hedge funds have played an instrumental role in this year’s rout in the US bond market by selling off more than $100 billion in Treasurys, according to a Bloomberg report.
Investors in the Cayman Islands, a major financial center and a known domicile for leveraged accounts, have been the biggest net sellers of US government debt, offloading $62 billion of sovereign bonds in February and dumping $49 billion in January, with Bloomberg citing data from the Treasury Department.
The sell-off began after the early January Senate run-off elections that were won by two Democrats. The victories gave that party a 51-vote majority in the upper house of Congress, including Vice President Kamala Harris, paving the way for a large new round of government fiscal spending. In March, President Joe Biden signed into law a $1.9 trillion stimulus package that passed 51-50 in the Senate.
The rollout of COVID-19 vaccines also contributed to investors deciding to exit bonds. As bonds sold off, rising yields prompted a return of convexity-type hedging flows, Bloomberg reported.
The bond market sell-off this year drove the widely watched 10-year Treasury yield above 1.7% for the first time since early 2020. The yield has since pulled back to around 1.58%.
IRS chief Charles Rettig told lawmakers on Tuesday that the agency was on course to start monthly payments of the child tax credit within a few months.
Asked whether the organization was ready to issue monthly checks on July 1, Rettig responded: “We are.”
He also added the agency was gearing up to roll out a new portal to allow parents to sign up and get the cash in advance. Currently, people receive it in a lump sum after filing their taxes every year.
“We will launch by July 1 with the absolute best product we are able to put together,” Rettig said at a Senate Finance Committee hearing. “We are trying to get it as user-friendly as possible, but we will launch by July 1.”
However, Rettig said the agency was ready to delay the portal’s rollout if any technical issues emerged that could lead to fraud. “If we are not prepared, we will not launch. We’re not going to risk our systems,” he said.
Rettig also said the IRS was grappling with 1,500 calls per second, and it’s still trying to bring onboard more employees to shrink their backlog of tax returns.
The one-year child tax credit measure was authorized as part of President Joe Biden’s stimulus law in mid-March. It will provide a $3,600-per-child benefit to parents with children age 5 and under through “periodic payments.” It will be $3,000 for each child between 6 and 17.
But many GOP lawmakers oppose it. Some are starting to raise concerns over possible waste and fraud, such as Rep. Kevin Brady of Texas, the ranking Republican on the House Ways and Means Committee, and Rep. Mike Kelly, another senior Republican.
“The new CTC and other provisions in ARP fail to learn from lessons of the past, are not targeted to pandemic relief, and risk the loss of billions of taxpayer dollars in fraudulent and improper payments,” the pair wrote in a letter sent Tuesday to the Biden administration.
President Joe Biden introduced a $2 trillion package that will form the first part of a likely $4 trillion infrastructure plan on Wednesday, a colossal measure aimed at overhauling the US economy, strengthening its competitiveness abroad, and leveling the playing field for the American middle class.
“Now it’s time to rebuild,” Biden said during his announcement, adding: “Wall Street didn’t build this country. You, the great middle class, built this country, and unions built the middle class.”
The plan is split into two parts; the first part is called the American Jobs Plan. It will feature federal spending to upgrade aging roads, bridges, and ports, along with climate-related measures to drastically cut carbon emissions. It invests in clean-energy projects, rural broadband, and affordable housing. It will also funnel funding towards caretakers for the elderly and disabled.
Biden called it a “once-in-a-generation investment in America” unlike anything since the 1950s-era building of the Interstate or the 1960s-era Space Race.
“It’s big, yes. It’s bold, yes. And we can get it done,” he added.
Spending for the package will take place over eight years, and breaks down into investments in transportation, water, broadband and power, housing and education, research and development, and manufacturing and labor.
The package will also contain an accompanying tax hike for corporations. The Made In America Tax Plan will raise the corporate tax to 28%, strengthen the global minimum tax to 21%, and provide tax credits for companies that will onshore jobs, instead of those who move them offshore. It would also provide more resources to the Internal Revenue Service.
Overall, the tax increase is meant to completely offset the cost of the package over 15 years.
A wide swath of Senate Democrats appear ready to sign on for another round of substantial government spending, although some progressives have already said it’s not large enough.
However, Republicans have made clear they will likely oppose any tax hikes to finance major chunks of the project.
The second part, the American Families Plan, to be announced in mid-April, will be geared towards social infrastructure, especially areas like childcare and education. That will likely include measures like universal pre-K, free community college, an extension of periodic cash payments for parents, and a national paid leave program.
Around 2 million women dropped out of the workforce over the past year because of the pandemic. Biden’s push is also aimed at reducing barriers to make it easier for women and people of color to find work as the economy recovers.
President Joe Biden is set to announce the first part of his two-part infrastructure package this afternoon. It’s called the American Jobs Plan, and it will cost about $2 trillion.
The package is focused on job creation, traditional infrastructure spending, and investment in many other things that stand to redefine infrastructure as a political issue, such as funding for care workers, as well as incentives for childcare to be provided at American workplaces. Biden plans to couple it with a tax increase for corporations, meant to offset the bill’s spending over 15 years.
Here’s how the spending will break down.
$621 billion for transportation includes:
$115 billion for modernizing roads, highways, and bridges
$20 billion for road safety
$85 billion for public transit
$80 billion for Amtrak and freight rail service
$174 billion for electric vehicles
$25 billion for airports
$17 billion for ports
$20 billion for neighborhoods historically excluded from transportation investments
$25 billion to fund new projects
$50 billion for infrastructure resilience, with a special emphasis on more vulnerable areas
$111 billion for water infrastructure includes:
$45 billion towards fully eliminating lead pipes through various programs
$56 billion in loans and grants to help modernize water systems around the country
$10 billion for monitoring and fixing substances in drinking water
Broadband and power
$100 billion for broadband
This would build out infrastructure for 100% coverage and would specifically allocate funds for tribal lands
It would also seek to reduce broadband pricing
$100 billion for power infrastructure includes:
$16 billion towards plugging old wells and cleaning up abandoned mines
$5 billion towards revamping former industrial and energy sites
$10 billion for the creation of a Civilian Climate Corps
Housing and education
$213 billion for creating and retrofitting over 2 million housing units, with a $40 billion investment in public housing infrastructure
$100 billion for upgrading and building public schools
$12 billion for community college infrastructure
$25 billion for upgrading childcare facilities and making it more widely accessible
This is accompanied by a tax credit to incentivize building childcare at Americans’ places of work
$18 billion to modernize Veterans Affairs hospitals, as well as $10 billion for federal buildings
$400 billion towards home/community care for the elderly and disabled
This would expand access, and seek to improve wages, benefits, and unionization for workers in the industry.
Research and development
$180 billion towards R&D includes:
$50 billion for the National Science Foundation
$30 billion for innovation and job creation R&D
$40 billion in upgrading research infrastructure, with half allocated to Historically Black College and Universities (HBCUs) as well as “Minority Serving Institutions” (MSIs)
$10 billion for those HBCUs and MSIs, as well as $15 billion to create over 200 centers at them to serve as research incubators
$35 billion in climate research and development
Manufacturing and labor
$300 billion for American manufacturing and small business
$50 billion for a new office for a new office focused on domestic industry
$50 billion for research and manufacturing for semiconductors
$30 billion to create new jobs and fend off losses during future pandemics
$46 billion for federal buying, with an emphasis on various clean technologies
$20 billion for regional innovation hubs
$14 billion towards increasing competitiveness through technological advances
$52 billion to domestic manufacturers
$31 billion for programs providing credit, R&D funding, and venture capital to small businesses
$5 billion to create a new “Rural Partnership Program,” aimed at supporting local rural efforts
$100 billion for workforce development includes:
$40 billion towards career services and training for workers who have lost jobs
$12 billion in targeted funding towards “workers facing some of the greatest challenges,” prioritizing underserved and hard hit communities, with $5 billion towards “evidence-based community violence prevention programs”
$48 billion towards worker protection and development infrastructure, including an expansion of apprenticeships, with a particular emphasis on women and people of color
The bill would carve out $174 billion for the EV sector, as Biden aims to better equip US companies to compete with China, which has a bigger market share of plug-in electric vehicle sales.
Biden’s plan would help automakers retool their factories, invigorate domestic supply chains for raw materials and parts, and “support American workers to make batteries and EVs,” according to a White House fact sheet on the proposal distributed today.
The infrastructure plan would also give rebates and tax incentives to US consumers that buy American-made EVs, and establish grant-and-incentive programs for local governments and the private sector to build a network of half-a-million EV chargers by 2030.
Electrifying the federal fleet of vehicles, US Postal Service vehicles, and at least 20% of school buses are also priorities of the infrastructure plan.
Shares of Tesla, Fisker, and Lordstown Motors each traded up as much as 4% in Wednesday trades. Shares of Chinese EV companies also moved higher, with shares of Nio, XPeng, and Li Auto up 1%, 5%, and 7%, respectively.
Two Democratic presidents. Two mass unemployment crises. Two federal spending plans to rescue the economy. So how does Biden’s stimulus stack up to Roosevelt’s New Deal? Maybe it’s bigger.
President Joe Biden’s large-scale federal spending has already earned comparisons to the New Deal, but a behavioral economics professor says the plan is setting its own precedent.
“People think of the New Deal as this really, really aggressive response to the Great Depression. But part of the reason the Great Depression lasted so long was that Roosevelt and the country, the political leaders were really concerned about deficits,” Leonard Burman, the Paul Volcker Chair of Behavioral Economics at Syracuse University’s Maxwell School, told Insider.
The New Deal packages yielded some historic measures – like Social Security and modern unemployment insurance (UI) – but didn’t actually bring the Great Depression to an end. Part of the proof of this is that FDR rolled out multiple New Deals, including a so-called Second New Deal, but high unemployment wasn’t really put to bed until wartime mobilization set in.
According to Burman, the New Deal “limited some of the pains by creating jobs for some people that needed them and providing other assistance, but it was way too small.”
Roosevelt’s New Dealers “spent much less than would have been appropriate for the size of the economic downturn at that point,” he said, “and we didn’t really recover until there was a massive infusion of spending in World War Two.”
When you contrast that with Biden’s American Rescue Plan, he said, “we’ve never done this.”
Biden’s big spending looks set to continue. He is due to roll out his next multitrillion-dollar package tomorrow, on infrastructure, which could come in anywhere between $3 trillion and $4 trillion, as The Washington Post reported.
Showing that deficit concerns remain a consideration, the package, which will be split into two parts, will include a large tax hike. However, that may be more to calm the inflation fears that have been roiling the markets since Biden took office, instead of the deficit specifically. The movement in Treasury yields indicates market concerns over future runaway inflation that hasn’t arrived yet and not on indicators of it happening at present.
Burman reiterated that this is something new, and should be useful to economists in the future. “I’m an economist. I like data,” he said. “I mean, this has got to be a new data point, and it will be helpful for us to calibrate future response to future economic downturns.”
The White House did not respond to a request for comment.
President Joe Biden is expected to unveil his massive infrastructure plan on Wednesday, but it could surprise to the upside.
While the plan was initially thought to have a $3 trillion price tag, it could now reportedly cost as much as $4 trillion, and could also include $3.5 trillion in tax hikes.
Last week, The New York Times first reported details of the upcoming infrastructure proposal. In that report, sources familiar with the plan said could cost up to $3 trillion, which was confirmed to Insider. According to documents obtained by the Times, the plan will be split into two separate legislative pieces: One focused on rebuilding infrastructure such as roads and bridges, and another focused on the care economy, with funding for things including universal pre-K and free community college.
But on Monday, three sources familiar with the matter told The Washington Post that the White House is expected to push for as much as $4 trillion in spending on infrastructure and for as much as $3.5 trillion in tax hikes.
The sources said that administration officials worried about the risk that the large gap between spending and revenue would widen the deficit so much could trigger a spike in interest rates, and increasing taxes would help mitigate that.
On Wednesday, Biden is expected to unveil the first legislative piece of the infrastructure plan, which would focus on rebuilding roads and bridges, expand clean energy investments, create infrastructure for electric vehicles, and more. This part of the plan would also include funding for disabled and elderly care.
As for the second part of the plan focused on the care economy, White House Press Secretary Jen Psaki said on Fox News Sunday that it will be released “in just a couple of weeks” and “will address a lot of issues that American people are struggling with.”
“The total package we’re still working out, but he’s [Biden] going to introduce some ways to pay for that, and he’s eager to hear ideas from both parties as well,” Psaki said.
Biden has already shown a historic willingness to go big with recovery packages, a contrast to the stimulus packages enacted during the Obama-era recovery during the Great Recession.
Tax hikes may be on their way – and Republicans don’t like that
As The Washington Post writes, the focus on the deficit could help appease critics who worry about spending – but it also lays out a big challenge for Biden. The White House would need to get Congress on its side to enact its reported tax increases, which “together would represent the largest tax hike in generations.”
Lawmakers have already begun floating a host of ideas to fund the infrastructure package, with tax hikes on the table. Moderate Democratic Sen. Joe Manchin of West Virginia told Axios in the beginning of March that an infrastructure bill could be as large as $4 trillion if it’s funded by tax hikes, but made it clear that he would not support using reconciliation to pass it, as the $1.9 trillion stimulus was.
Biden said during his campaign that he would increase the corporate tax from 21% to 28% – still lower than its 35% rate prior to former President Donald Trump’s tax cuts. He’s also reportedly been looking at adjustments to the stepped-up basis, as well as expanding the capital gains tax. He may also raise income taxes to as high as 39% for Americans making over $400,000 a year.
But Republican lawmakers are unlikely to support tax hikes to fund infrastructure. In fact, some have been pushing for the opposite of Sanders’ proposed increase to an estate tax, instead calling for it to be repealed.
“I don’t think there’s going to be any enthusiasm on our side for a tax increase,” Senate Minority Leader Mitch McConnell told reporters last week.
President Barack Obama and President Joe Biden faced similar circumstances in their first months in office. Both entered the White House in the midst of crippling economic downturns. Both immediately pursued emergency stimulus plans to put the country on track for a recovery. And both spent unprecedented amounts to do so.
But Biden is going bigger, and it could be a very big deal for the future of economic policy.
Biden came out swinging with his $1.9 trillion stimulus package, passed less than two months into his presidency. Beyond its size, scope, and speed, the plan signaled a major deviation from Obama-era logic on spending and working across party lines. The result was a wide-reaching package passed through reconciliation, one that picked up zero Republican votes in both the House and the Senate.
It showed that Biden doesn’t plan to govern like Obama, where the aim was as much bipartisanship as possible and a mindfulness of the size of the federal debt. Biden’s big spending has already evoked comparisons to FDR and LBJ – two presidents Axios reported Biden is very interested in these days – and he may just be getting started. The big question is what comes next.
“The recovery from the Great Recession was long and painful. It exacerbated inequality and other forms of economic scarring,” Claudia Sahm, a former economist at the Federal Reserve, told Insider. “Those experiences are fresh in the minds of policymakers and the public.”
Neither Obama’s office nor the White House responded to requests for comment.
Recover first, pay the bill later
Congress’ recession-recovery playbook has traditionally been fairly simple: offer support where needed, then pull back on aid and turn to austerity once the rebound is on track. Past downturns have seen calls for fiscal support quickly give way to deficit concerns among Republicans and Democrats.
But the record of recoveries from past downturns is informing Biden’s approach. The Federal Reserve’s decision to dampen inflation and start lifting interest rates in 2015 sparked years of weak growth and low inflation. Many economists have since looked back at the rate hikes and the Obama administration’s stimulus package as allowing for a plodding economic rebound.
The very nature of the current slump changed the thinking around fiscal stimulus and paved the way for a new era of government support, said Jason Furman, professor of economics at Harvard University and chair of Obama’s Council of Economic Advisors.
“When there is a big disaster like Katrina or the Gulf oil spill or superstorm Sandy, we’ll spend $100 billion. This was like one of those disasters, but happening everywhere at the same time,” Furman said. “People don’t completely believe in fiscal stimulus. They do believe in disaster relief.”
Congressional Democrats and Federal Reserve officials have been lining up alongside Biden. The rush to austerity in 2009 was a “big mistake” that left the country in recession for five years, Senate Majority Leader Chuck Schumer said in a March interview on CNN.
More recently, Federal Reserve Chair Jerome Powell told NPR that the economic recovery still takes priority over the national debt. While the country’s spending path is currently unsustainable, low rates ensure it can pay off its debt until the economic activity fully rebounds.
The government will eventually have to put the federal debt on a sustainable path, “but that time is not now,” the Fed chair added.
The central bank is still projecting its first rate hike won’t arrive until after 2023, and officials have hinted they aren’t even considering pulling back on the Fed’s emergency asset purchases. Rising Treasury yields suggest investors have different expectations, but policymakers have so far been steadfast in their patience.
“If my 2010 self could see just how different we’re handling this recovery than we handled that one – when we were just pulling our hair out, because Congress was turning towards austerity when the unemployment rate was literally over 9% – it was just an outrageous approach to the recovery at that time,” Heidi Shierholz, director of policy at the left-leaning Economic Policy Institute and former chief economist to Obama’s secretary of Labor, told Insider. “And so this is just incredibly different.”
A lack of state and local spending hindered Obama’s recovery, but Biden is pouring in billions
Economists began to sound the alarm before the second stimulus, emphasizing the urgent need for state and local funding. As Insider’s Ben Winck and Joseph Zeballos-Roig reported at the time, the CARES Act’s $150 billion for local governments ran out on December 30 – and the lack of similar funds in the Great Recession likely slowed the subsequent recovery. That funding was also scrapped in former President Donald Trump’s second stimulus package; as CNN reported.
When it comes to his legacy, Biden is reportedly excited about what’s forming. Axios reported that he recently met with presidential historians to discuss the size and speed of potentially huge changes, with comparisons abounding to Presidents Franklin Delano Roosevelt and Lyndon Baines Johnson, who both spearheaded huge expansions of the social safety net.
“The historians’ views were very much in sync with his own: It is time to go even bigger and faster than anyone expected. If that means chucking the filibuster and bipartisanship, so be it,” Axios’ Mike Allen and Jim VandeHei wrote. In fact, they report, Biden loves the narrative that he’s thinking bigger and bolder than Obama.
He’s even gotten praise from another longtime politician and Senate veteran: Progressive figurehead Bernie Sanders. In an interview with The New York Times’ Ezra Klein, Sanders praised Biden for moving past his more “moderate” past and “acting boldly” with the American Rescue Plan.
Leonard Burman, the Paul Volcker Chair of Behavioral Economics at Syracuse University’s Maxwell School, told Insider that the Great Depression actually lasted as long as it did because Roosevelt and other leaders feared deficits too much.
FDR actually spent less than would have been “appropriate,” Burman said, and recovery really only came with the influx of spending that accompanied World War Two.
“People think of the New Deal as this really, really aggressive response to the Great Depression,” said Burman, who is also cofounder of the Urban Institute’s Tax Policy Center, and he said it limited pain by creating jobs for some people that needed them and providing other assistance, “but it was way too small. So we literally have now – as far as I know – we’ve never done this.”
“We have lots of experience with spending too little to try to get out of a recession. We don’t have any experience with spending too much,” Burman said. “So it’ll be interesting to see what happens.”
The Fed is behind the push for stronger-than-usual price growth. The central bank updated its policy framework in August to target inflation that averages 2% over time, as opposed to the prior goal of simply pursuing 2% inflation.
Officials have since confirmed that, at least for a period after the pandemic, the Fed aims to let inflation trend above 2% to counter years of weak price growth, underscoring just how different the approach is this time around.
The Obama administration “had a hard time” getting some Democratic senators to lift the debt limit and spend roughly $831 billion on the American Recovery and Reinvestment Act, Furman told Insider.
The Biden administration, on the other hand, has had a far easier time uniting Democrats around trillions of dollars worth of relief spending.
“The inflation debate is largely taking place among economists. It’s not a concern that I’ve heard very much from members of Congress,” Furman said. “Biden benefits from people having much more tolerance for larger numbers than they used to.”
Biden and the Fed both want an equitable labor market
Going hand in hand with the Fed’s new inflation target is a goal to pursue “maximum” employment instead of its previous mandate of “full” employment. The updated strategy leans more on using a range of indicators to judge the labor market’s health than focusing on the headline unemployment rate.
Though the central bank acts independently of the White House, the new framework opens the door to economic policy that more aggressively targets a tighter and more equitable labor market.
“There was a time when there was a tight connection between unemployment and inflation. That time is long gone,” Fed Chair Powell said during a March 17 press conference. “We had low unemployment in 2018 and 2019 and the beginning of ’20 without having troubling inflation at all.”
Job gains seen at the end of the last economic expansion largely benefited racial minorities and lower-income Americans, two groups that underperformed the broader unemployment rate for years. Biden’s latest stimulus plan stands to lift demand and pull forward such gains. The millions of jobs still lost to the pandemic indicate there’s plenty of slack in the economy and, therefore, reason to supercharge growth with fiscal support, UBS economists said in a March 9 note.
That slack also supports calls for additional large-scale spending packages. The $3 trillion in new spending is still not enough to get the US economy to the finish line, Sahm told Insider.
“Both the 2001 and 2008 recession were jobless recoveries, in that GDP got back on track much sooner than employment,” she said. “A year into the pandemic, we are still missing 9.5 million jobs relative to pre-pandemic. We cannot afford to have another jobless recovery.”
It’s becoming clear just two months into his presidency that Biden has an endgame in sight: lots of government spending to create a more equitable economy.