Senate Democrats signal they’re ready to ditch GOP on infrastructure as White House turns to new bipartisan group

Chuck Schumer
Senate Majority Leader Chuck Schumer (D-New York).

  • Biden’s talks with Senate Republicans broke down on Tuesday after more than a month.
  • Schumer said Democrats are looking to pass infrastructure spending alone down the road.
  • The White House is turning to a new working group that is eyeing stimulus money to pay for infrastructure.
  • See more stories on Insider’s business page.

Senate Democrats are starting to signal they are prepared to ditch Republicans on infrastructure, as the Biden administration’s talks with the GOP collapsed without a deal after more than a month.

Senate Majority Leader Chuck Schumer said Democrats were preparing to use reconciliation, a tactic to approve certain bills with a simple majority of 51 votes in the Senate.

“We all know as a caucus we will not be able to do all the things that the country needs in a totally bipartisan way,” he said at a weekly news conference. “So at the same time, we are pursuing the pursuit of reconciliation.”

Several hours later, Sen. Shelley Moore Capito of West Virginia, the chief negotiator for Republicans, announced her talks with President Joe Biden broke down after they failed to resolve major differences.

“I spoke with the president this afternoon, and he ended our infrastructure negotiations,” Capito said in a statement, adding she was “disappointed” in the decision.

“Throughout our negotiations, we engaged respectfully, fully, and very candidly – delivering several serious counteroffers that each represented the largest infrastructure investment Republicans have put forth,” she said.

The West Virginia Republican met with Biden twice in the Oval Office since last month, and both sides were unable to strike an agreement after six weeks of back-and-forth discussions. They were never close to bridging differences on the size and scope of a plan, or on how to finance it.

Biden was seeking at least $1 trillion in new spending, a significant cut from the initial $2.3 trillion infrastructure plan he unveiled in August. Capito’s latest offer that the White House dismissed Friday included only $338 billion in fresh spending – a $700 billion gap.

Now, the Biden administration’s attention is likely to turn to another bipartisan working group that includes Sens. Joe Manchin of West Virginia, Mitt Romney of Utah, and Bill Cassidy of Louisiana, and Sen. Rob Portman of Ohio.

Biden also called Cassidy on Tuesday in a fresh sign of the White House’s new efforts to cobble together a new coalition to support an infrastructure plan.

Cassidy told Insider earlier on Tuesday that some of the group’s plan could be financed with money from the $1.9 trillion coronavirus relief law.

“Dollars that have not been used that are still out there – and won’t be used for years – seem like a logical place to go,” he told Insider. The Louisiana Republican also ruled out there being any funding for caregiving in the proposal, saying that goes beyond the scope of infrastructure.

Romney also said the group was eyeing the use of emergency stimulus funds provided to states in their package. “We’ll allow them to use some of the money we’ve sent to them,” he told Insider.

The Biden administration rejected that measure during the negotiations with Capito. Other Democrats urged quick action after the crawling pace of negotiations with Republicans, arguing they barely budged.

“I think we have to move this up as quickly as we can,” Sen. Bernie Sanders told reporters. “I have not seen any indication that Republicans are prepared to support the kind of serious legislation this country needs.”

Sanders said any reconciliation bill would include both of Biden’s infrastructure plans – the $2.3 trillion American Jobs Plan as well as the $1.8 trillion American Families Plan. The first is devoted to upgrading roads and bridges, instituting elder care, and revitalize manufacturing among other measures.

The latter plan aims to set up universal pre-K, tuition-free community college, cash payments for families, and a national paid leave program.

Democratic Sen. Bob Casey of Pennsylvania, said Democrats will still need to pass a second bill through reconciliation, along party lines, even if Democrats can agree with Republicans on a smaller physical infrastructure bill focused on fixing roads, bridges and ports. If they can’t, he said, then Democrats will need to include all they can in a reconciliation package.

Casey is pushing for funding for the infrastructure plan to include Biden’s request for a $400 billion fund that would pay for older adults and people with disabilities to get care at home. He dismissed concerns about high spending.

“Those are big numbers but when you consider what corporations and extraordinarily rich people have taken out of the tax code over 40 years, it’s astronomical,” he said. “Even those numbers we are talking about now are dwarfed by the dollars taken out of the tax code because it was rigged.”

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How Biden’s historically diverse administration plans to improve workforce diversity and economic equity

Biden cabinet
Joe Biden holds the first Cabinet meeting of his presidency on April 1, 2021.

  • President Biden vowed to appoint the most diverse Cabinet in history and fix economic inequities.
  • Financial support for women, communities of color, and low-income American are among the pledges.
  • The president faces an uphill battle to get the plans through Congress amid Republican resistance.
  • See more stories on Insider’s business page.

President Joe Biden promised his Cabinet would be the most diverse in history. Recently released data revealed his progress.

After saying he wanted his administration to “look like America” in December last year, the 78-year-old president has mostly succeeded in his plan to diversify the executive branch, according to an analysis by Insider in February.

As the country tries to emerge from the worst economic crisis since the 1930s, Biden has installed a diverse team to forward his economic and business agenda, which includes tackling entrenched inequities.

Among them, Treasury Secretary Janet Yellen as the first woman to lead the department in its 231-year history, Cecilia Rouse as the first African American to chair of the Council of Economic Advisors, and Pete Buttigieg as the first openly gay cabinet member in his role as transportation secretary.

Last week marked the first 100 days of the Biden administration. We take a look at some of the actions taken since his January inauguration to promote diversity in business, the workplace and support communities disproportionately affected by the Covid-19 pandemic.

Bridge
Biden’s $2 trillion American Jobs Plan aims to rebuild the country’s aging road and bridge network.

A $2 trillion infrastructure plan that targets funding towards underserved neighborhoods

Biden’s proposed $2 trillion infrastructure bill sets out to repair the country’s dilapidated road and bridge network, expand access to high-speed broadband and accelerate the clean energy transition.

The American Jobs Plan targets infrastructure projects towards historically underserved communities. The plan includes proposals to replace lead pipes that disproportionately harm Black children and a $20 billion investment to “reconnect” previously cut-off areas to affordable public transportation systems.

The plan would also build more climate-resilient public infrastructure, with a focus on low-income people and communities of color, who are most vulnerable to the impact of extreme weather events such as flooding.

However, Republicans have opposed the bill, citing its “far-left” priorities and the corporate tax hike Biden has said will finance the plan.

Jennifer Granholm
Energy secretary Jennifer Granholm speaks at Howard University.

Proposed funding to build a diverse clean-energy workforce, with investments targeted towards historically Black colleges

Biden’s administration is pushing for more solar panels to be installed in communities disproportionately affected by pollution, as part of his American Jobs Plan.

The Department of Energy announced on Tuesday that $15.5 million would go into installing solar panels in underserved communities and training a diverse clean-energy workforce.

The DOE also committed $17.3 million to fund internship and research programs, with a focus on training more students of color in STEM fields. More than $5 million will be directed to 11 colleges, including historically Black universities Howard and Florida A&M.

Historically Black colleges have long been denied equal access to federal funding opportunities, DOE secretary Jennifer Granholm said in a roundtable discussion at Howard University on Monday.

“This administration is really committed to making the transition to clean energy an inclusive transition, offering benefits to every community,” Granholm said.

Working mom
Biden’s American Families Plan aims to support working mothers.

A plan to introduce 12 weeks of paid family leave – and Biden hopes it will encourage women to stay in the workforce

Biden has introduced a $1.8 trillion American Families Plan – made up of a mix of investments and tax cuts – that would create a national paid family and medical leave program.

The plan is estimated to cost $225 billion over 10 years.

The Biden administration hopes that introducing 12-weeks of paid family leave will help mothers to keep working, reduce racial disparities in lost wages, and improve children’s health.

Biden’s plan also commits to providing support for low- and middle-income families to access childcare, ensuring this does not account for more than 7% of their income, and investing in the childcare workforce.

Childcare workers are among the most underpaid in the US and more than nine in ten jobs are held by women, and more than four in ten by women of color.

D&I training
Biden reversed a decision by former President Trump to ban federal workplace diversity training.

An overturn of Trump’s ban on federal workplace diversity and inclusion training

One of Biden’s first actions as president was to revoke the workplace diversity training ban, signed by former President Trump, across federal agencies and their contractors.

Biden issued an executive order on his first day in office, which overturned Trump’s ban on diversity and inclusion training that taught critical race theory and involved discussions on institutional racism.

The new order instead advances a “whole-of-government” approach to addressing racial inequities, and asks federal agencies to consider whether their policies and programs create barriers for underserved communities to access their benefits and services.

Takeout delivery
Biden has extended unemployment insurance for gig workers.

Targeted Covid-19 relief, including protections for those in insecure work

The landmark $1.9 trillion stimulus package includes funding commitments to help communities that have been disproportionately affected by the pandemic.

In the law, signed in March, $5 billion is provided to farmers of color to invest in their business, buy equipment and repay loans.

“This is a big deal for us,” John Boyd, Jr., president of the National Black Farmers Association, told CBS. “We see this as a great opportunity to help thousands.”

In the package, unemployment insurance for self-employed and gig workers, such as ride-share and takeout delivery drivers, has been extended until September.

In announcing the plan, Biden called on businesses to provide back hazard pay to frontline workers – who are disproportionately Black, Latino and Asian American and Pacific Islander – in retail and grocery sectors. It was employers’ “duty,” the proposal stated, to compensate workers who had risked their lives to keep businesses running.

Biden still faces a challenging road ahead

The president’s administration has taken bold and swift action in its first 100 days, even winning praise from more left-leaning members of his own party. But the impact of Biden’s policies will only be felt in the coming months and years.

Biden still faces an uphill battle to get his Jobs Plan and Families Plan through Congress in the face of Republican opposition and with a razor-thin majority.

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Top House Democrat unveils plan to establish universal paid family and medical leave programs

Richard Neal
Rep. Richard Neal, D-Mass., speaks at a news conference on Capitol Hill in Washington, Friday, July 24, 2020, on the extension of federal unemployment benefits.

  • Top House Democrat Richard Neal introduced a plan for universal paid sick and medical leave on Tuesday.
  • The typical worker would get around two-thirds of their past wages replaced.
  • Progressives are urging Biden to prioritize paid leave programs as part of his latest economic plan.
  • See more stories on Insider’s business page.

Rep. Richard Neal of Massachusetts, chair of the House Ways and Means Committee, introduced a plan for universal paid sick and medical leave on Tuesday.

The proposal would set up 12 weeks of paid family and medical leave for every worker in the US, calculating benefits based on average monthly earnings. The typical worker would get two-thirds of their wages replaced, though it covers up 85% of a worker’s earnings below $1,257. Higher-paid workers are set at lower wage replacement rates.

“For our economy to fully recover from this pandemic, we must finally acknowledge that workers have families, and caregiving responsibilities are real,” Neal said in a statement to Insider. “By acting on this plan, we will rebuild our society to be better and stronger than ever before.”

It would take effect at the start of 2023, an apparent recognition of the difficulties of setting up a robust paid leave initiative. Benefits would be distributed through employers, the Treasury Department, and state paid leave programs. It also makes permanent a monthly check program for parents, a top Democratic priority.

Currently, the US stands alone among developed nations for not federally mandating a paid sick leave program. Such a measure was scrapped as part of President Joe Biden’s stimulus. A vast collection of progressive groups as well as 17 state treasurers are now urging Biden, along with Congress, to approve comprehensive leave programs.

The pandemic underscored the lack of affordable childcare as rising costs collided with the shuttering of daycare centers, disproportionately impacting women and compelling many to quit their jobs.

A recent report from the National Women’s Law Center and the Center on Poverty and Social Policy at Columbia University said 2.3 million women dropped out of the workforce due to the crisis, compared to 1.8 million men.

Neal’s measure comes as Biden prepares to unveil the second part of his infrastructure plan, largely directed at ratcheting up government spending on families as a product of childcare and education initiatives. The Washington Post reported it will contain $225 billion for child care funding and $200 billion to establish universal Pre-K.

The latest proposal will be funded with tax increases on the wealthiest Americans, including a new capital gains tax on the top 0.3%.

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Why at least 300,000 people in 33 states are losing unemployment benefits earlier than expected

Unemployment filing coronavirus
  • A key tool to provide jobless aid to long-term unemployed people is broken in 33 states, per a new report.
  • The shut-off is affecting at least 300,000 people in at least 33 states, researchers say.
  • The study said unemployment benefits for some claimants could turn off in New York and California.
  • See more stories on Insider’s business page.

A policy instrument designed as a buffer for unemployed Americans is broken in 33 states, according to a new report released Tuesday from the California Policy Lab.

The Extended Benefits program is meant to provide jobless aid to people who exhausted regular benefits in high-unemployment states. Earlier federal rescue packages that Congress approved lengthened the eligibility period for people to get the assistance.

But it appears the program is shutting off because it’s not counting long-term unemployed people collecting emergency federal stimulus aid in a measurement used to gauge the share of the workforce claiming unemployment benefits.

“It’s as if the Titanic had stopped loading the lifeboats because some people had already gotten off of the ship,” TJ Hedin, a co-author of the study, tweeted on Tuesday.

“If these triggers were updated to count all people receiving unemployment benefits, then it would mean benefits would be available to impacted workers for longer durations, which seems sensible during times of extended job losses like the pandemic,” Alex Bell, another co-author of the study, said in a statement.

“Unfortunately, in state after state we see that the counter-intuitive design of the program’s trigger system is causing the exact opposite to happen,” he said.

Some states such as Alabama, Maryland, Ohio, South Carolina and Virginia have experienced an early shut-off of the EB program, impacting around 20% to 30% of jobless claimants.

Researchers warned some people’s benefits could be yanked in California, New York, Massachusetts, Nevada, and New Mexico over the coming weeks. These states have over 30% of claimants receiving aid under the program, the report said.

A $300 weekly federal unemployment benefit is in place until September 6, a key part of President Joe Biden’s recent stimulus law. Unemployment claims last week dropped to a new pandemic-era low, as 576,000 people filed for benefits.

Some Congressional Democrats are pressing to overhaul the nation’s battered unemployment system. Sens. Ron Wyden and Michael Bennet unveiled a plan last week to beef-up state unemployment checks and penalize states who stray from new benefit standards.

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Senate Republicans are drafting their own infrastructure plan and want to tax people for it, not corporations

Mitt Romney
Sen. Mitt Romney (R-UT).

  • Republicans are starting to draft an infrastructure plan in a bid to strike a deal with Biden.
  • It may shift the financial burden of the plan onto people instead of large corporations.
  • The plan could come in at less than half of the $2.3 trillion proposal laid out by the White House.
  • See more stories on Insider’s business page.

A group of Senate Republicans is assembling an infrastructure plan, part of a bid to strike a deal with President Joe Biden on a package that’s more narrowly targeted in scope.

The Republican faction appears to consist of the same 10 GOP senators who pitched Biden a $618 billion stimulus package in early February. Those negotiations didn’t yield a breakthrough, as the Democrats passed a $1.9 trillion stimulus without any Republican votes.

These infrastructure proposals are shaping up to be similar, as the Republican group is preparing to unveil an infrastructure bill likely worth $600 billion to $800 billion, much smaller than Biden’s $2.3 trillion plan.

The bloc includes Sens. Mitt Romney of Utah, Bill Cassidy of Louisiana, and Shelley Moore Capito of West Virginia.

Here are some emerging outlines of the plan, based on comments from those Republican lawmakers:

  • $600 billion to $800 billion price tag.
  • Focused on roads, bridges, highways, airports, water and broadband.
  • May double the spending on roads and bridges from Biden plan ($115 billion).
  • Financed with “user-fees” such as a tax on vehicle-miles traveled.
  • No corporate tax hikes.

Romney said told reporters the plan remained in its “early stages,” an indication many details still need to be hashed out. Yet the developments could lead to weeks of negotiations between the Republican-led group and the White House on a smaller infrastructure plan.

Capito on Wednesday said “a sweet spot” for an bipartisan infrastructure deal would range between $600 billion to $800 billion – less than half of the $2.3 trillion package Biden laid out.

“What I’d like to do is get back to what I consider the regular definition of infrastructure in terms of job creation. So that’s roads, bridges, ports, airports, including broadband into that, water infrastructure,” she told CNBC.

‘The people who are using it’ should pay for infrastructure

Other Republicans say they would back shifting the cost of the package from large companies onto the “users” who benefit from government spending. Many are strongly opposed to reversing the Trump tax law to pay for an infrastructure overhaul.

“My own view is that the pay-for ought to come from people who are using it. So if its an airport, the people who are flying,” Romney told reporters. “If it’s a port, the people who are shipping into the port; if it’s a rail system, the people who are using the rails; If it’s highways, it ought to be gas if it’s a gasoline powered vehicle.”

Romney also said he supports implementing a mileage fee on drivers of electric vehicles. Then Capito suggested redirecting unused stimulus money to pay for an infrastructure plan among other measures.

“We’re going to look at Vehicle Miles Traveled as a possibility when you look at fleets or when you look at electric vehicles. We’re going to look at assessing electric vehicles for road usage even though they don’t pay into the gas tax,” she said.

Meanwhile, Cassidy is pushing for an even bigger federal commitment to repair roads and bridges.

“Something I would like to see is double the money for roads and bridges,” he said Wednesday, adding he was in talks on a plan alongside Gov. Larry Hogan of Maryland, the head of the National Governors Association.

News of the Republican plan triggered some early criticism from Sen. Bernie Sanders, who heads the Senate Budget Committee.

“We have a major crisis in terms of roads, bridges, water systems, affordable housing, you name it. [The GOP price tag] is nowhere near what we need,” he told reporters on Wednesday.

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A single GOP senator blocked a bill that would stop private debt collectors seizing stimulus checks

pat toomey gamestop
Sen. Pat Toomey, R-Pa.

  • GOP Sen. Pat Toomey blocked a bill meant to stop debt collectors seizing stimulus checks.
  • Democrats had hoped to pass the measure to maximize the help people would get.
  • But Toomey intervened, saying debt collectors had the right to claim cash owed.
  • See more stories on Insider’s business page.

Republican Sen. Pat Toomey on Thursday blocked a bill meant to bar private debt collectors from seizing checks issued as part of the recent stimulus bill.

The law that Toomey opposes had been proposed by Democratic senators Ron Wyden and Sherrod Brown.

Such a measure was included in the December stimulus package passed under President Donald Trump, which provided $600 checks.

However, it was not included in the latest stimulus bill passed under President Joe Biden, which provided $1,400 checks to most Americans.

Democrats still supported the proposal, but had to leave it out because of the rules of the Senate mechanism known as “budget reconciliation” which was used to pass the latest stimulus.

That mechanism let Democrats pass the bill without any GOP votes, but comes with limits on what is allowed. The same rules led to proposals for a $15 federal minimum wage being dropped.

Democrats tried to introduce the rule in separate legislation, arguing that the cash is meant to help struggling Americans rather than debt collection agencies.

Wyden and Brown proposed the measure under a unanimous consent rule, which allows bills to pass quickly and bypass some lengthy Senate procedures.

However, any single senator can block such a proposal, which Toomey chose to do.

Toomey argued that Democrats were to blame for the rule not being in the recent relief bill, because they chose not to involve Republicans in putting it together.

He said that debt collectors had “valid legal claims” against people who “owe money to someone else and that someone else has gone to court, and it’s been adjudicated.”

The senator also said that, with 90 million relief checks already issued, it was too late to seek the amendment.

The process of the relief check money being seized by creditors is known as “garnishment.”

“These payments have already gone out the door,” Toomey said. “The garnishment happens automatically. It’s already happened!”

Toomey’s objection means it is likely that many other relief checks will be seized by debt collectors.

In comments to the Huffington Post, Brown said “we will keep trying” to get the measure passed. Senators can still try to pass it without unanimous consent, which would take longer and would also require some Republican support to evade filibuster rules.

“Families are hanging on by a thread, but Senate Republicans blocked protections against their relief payments from being seized to pay credit card and medical debt. It’s shameful,” said Wyden in a statement Thursday.

It is unclear if there is wide backing in the Senate GOP for Toomey’s objection to the measure. Republicans have supported the measure before but may not in future.

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A former Obama economic advisor says inflation warnings about the new stimulus bill are ‘absurd’ – here’s why

People Shopping covid NYC
People shopping at an outdoor market in New York City in December 2020.

  • Paul Constant is a writer at Civic Ventures and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, Hanauer and Goldstein spoke with economist Austan Goolsbee on whether or not government stimulus spending could cause hyperinflation.
  • Goolsbee says that hyperinflation is highly unlikely and that the stimulus package should be seen instead as disaster relief money.
  • See more stories on Insider’s business page.

Every time an elected leader proposes a progressive policy that will cost money – expanding health care, for instance, or the wildly popular American Rescue Plan that the Biden White House is championing to combat the economic damage caused by the coronavirus pandemic – the inflation hawks loudly warn that another Great Inflation is on the way.

To anyone below the age of 50, “inflation” sounds like a kind of boogeyman, a campfire ghost story used to warn against government spending.

I’ve never personally encountered hyperinflation in my life – I was born in 1976 – but the word triggers nightmares for those in my parents’ generation. During The Great Inflation, which spanned the years between 1975 and 1982, prices skyrocketed out of control in grocery stores and gas stations around the country, surpassing wage growth by a huge margin and putting everyday necessities out of reach for many.

The fear-mongering of hyperinflation

After nearly four decades without an inflation crisis, is hyperinflation still a danger? Could a $1.9 billion COVID relief bill set off a spate of higher prices around the United States? This week on “Pitchfork Economics,” hosts Nick Hanauer and David Goldstein ask Austan Goolsbee, who served as chair of President Obama’s Council of Economic Advisers and is now a professor of economics at the University of Chicago, whether too much government spending could result in a $10 gallon of milk.

“I consider much of the inflation-mongering to be absurd,” Goolsbee said, adding that rank partisanship is fueling most of the loudest claims. “90% of the inflation-mongering comes from the same people who deficit-hawk when Democrats are in office, but were absolutely for increasing the deficit when Donald Trump was president.”

That said, the return of hyperinflation is always within the realm of the possible. Serious economists do warn that too much government spending might increase the output gap, which Goolsbee explained as “the difference between what we think is the potential is for the economy, and what the actual economy is.”

In other words, if the government starts pumping more money into the economy than the economy is actually worth, the actual value of the American dollar begins to lose coherence, throwing the prices of imports and exports out of whack and potentially driving the cost of goods up.

“In a normal stimulus environment, you’re trying to fill the output gap to get us back to where we were in unemployment and output and wages,” Goolsbee explained.

Because the stock market has largely done very well, and because the wealthiest Americans have amassed over a trillion dollars in additional wealth since the beginning of the pandemic, some economists don’t believe the current economic crisis is big enough to warrant spending.

Stimulus versus disaster relief

Goolsbee believes it’s a mistake to consider the American Rescue Plan to be a stimulus package in the first place. Unlike Obama’s stimulus package, he explained, the plan that the Biden administration is pushing “isn’t about trying to generate a big multiplier on government spending to raise the GDP, the way normal stimulus is. This is absolutely disaster relief money, in which you’re trying to prevent permanent damage.”

This spending isn’t trying to offset generalized harm to the American economy as a whole. Instead it’s counteracting the specific financial harm absorbed by the American people as they followed public health protocols to stop the spread of coronavirus. The money in the American Rescue Plan will go directly toward keeping small businesses open, keeping Americans housed without ruining their credit ratings, and feeding American families who have lost one or both sources of income.

Say the government gives someone $1,000 to make a rent payment that she otherwise wouldn’t have been able to make, preventing her eviction. That’s a very different kind of government spending than, say, propping up the GDP through high-level stimulus spending on financial institutions. It avoids the negative impact on the economy that a wave of mass evictions would represent, and that rent money is immediately recirculated through the economy in the form of consumer spending.

A calculated risk

Goolsbee points to recent economic analysis of the American Rescue Plan, which projects that the output gap would probably grow by about 1% by the end of 2022 – an amount lower than the output gap after both President Trump’s $2 trillion corporate tax cuts and the dot com bust of the George W. Bush Administration.

“We’ve had three times in the last 30 years where we were, for an extended period, running hotter than what [the economy under the American Rescue Plan] would run, without inflation,” Goolsbee said.

But what if, for one time in four decades, the inflation hawks are right and prices do start to rise?

“We as societies, as economies, have a lot of tools for fighting inflation,” Goolsbee said, “and we have virtually no tools for fighting deflation.”

It’s better for our leaders to risk a little bit of inflation that they can then alleviate through higher interest rates and other economic mechanisms, because that price would be nothing compared to what we would all pay if the economy tanks because too many businesses close, too many Americans lose their homes, and consumer spending plummets.

“But that said,” Goolsbee said, “I think the case for inflation is a lot smaller than they say.”

Read the original article on Business Insider

Millennials need a lot more than a $1.9 stimulus package to heal their economic wounds

millennial
The stimulus will help millennials, but they also need longer-term solutions.

Are financially burdened millennials finally seeing the light at the end of the tunnel?

The House of Representatives passed the $1.9 trillion stimulus package on Wednesday, and President Joe Biden just signed it into law.

Designed to boost the economy during the worst crisis seen in generations, the law provides everything from additional funding for small businesses and vaccine distribution to housing and rental benefits, and a pot of money for state and local governments. An early analysis of the rescue plan indicates the vast majority of its benefits are squarely directed at middle and low-income households.

But it also has the potential to be a stepping stone that millennials need to help climb their way out of the affordability crisis they’ve been facing for most of their adulthoods, marked by two recessions before the age of 40.

Beefing up unemployment benefits to $300 a week will help many Americans, but especially the younger workers who have been hardest hit in terms of income loss during the pandemic. The older cohort of millennials in prime child-rearing years stand to benefit from a beefed-up child tax credit that will put up to $3,600 in the pockets of parents. And $1,400 checks will help cover the things millennials struggle with most: living costs like rent and debt.

While critics say the final American Rescue Plan is missing some key initiatives like a federal minimum wage hike and student-loan debt relief, it has overall received widespread support. A new Morning Consult poll found that 75% of voters support the package, including 59% of Republicans.

While it’s a good start, millennials need more to heal their economic wounds; they need solutions to restructure the broken economy they inherited.

Millennials have been facing an affordability crisis

Millennials are a generation of optimistic, hard-working people who have been dealt a bad hand, according to Jill Filipovic, author of “OK Boomer, Let’s Talk,” which explores how boomers created an economic crisis that will leave millennials the first generation worse off than their parents.

“None of this was an accident,” she told Insider back in August. “If we understand where millennials are and how we got here, we can have a better idea of how to fix things going forward.”

The oldest millennials came limping out of the Great Recession with crippled finances, and they were still dealing with its lingering effects a dozen years later, when the coronavirus recession hit.

The financial crisis left the oldest millennials with wealth levels 34% below where they would be if it didn’t occur, and it could have led to stagnant wages for the generation up to 15 years after graduation. Coupled with student-loan debt, soaring costs for things like houses and health care, and now, income loss due to the pandemic, it’s been a grim wealth-building journey.

millennial job loss
Many millennials have struggled with everything from rent to student-loan debt.

But these aren’t the only economic forces behind millennials’ economic plight.

A November Deutsche Bank Research report stated that younger generations have been hit hard while older generations have reaped benefits from the economy. Boomers, it said, saw an increased value in assets thanks to low interest rates and inflated housing prices. They didn’t have to pay as much for education as millennials have, nor will they face the cost for environmental damage caused by the carbon emission-releasing companies in which they’ve invested.

Boomers have been questioned by authors like Filipovic and news outlets ranging from Vox to the Guardian for their role in bankrupting the rich economy they inherited, leaving millennials to pick up the pieces. And they’re not actively setting up a framework to fix this.

Neil Howe, the economist, historian, and demographer who coined the term “millennial,” told Insider that boomers refuse to pay for institutional upkeep, preferring to spend money on things that change people’s lives now. He said this is a result of their coming-of-age experience, in which their parents, the GI generation, cared about building strong institutions and looking into the future. Boomers took that for granted and developed a “live-for-today attitude,” he said.

Consider when boomers entered the same life stage millennials are in now, in the 1980s. They supported the increasing financialization of the economy and a massive reduction of taxes, causing financial asset speculation to become both disconnected from and controlling of the real economy, Kurt Andersen, author of “Evil Geniuses: The Unmaking of America,” told Insider in February.

Millennials need a game plan and room at the table

Biden promised to “go big” on a stimulus package, and he delivered with a progressive historic bill that some have likened to FDR’s “New Deal” agenda of the 1930s. As Insider’s Juliana Kaplan wrote, it has the potential to inject the government into American life in unprecedented ways, while Insider’s Ben Winck reported that’s part of $5 trillion in stimulus going back to the early days of the pandemic during the Trump administration.

Putting cash in pockets and fattening unemployment benefits will inevitably be a leg up for many millennials suffering from economic hardships. But it needs to be followed up with longer-term action.

“Millennials would like to see a real game plan,” Howe said, adding that they ideally want to see society move in a more constructive way that ensures their future. The older generation, he said, is more focused on getting through the next six months than investing in a structural solution for the future.

Joe Biden
Biden needs to follow up the stimulus package with long-term action.

Take the question of student-loan debt, for example. Biden has advocated for canceling up to $10,000 of it while resisting the more progressive agenda to cancel up to $50,000. Biden claims he lacks the legal authority to do it.

Sen. Elizabeth Warren disagrees, and she was a cosponsor of a tax exemption in the stimulus on student-loan forgiveness through 2025. She argues it sets the stage for student loan forgiveness. While this would wipe out debt for 15.3 million Americans, it doesn’t solve the problem of the rising cost of tuition that leads to such massive student-debt burdens.

But millennials are by and large waiting for a political class from another generation to make these decisions.

Boomers have held tremendous political, cultural, and economic power for the past several decades, Filipovic said. “What millennials need is not just boomers imparting their wisdom and experience, but really making room at the table for us,” she added.

While the number of millennials in Congress rose slightly this year by 1%, they still only make up 7% of Congress with 31 out of 532 voting members, per the Pew Research Center.

“Unless millennials are at the table, we’re really not going to see the issues that are most important to us addressed,” Filipovic said. “You need people who are actually going to live in the future, who have a stake in the future, at the decision making table.”

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Biden’s $1.9 trillion stimulus could drastically cut poverty, studies say

Joe Biden
President Joe Biden.

  • Biden’s $1.9 trillion stimulus passed the House again today, and is set to be signed into law this week.
  • The legislation could play an enormous role in reducing poverty rates, especially for children.
  • Two separate studies found it could reduce poverty rates by a third, but only over the next year.
  • See more stories on Insider’s business page.

President Joe Biden’s historic $1.9 trillion stimulus relief package just passed the House, and is set to be signed into law this week.

The bill will allocate billions towards Americans, providing relief for unemployed workers, parents, and millions more. Many taxpayers are set to receive $1,400 stimulus checks, and parents could receive up to $3,600 per child under the child tax credit.

One area where the stimulus will be acutely felt: poverty rates. Two different studies anticipate that the legislation will have a dramatic effect, projecting that millions of Americans will no longer be living in poverty in 2021. The bill, passed via reconciliation along party lines in both the House and Senate, includes measures that will expire in 2022, meaning that it’s an open question what happens to poverty rates at that point.

A study out of the Center on Poverty & Social Policy at Columbia University found that the package could nearly halve child poverty, and would more than halve the rate for Black and Hispanic children. Broadly, that study projects that the annual poverty rate would fall from 12.3% to 8.2% – meaning it would drop by a third.

Meanwhile, a study from the Urban Institute finds the plan would cut poverty by over a third. That study projects that the annual poverty rate would shrink from 13.7% to 8.7%, with 16 million fewer Americans living in poverty in 2021.

This will also impact some of those who have been hardest hit by the pandemic. Poverty rates will drop by half for those in households who experienced job losses during the pandemic, compared to a nearly one-third drop for households who did not lose jobs during the pandemic. As Insider’s Ben Winck previously reported, low-wage, minority workers were the hardest hit by pandemic unemployment.

The share of Americans in deep poverty – defined as those with resources that are less than half of the poverty threshold – would also drop by a third.

The legislation will help address some racial disparities. Historically, poverty rates have been higher for Black and Hispanic Americans. With the American Rescue Plan, it would fall 42% for Black Americans, 39% for Hispanic Americans and 34% for white Americans.

Those drops aren’t unexpected. Throughout America’s pandemic year, poverty has fallen with each new stimulus package and increased unemployment benefits, according to research from economists at University of Chicago, University of Notre Dame, and Zhejiang University.

In a statement on the bill’s passage, Biden highlighted how it will reduce child poverty, and added: “This legislation is about giving the backbone of this nation – the essential workers, the working people who built this country, the people who keep this country going – a fighting chance.”

There is that one catch, though: What happens to poverty rates after the stimulus money runs out?

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The $5 trillion in pandemic-era stimulus is more than triple Great Recession-era aid – and suggests a permanent shift in the way Congress spends

Biden stimulus
  • Passage of President Biden’s stimulus plan brings the total pandemic-relief bill to $5 trillion.
  • The relief packages handily surpass past measures and mark a turning point for how Congress spends.
  • Americans largely back the new approach, with 66% supporting Biden’s measure in a recent poll.
  • Visit the Business section of Insider for more stories.

The amount of fiscal stimulus used to keep the US economy afloat over the past year blows past packages out of the water. But Americans don’t seem all that worried. In fact, one could say they’re getting used to it.

House Democrats passed President Joe Biden’s $1.9 trillion relief package on Wednesday, sending the bill to the Resolute desk for a final signature. The plan’s approval brings the sum of federal aid passed during the pandemic to roughly $5 trillion, a level practically unimaginable just 10 years ago.

All three stimulus packages passed during the pandemic have each handily surpassed the largest relief measure approved during the financial crisis. When compared to even older aid measures, the pandemic-era bills are gargantuan.

The scope of the virus’s economic fallout is just one reason for the packages’ hefty price tags. Others have critiqued past plans as inadequate and urged Congress to err on the side of overspending.

Yet even adjusting for inflation, the deals passed by President Biden and President Donald Trump exist in a league of their own. And despite the swelling price tags, several recent polls suggest Americans are largely on board.

Bridging the last crisis

For comparison, stimulus passed by President George W. Bush at the start of the financial crisis totaled just $152 billion. The Troubled Asset Relief Program created soon after allocated $700 billion for buying up banks’ toxic assets. Yet only $426 billion was invested through the program.

President Barack Obama’s first major legislative accomplishment came in February 2009 when he signed the American Recovery and Reinvestment Act into law. The stimulus plan included some $831 billion in aid spread across tax cuts, expanded unemployment benefits, education funding, and aid for state and local governments.

The Obama administration at one point aimed to pass a $1 trillion bill but gave up on such plans after considering how difficult it would be to market the legislation to more moderate lawmakers, according to the former president’s memoir. Still, the approved bill was then the largest-ever stimulus package by a large margin.

But stimulus measures aren’t the only laws to boast increasingly massive price tags. The Tax Cut and Jobs Act signed by Trump in 2017 is estimated to raise the federal deficit by $1.9 trillion from 2018 to 2028, according to the nonpartisan Congressional Budget Office.

The bill included the largest ever cut to the corporate tax rate. Still, analysis by the Committee for a Responsible Budget pegs it as the eighth-largest in US history when measured as a proportion of the country’s gross domestic product.

Looking further back, it’s clear that Washington has grown more comfortable with spending swaths of cash in response to crises. Just weeks after the 9/11 terrorist attacks froze the travel industry, Congress passed a measure to extend $15 billion in relief to struggling airlines. That sum amounts to roughly $22.2 billion when adjusted for inflation.

Even New Deal policies enacted throughout the 1930s pale in comparison to the COVID-19 rescue packages. The collection of programs and laws is estimated to have cost $41.7 billion at the time, according to a 2015 study by economists Price Fishback and Valentina Kachanovskaya. That equates to about $789 billion in today’s dollars, less than Obama’s stimulus package and roughly 40% the size of Biden’s plan.

Pay now, worry later

Passage of the third major pandemic-relief bill marks a turning point in how Congress spends, but Americans are generally for the change. Two-thirds of Americans back Biden’s plan while just 25% oppose it, according to a late February poll conducted by The Economist and YouGov. That’s makes it more popular than Obama’s stimulus bill, the 2008 TARP plan, and Trump’s 2017 tax cut.

Studies of the $2.2 trillion CARES Act passed in March 2020 suggest the main tenets of the package – $1,400 direct payments and expanded unemployment benefits – will quickly lift consumer spending and accelerate growth. Americans receiving checks from the first stimulus measure immediately raised spending by $604 on average, according to research from the Federal Reserve Bank of Chicago.

Americans living paycheck-to-paycheck spent 62% of their stimulus payment in just two weeks. That compares to 35% for Americans who save most of their monthly income, the Fed researchers said. The data signals that targeting lower- and middle-income Americans with additional aid is the most efficient way to spur growth.

Wall Street is also optimistic Biden’s bill can supercharge the climb to pre-pandemic strength. Morgan Stanley and UBS lifted their growth forecasts this week, citing the plan and its size for their rosier outlooks. The plan’s passage and fast-acting effects on spending can bring US GDP to levels seen before the pandemic by the end of the month, economists at Morgan Stanley said.

To be sure, the unprecedented amount of federal spending has racked up a similarly historic bill. Federal debt was expected to reach 102% of GDP this year even before Biden’s plan was approved, the CBO said last month. The office also pegged the pre-stimulus budget deficit at $2.3 trillion, meaning the bill’s passage stands to lift the shortfall to its largest level ever.

Yet officials at the Fed aren’t immediately concerned with paying for the trillions of dollars in aid. The central bank has signaled it plans to hold interest rates near zero through 2023, ensuring that the cost the US pays to service its debt won’t rise to dangerous levels.

Chair Jerome Powell reiterated to lawmakers in February that, although the debt can’t remain at such elevated levels, Congress’s focus should remain on reviving the economy.

“I think that we will need to get back on a sustainable fiscal path,” Powell said while testifying to the Senate Banking Committee. “That’s going to need to happen, but it doesn’t have to happen now.”

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