Among the many factors driving the surge in companies going public, from traditional IPOs to SPACs, is the heady valuation of the stock market due in large part to the flush of stimulus packages passed during the pandemic and the Federal Reserve’s low interest rate policies.
“Five-hundred million used to be a pretty big IPO,” Jeff Bunzel, global co-head of equity capital markets at Deutsche Bank told Reuters. “Nowadays everything seems to be in the billions or three-quarters of a billion-plus. So there’s really been an explosion in the size of transactions as well.”
By the end of 2021, US IPOs could potentially raise a staggering $250 billion-$300 billion or more, data from Dealogic showed.
Meanwhile, SPACs, a popular route to public markets used by many startups, have boomed as well.
In 2020, a total of 248 SPACs raised $83.3 billion according to SPAC Analytics. But 2021 data already shows 340 SPACs have raised $106 billion just six months into the year.
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.
American billionaires have earned so much money during the pandemic that they could fund two-thirds of President Joe Biden’s COVID-19 relief package using profits generated in the last year, a report shows.
The combined fortune of American billionaires rose around $1.3 trillion, or 44%, from March 2020 to March 2021, Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS) said.
The total jump in wealth for Amazon CEO Jeff Bezos, Tesla CEO, Elon Musk, and Facebook CEO Mark Zuckerberg during the pandemic would fund almost all of the relief plan’s supplemental $300 weekly unemployment benefits for the next six months, the groups said.
The groups based their analysis on Forbes data.
As of Wednesday, the US’ 657 billionaires were worth a combined $4.2 trillion, the ATF and IPS said. Under current tax laws, none of this would be taxed during their lifetimes, unless the underlying assets are sold at a gain, they said.
Argentina became the first country to respond to the pandemic with a one-off “millionaire tax.” Fewer than one in 100 earners will pay the tax, which the government hopes will raise $3.78 billion to help pay for its pandemic response.
“The relief package will ease some of the suffering, but it is temporary,” Chuck Collins, director of the Program on Inequality at IPS, said. “We also need to permanently address the underlying economic conditions that the pandemic exposed.”
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.
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.
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.
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.”
The recently signed$1.9 trillion stimulus may have just solved the issue, pumping billions of dollars into not just New York but state and local governments across the country; it spends $350 billion on state and local governments, to be exact.
The package targets areas that saw higher levels of unemployment over the last three months of 2020. According to a Fitch report, it will significantly boost near-term revenues for states, local governments, transit systems and education providers.
According to Fitch, $195.3 billion will be allocated to the states and the District of Columbia; $25.5 billion of that is divided up evenly, and the rest is allocated based on unemployment numbers. That means the states of New York, California, Texas, and Florida are all set to receive more than $10 billion each. In addition, local governments are set to receive $130.2 billion, with $45.6 billion allocated for cities.
A Bank of America Research note said New York state will receive $12.7 billion, its local governments will get $10.6 billion, and New York City will get $5.6 billion.
Tribal governments are set to get $20 billion in direct aid, as well as $11 billion more for other programs including healthcare, housing, and education. It’s the government’s largest-ever investment in Native communities, according to the Senate Committee on Indian Affairs.
Relief for a financially ailing New York
Last year, New York Gov. Andrew Cuomo demanded $15 billion in federal aid. As the Associated Press reports, Cuomo said he would pursue some form of legal action if the aid wasn’t sent, while warning that that New York’s highest earners would face the country’s highest income tax if the White House didn’t step in with aid.
In his preliminary budget for fiscal year 2022, Mayor Bill de Blasio said the city had seen a $1.5 billion decline in revenue and property tax revenue fall by $2.5 billion – the largest drop since 1996.
Per BofA, sales tax collections in New York City were down 6% year-over-year in January, but there’s been an almost 22% overall year-over-year drop in collections since March, a sharp contrast with other areas of the state seeing an increase in collections.
Beyond these declining revenues, de Blasio said the city had spent $5.9 billion on “COVID-19 related expenses,” with $1.3 billion not covered by federal reimbursement at the time. He added that the state’s proposed budget cuts of $8 billion could mean $4 billion in cuts for the city.
“With direct local aid, New York City can be made whole again,” de Blasio said.
Economists have previously warned about the dangers of not including state and local aid in the stimulus packages of 2020 and 2021. As Insider’s Ben Winck and Joseph Zeballos-Roig reported, a lack of state and local aid after the Great Recession slowed growth for years afterward – plaguing Barack Obama’s presidency and economic recovery with state cutbacks. Economists feared it could happen again this decade if that aid wasn’t included in future packages.
In February, every elected Democratic state treasurer called on the federal government to include the $350 billion in state and local aid in the stimulus.
“We are cutting costs, whether it’s at the state or local level,” Wisconsin state treasurer Sarah Godlewski previously told Insider. “We are being scrappy, and figuring out how we can reallocate resources in ways that we’ve never imagined before.”
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?
The historic $1.9 trillion American Rescue Plan just passed the House of Representatives for a second time, sending it to President Joe Biden’s desk to be made law as soon as this week.
The package is the first major legislation of Biden’s presidency – and it enjoys widespread support. A new Morning Consult poll found that 75% of voters support the package, including 59% of Republicans. In fact, poll after poll has shown the popularity of going big with the package.
Since he emerged as a serious candidate for president in 2016, Sanders has loudly advocated for the United States to join the ranks of developed countries that have embraced social democracy.
The stimulus is chock-full of social-democratic ideas: Putting cash into Americans’ pockets, beefing up their unemployment benefits, and providing a child tax credit, to name just a few.
Although Sanders defines himself as a Democratic Socialist, there’s a big difference between “socialism” and social democracy, as the developed countries Sanders admires so much include pro-market democracies, often Scandinavian ones.
“I think we should look to countries like Denmark, like Sweden and Norway, and learn what they have accomplished for their working people,” Sanders said in a 2016 CNN debate.
The final American Rescue Plan does indeed echo some of those countries.
So it’s not surprising then that Sanders has thrown his support behind the legislation, calling it the “the most significant piece of legislation to benefit working families in the modern history of this country” in a tweet.
In fact, FDR’s “New Deal” agenda of the 1930s was a sea change in American politics, injecting the government into American life in unprecedented ways. But it stopped short of establishing a modern welfare state along the lines of those that emerged in Western Europe. Democrats tried again under President Lyndon Johnson’s “Great Society” of the 1960s, but that also fell short of the party’s dreams amid social unrest and the Vietnam War.
Sanders, now the chairman of the Senate Budget Committee, has led a generation of progressives in seeking to rekindle FDR-sized ambitions in the party. At least one economist has called for a “New New Deal” to address the pandemic’s recession and economic devastation. It’s not the first time the New Deal has been evoked in modern politics. Leading progressive Rep. Alexandria Ocasio-Cortez named her plan to address climate change the “Green New Deal.”
For some Western European countries, that idea is already a reality: Germany and Sweden both have universal child benefits and Luxembourg boasts a monthly family allowance, while Denmark has a slightly lower quarterly one.
Another provision, as reported by The Washington Post, is $5 billion to disadvantaged farmers, something Black farmers stand to benefit from.
An analysis from the Tax Policy Center found that the bill could ultimately give the poorest 20% of Americans a 20% boost in income.
Some major progressive initiatives are still missing from the package
A federal minimum wage hike (which would’ve been the first one since 2009) didn’t make it into the package. It’s something long championed by Sanders, and an issue Biden ran on as well, but Biden and Senate Democrats ultimately respected the parliamentarian’s decisionnot to include it in the Senate version of the bill.
There’s also the issue of student-loan debt relief. The legislation includes a tax exemption on student-loan forgiveness through 2025, which could set the stage for student loan forgiveness. But while leading Democrats – including Senator Elizabeth Warren – have called for $50,000 in student loan forgiveness, Biden has said he may cancel up to $10,000.
The package also contains an important provision for unemployment, extending it through September, but cutting it from $400 to $300.
Millions of Americans will no longer live in poverty because of the act, according to a new analysis from the Urban Institute. That study finds that the plan would reduce the projected annual poverty rate in 2021 by over a third – meaning that the number of Americans living in poverty would shrink by around 16 million people.
“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,” Biden said in a statement.
He added: “On Friday, I look forward to signing the American Rescue Plan into law at the White House – a people’s law at the people’s house.”
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.”
Not a single Republican lawmaker in either chamber voted in favor of President Joe Biden’s $1.9 trillion economic aid package, reflecting their fierce opposition to an early Democratic legislative priority.
The House voted 220-211 to approve the relief package in mostly party-line vote. The legislation encountered a brick wall of GOP opposition as every House Republican opposed it. Only one Democrat voted against it.
The bill’s path through the House and Senate starkly illustrates the widening gulf between Republicans and Democrats in Congress. Nearly a decade ago, President Barack Obama pushed through an $800 billion stimulus package aimed at preventing the freefall of the American economy after the financial crisis.
That measure drew some GOP support. Every House Republican voted against the bill in February 2009. However, it garnered the support of three Republican senators in the upper chamber as Democrats at the time pressed to keep the bill’s price tag in check.
Still, right-leaning experts argue now that Republicans were cut out of the negotiating process by Biden along with Congressional Democrats. Biden rejected a $618 billion stimulus counteroffer put forward by a group of 10 Senate Republicans in February.
“They were completely ignored,” Brian Riedl, a budget expert at the libertarian-leaning Manhattan Institute, said in an interview. “Democrats put out a $1.9 trillion bill barely moved an inch and there was no attempt at compromise.”
He added: “Republicans are more concerned about drawing a line in the sand, and spending money more smartly in the recession.”
Others say that Republicans are less willing to negotiate a middle ground with Democrats.
“It’s the latest indication of how polarized the Republican Party has become, despite the fact it’s overwhelmingly popular with the American people,” Jim Manley, a former senior Democratic aide, told Insider. “They were prepared to vote no.”
Democrats pushed through the legislation using a maneuver known as budget reconciliation. It allows bills to be approved in the Senate with a simple majority of 51 votes instead of crossing a 60-vote threshold.
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.
You can jump to a section or group through the table of contents here, or you can scroll through.
Table of Contents: Static
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.