A Look at the Past and Future of COVID Economic Relief
When the emergence of COVID-19 in the U.S. forced nationwide lockdowns in March of 2020, the virus hit the economy hard and fast. Seemingly overnight, millions of Americans were left without jobs. Stocks crashed and real GDP fell by over 30% after 23 consecutive quarters of growth. The country had not faced such a severe economic downturn since the Great Depression, and the duration and scale of the crisis demanded bold government intervention. Congress passed a $2.2 trillion economic stimulus package in March of last year, followed by a second $900 billion package in December. On January 14, 2021, one week before his inauguration, President Joseph R. Biden announced plans to enact a sprawling third stimulus package to address the pandemic’s ongoing effects. Let’s take a look at prior economic relief legislation, both before and during the pandemic, in order to contextualize President Biden’s plans for the coming months.
The contents of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020 and its December follow-up bill sparked fierce debate amongst lawmakers, but they ultimately consisted of a mixture of direct payments to individuals, expanded unemployment benefits, and small business loans, amongst other provisions. Direct payments, also known as stimulus checks, are one-time checks the government sends to taxpayers in order to encourage consumption at a time when people are otherwise tightening their purse strings.
The U.S. government has distributed direct payments in several prior instances. In 1975, while the American economy languished due to the OPEC oil embargo, President Gerald Ford authorized a tax rebate check sent to individuals equal to 10% of their taxes paid in 1974, and a $50 direct payment to Social Security recipients. In 2001, in the midst of a recession brought on by the Y2K scare and 9/11, upwards of 90 million taxpayers received $300 checks ($600 for married taxpayers). During the 2008 recession caused by the collapse of the housing market, Congress reduced income taxes and refunded up to $600 for individuals or $1,200 for married couples. The 2008 round of stimulus payments was followed in 2009 by $250 checks sent to beneficiaries of federal programs such as Social Security.
The 2020 COVID relief packages also expanded unemployment benefits. Federal unemployment insurance was initially signed into law by President Franklin D. Roosevelt in 1935, and to this day states provide regular cash payments using federal funds to eligible unemployed people for anywhere between 12 and 30 weeks. In order to receive these benefits, individuals must be unemployed through no fault of their own (e.g. laid off) and be actively seeking employment. With record numbers of Americans filing for unemployment during the pandemic, this category of check was crucial to Congress’ recent economic relief efforts.
The $2.2 trillion CARES Act, signed into law by President Donald Trump on March 27, 2020, contained ample funds for economic relief. In a speech to the House of Representatives in support of the bill, House Speaker Nancy Pelosi voiced the need to react aggressively to the pandemic with aid for individual Americans. “The American people deserve a government-wide, visionary, evidence-based response to address these threats to their lives and their livelihoods, and they need it now,” Pelosi said.
Amongst the bill’s main provisions was $300 billion in funding for direct payments. This funding provided taxpayers with incomes of less than $75,000 a year with $1,200 checks and married couples with a combined income of less than $150,000 with $2,400 checks. Families received an additional $500 per child. The Internal Revenue Service distributed the checks using information from Americans’ 2018 and 2019 tax returns. Just as in prior recessions, these direct payments were intended to prevent economic collapse from lack of consumer spending. Also included in the CARES Act was $260 billion in extra unemployment benefits. The bill increased state unemployment insurance payments by $600, and also increased the amount of time that eligible people would receive these benefits by 13 weeks.
The CARES Act passed by voice vote in the House and unanimous consent in the Senate, a rare show of bipartisanship that reflected the severity of the crisis.
In the months that followed the implementation of the CARES Act, the number of people filing for unemployment each week decreased steadily, the stock market rebounded, and consumer spending was buoyed by e-commerce, according to CNN. However, it’s not clear how effectively the bill reached those who stood to benefit the most from its provisions. A Brookings Institution survey found that approximately half of those seeking unemployment and stimulus checks through the act had not received these benefits or struggled to apply for them throughout the early months of the pandemic.
Battle for Second Package
The CARES Act may have been unprecedented in size and scope, but as the pandemic continued to rage throughout 2020 it became clear that further economic relief legislation was needed. In May, the Democrat-controlled House of Representatives narrowly passed a $3 trillion follow-up package, but the Republican-controlled Senate did not vote on the bill. Then-Majority Leader Mitch McConnell (R-KY) referred to the failed bill as “an 1,800 page seasonal catalog of leftwing oddities,” and claimed that Democrats were attempting to use COVID relief to give stimulus checks to illegal immigrants and alter election laws.
Partisan disagreement plagued economic relief talks throughout the summer, with Senate Republicans proposing a $1 trillion package that never came to fruition. On September 28, House Democrats announced an updated version of the failed May bill worth $2.2 trillion. The updated Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act extended many of the provisions of the CARES Act, including direct payments and unemployment insurance. Once again, the Senate did not vote on the proposed legislation.
As 2020 drew to a close and the U.S. government faced a shutdown, Congress rushed to pass a $2.3 trillion spending bill that lumped funding for the 2021 fiscal year with $900 billion in COVID relief. The second COVID relief package provided for $600 stimulus checks and increased unemployment benefits by $300 through March 2021. Notably, the negotiated bill significantly cut back on the $2,000 direct payments called for by many Democratic lawmakers and even President Trump, and also did not deliver direct aid to struggling state and local governments. President Trump signed the spending bill into law on December 27, 2020.
Biden’s Plans & the Road Ahead
After Congress managed to squeeze another round of COVID relief into the tail end of 2020, Biden praised their efforts and voiced his commitment to securing further aid for struggling Americans once he took office. “I applaud Congress on their economic relief package that included funding for vaccine distribution, much needed temporary relief for workers, families and small businesses,” Biden told reporters on December 22. "Congress did its job this week. And I can, and I must, ask them to do it again next year."
The Biden administration laid out its economic relief plans on January 14, 2021, dubbing its proposed $1.9 trillion stimulus package the “American Rescue Plan.” Amongst the American Rescue Plan’s provisions are $1,400 direct payments to individuals, adding to the $600 checks included in the 2021 omnibus spending bill; a $400 weekly supplement to unemployment insurance benefits and an extension of benefits through September 2021; and $350 billion in emergency funding for state and local governments to keep public workers employed and distribute vaccines.
Notably, Biden’s American Rescue Plan moves beyond short-term solutions with ambitious calls to raise the federal minimum wage to $15 per hour, which has since been removed from the plan on parliamentary grounds, and expand access to and provide tax subsidies for childcare. These proposals are consistent with the progressive economic agenda Biden championed on the campaign trail last year, which also entails raising taxes on individuals making more than $400,000 per year.
COVID economic relief is reportedly Biden’s top priority as virus cases reach new heights worldwide and upwards of 20 million Americans remain out of work. However, passage of the president’s American Rescue Plan is far from guaranteed. Despite attempts to garner Republican support, many GOP lawmakers are opposed to the level of government spending the plan would require, including Senate Minority Leader Mitch McConnell. Absent bipartisan support, the bill is not likely to receive the 60 vote supermajority necessary to overcome a potential filibuster.
Democratic leadership are exploring alternative methods to pass the legislation. The budget reconciliation method, a process by which Congressional committees alter existing spending and budget limits, requires a 51 vote simple majority for passage. Senate Majority Leader Chuck Schumer (D-NY) said January 26 that “time is of the essence."
No matter what ultimately becomes of Biden’s American Rescue Plan, the COVID pandemic has already seen the U.S. government commit to economic relief of unprecedented proportions. The previous two stimulus packages have set new norms for the government’s role in times of crisis, and time will tell whether further efforts to put money into the pockets of struggling Americans will be enough to carry the economy through the long months ahead.