Biden's recovery plan would get the economy on track again by the end of the year

Experts say the $1.9 trillion COVID relief plan proposed by President Joe Biden and widely opposed by Republicans could get the U.S. economy back on track as early as the end of 2021.

Without implementation of the plan, they say, it could potentially be years before the economy would recover.

A White House statement posted Wednesday noted that projections for economic growth in the country are “dire – and a call to immediate action, not calm, not wait-and-see.” Currently, 11 million American workers are unemployed, and 15 million adults are behind on their rent payments.

Biden’s $1.9 trillion American Rescue Plan would extend $400-a-week unemployment benefits through September and send $1,400 direct payments to individuals who make less than $75,000 or couples who make $150,000. It would also allocate $170 billion to public education, $20 billion to expanded vaccination initiatives, and $350 billion in emergency aid to state, territorial, and local governments.

Two recent independent analyses conducted by the nonprofit Brookings Institution and the firm Moody’s Analytics have found that the plan would help get the struggling economy back on track faster.

In a best-case scenario, economists from Brookings have projected Biden’s plan could result in the country’s gross domestic product, a measure of the value of finished goods and services produced in the country, reaching pre-pandemic levels by the end of 2021 at the earliest.

“We estimate the Biden package would result in real GDP exceeding its current-law baseline by 3.6 percent at the end of 2021 and 2.1 percent at the end of percent in 2022,” the Brookings analysis notes, and concludes that the cumulative real GDP would likely rebound to pre-pandemic levels by 2023 at the latest.

Moody’s says, “Biden’s expansive fiscal policy proposal is good economic policy.” Its analysis suggests that unemployment could return to baseline pre-pandemic levels by fall 2022, a year earlier than it would without Biden’s relief plan. The $1.9 trillion plan would double economic growth and add some 7.5 million jobs, according to the analysis.

“By then, the economy will have returned to full employment — an unemployment rate of 4% to 4.5% and a labor force participation rate of more than 62.5%,” the economists note. “This is about a year sooner than would be the case if there is no additional fiscal support.”

But analysts say the outlook is more bleak if Republicans continue to obstruct Biden’s relief plan.

A report released by the Congressional Budget Office on Monday projects that without additional economic relief, U.S. employment rates may not be back to pre-pandemic levels until 2024, and that although GDP will rebound in 2021, it would not return to potential, a measure of the country’s maximum possible economic output, until 2025.

Republicans have introduced their own plan, a $618 billion counterproposal with smaller direct payments and no aid to state and local governments.

Experts say, however, that the cost of the Biden plan is not excessively high.

Texas A&M University political science professor William Clark said, “In the current economic environment, the U.S. government is able to borrow at very low interest rates. As long as interest rates remain at their low rate and given the economic displacement that the pandemic has caused, it isn’t an inappropriately large amount.”

Kevin Hassett, a former economic adviser to Donald Trump, backed Biden’s plan, telling CNN, “We made it through last year without a total, utter collapse of the GDP because of extremely aggressive stimulus.”

With the American Rescue Plan unlikely to receive the supermajority of 60 votes in the Senate needed to pass, Democrats have taken early steps toward bypassing Republicans and passing the bill through the process of budget reconciliation, which would enable them to push through the legislation with a simple majority of only 51 votes.

“I think we’re leaving open the possibility of Republicans working with us but I think the bottom line is we have to deliver,” said Hawaii Democratic Sen. Brian Schatz.

Published with permission of The American Independent Foundation.