Only a tiny fraction of the bill goes into vaccinations and other priorities directly related to the pandemic.
Much of the remainder of the spending is not well suited, or not designed at all, to respond to today’s more favorable economic conditions.
Democrats tell themselves that it’s like 1933 when we were in the middle of a depression, while it’s more like 1983 when we came out of a punishing recession.
Or to put it another way: The Biden calculation reacts to the wrong spring. It is no longer the catastrophic spring 2020, when the economy is closed and there is nothing to fight the virus other than social distancing and masks, but the much more hopeful spring 2021, when the economy reopens, Covid cases drop sharply and vaccinations are increasing massively.
Unemployment claims have fallen and the unemployment rate is 6.2 percent. Personal income is higher than at the beginning of the pandemic. Both the CBO and Goldman Sachs forecast rapid economic growth in 2021.
As states reopen – and not just supposedly “Neanderthals” Texas, but deep blue Connecticut as well – nearly 20 percent of the US population has received at least one vaccination shot.
That doesn’t mean everything is okay. There’s an estimated $ 420 billion hole in the economy, though, as even critics of the center-left bill have noted, you don’t need a $ 1.9 trillion bill to fill it (aside of the roughly $ 4 trillion in previous auxiliary bills that went on the economy in the past 12 months, not all of which were spent).
The latest editions are divided, willy-nilly, across democratic priorities and constituencies.
Participate in public education where democratically allied teacher unions dominate. It is not clear why additional spending is required, as tens of billions of billions of funding from previous Covid relief laws are still being spent, even though many districts have already begun to reopen to in-person tuition.
Even so, the bill spends an additional $ 130 billion on K-12 education. According to a CBO estimate, we are long past the pandemic that purportedly justifies it by the time most of the money is being spent.
The CBO assumes that more primary and secondary education will be spent in financial year 2026 than in this financial year. And in fiscal year 2025, around three times as many expenses would go out the door as in fiscal year 2021. These zombie covid relief spending will continue into fiscal 2028.
The $ 350 billion aid to states and municipalities comes through, even though state and local tax revenues are only a tad down by 2020 compared to the previous year. According to the much-quoted Moody economist Mark Zandi, the state and local funding gap will be around $ 60 billion by fiscal 2022. Still, states and municipalities are inundated with funds after more than 500 billion US dollars were made available to states and municipalities last year.
According to an analysis by the Responsible Budget Committee, California is projected to have a budget surplus of more than $ 20 billion this year, but will still receive more than $ 20 billion from the Covid Relief Act.
The bill spends $ 86 billion on bailing out union-negotiated multi-employer pension plans.
Transportation is receiving tens of billions of new expenditures, which by its nature does not happen quickly, and more than $ 30 billion goes to expanding Obamacare, a long-term democratic political goal.
It is doubtful that the checks of $ 1,400 are needed remotely for those earning less than $ 75,000 a year, as more supply – i. H. Companies shut down or supply chains disrupted – as demand is currently hampering the economy.
The continued rise in unemployment benefits makes unemployment more lucrative than employment for many people and will hamper the return to work on the margins.
There’s a lot more to the bill. Still, it’s popular. From where Biden is based, why not spend as much as possible under the heading “Covid Relief”? To paraphrase Rahm Emanuel, a pandemic is a terrible thing to be wasted. An invoice this size with so many expenses that were barely or not audited would be impossible to pass under different circumstances or for other reasons.
It can work politically. Regardless of this, the economy will recover rapidly. Assuming the bill does not have catastrophic unintended consequences, Biden can credit the inevitable economic boom.
This may be a wise policy, but it is not evidence-based or bipartisan governance. It just keeps getting better when you get it and provided no one will notice.