President Joe Biden formally announced his COVID-19 stimulus plan on January 14, 2021, and on March 11, 2021, it was signed into law, making it the first major milestone this administration has delivered in line with its’ campaign promises. With a $1.9 trillion relief package, this bill reaches far beyond the pandemic response of the past year and gives us a picture of what the new administration has planned for the economy.
Part 1: The American Rescue Plan
As promised, President Biden and his administration delivered a large bill with actions that are intended to ease some of the financial stress many Americans have endured due to the COVID-19 pandemic. About $1 trillion is reserved for direct aid including stimulus checks, extended emergency unemployment insurance, and additional funding for eviction and foreclosures. The plan builds and expands on many of the measures introduced in the CARES Act of March 2020, as well as addressing various areas that were not included under the original relief package. For example, the American Rescue Plan breaks away from the prior administration’s focus by making several modifications to the tax code to increase credits, particularly for parents and qualified individuals paying for health insurance premiums through the Affordable Care Act exchange. For families who need childcare during the day while they work, the child care expense limit increased to $8,000 for one qualifying child and $16,000 for more than one qualifying child, intended to add relief during a time when many students continue distance learning. The bill also funnels billions to support state and local governments, an area which received less attention from the original CARES Act, and allocates funds broadly for education, which previously only obtained a small amount of direct aid.
Part 2: The Future Economic Direction
The contrasts between the American Rescue Plan and the CARES Act also shows us some of the different priorities of the new administration. The president and his team want to put a spotlight on the planet, and are driving initiatives to have several industries face up to climate risk. Rostin Behnam, the acting chairman of the Commodity Futures Trading Commission, announced that he is establishing a Climate Risk Unit to focus on the role of complex financial derivatives in understanding and pricing climate-related hazards. This follows recent news from the Securities and Exchange Commission which is looking into new ways for companies to disclose reliable information on climate change risks to investors. The policies are still fiscal minded – extreme weather disasters cost taxpayers, businesses, investors, and homeowners a combined $95 billion last year, according to the federal government. The new administration has also acknowledged that free-trade policies of the past have harmed some American workers, and are now pledging to center American economic security in its decisions regarding international engagements, which in many ways appears to be a gentler version of the Trump administration’s “America First” strategy. Looking to the future, it does seem that there is greater hope of building bipartisan consensus around trade, renewable energy, and American Innovation, which will all be pivotal to moving the country forward in our increasingly digital age.