Commentary on the ‘American Rescue Plan’
$1.9 trillion COVID relief is badly needed, but more needs to be done
San José, CA – This past week, on March 11, Democrats in the U.S. House of Representatives, U.S. Senate, and White House passed a $1.9 trillion COVID-19 rescue law without the support of a single Republican in the House or the Senate. The law provides much-needed relief for millions of people whose finances have been wounded by the pandemic. Yet much more needs to be done, especially in the fight against the growing economic inequality.
The latest report on unemployment insurance or UI showed that the number of new claims for the week ending March 6 continued to be at high levels. The number of applications for state UI was 712,000, still higher than the pre-recession record of 695,000 set all the way back in the early 1980s. While the number of new claims for regular state unemployment insurance dropped by more than 40,000, the number of new claims for the federal Pandemic Unemployment Assistance, or PUA, rose by almost the same amount, leaving the total almost unchanged from the week before, at almost 1.2 million claims.
The same report showed that the total number of people collecting state UI, the PUA, or other unemployment programs rose again to more than 20 million people for the week ending February 20. While the number of people receiving state UI was virtually unchanged at 4.8 million, the number collecting PUA benefits jumped by more than a million to total almost 8.4 million. The federal Pandemic Emergency Unemployment Compensation, or PEUC, for the long-term unemployed also increased by almost a million to more than 5.4 million. The state Extended Benefits or EB program for the long term unemployed in states with high unemployment rates also increased by a small amount to 1.3 million.
Without the American Rescue Plan (ARP), the PUA and PEUC would have stopped new claims as of March 15, and would have ended benefit payments on April 15, cutting off 13.8 million people from their unemployment benefits financial lifeline. The ARP also extended the unemployment insurance from the regular six months to a year and a half: the PUA now pays benefits for 79 weeks, and the PEUC to pay benefits for 53 weeks after the regular state UI, which lasts 26 weeks, runs out. These extended benefits run until September 6.
The ARP also extends the unemployment insurance supplement at a lower level of $300 per week until September. This supplement is much needed, as the maximum amounts of state unemployment are often nowhere enough to even pay the rent, much less survive. It also exempts the first $10,200 of UI from federal taxation – providing some relief to those hit by first losing their jobs, and then having their UI benefits taxed by the federal government.
With more than half of Americans getting their health insurance from their jobs, the ARP expansion of the Affordable Care Act (Obamacare) will provide some relief to those who lost their health insurance along with their paycheck. The ARP also adds money to the COBRA program that allows laid-off workers to keep their former health insurance at a lower cost than before. There is also money for paid sick leave, but it does not require businesses to offer paid sick leave. The lack of sick leave helped contribute to the pandemic, as American workers have been forced to develop a culture of coming to work sick in order to avoid loss of pay or worse.
While the aid to renters, homeowners and homeless people is a very small part of the ARP (only $37 billion or about 2% of the total), it is a start towards aiding the tens of millions of renters and millions of homeowners who have fallen behind in their rent or mortgage. But, with some 3 million people without their own homes, the ARP aid is nowhere near enough to solve the problem.
The ARP also provides more money for the Supplemental Nutrition Assistance Program, or SNAP, previously known as Food Stamps. It extends the 15% increase in benefits through September, past the existing cut-off of June. But the ARP does not permanently increase the benefit level, relax the work requirement, or loosen the savings limit that restrict participation and contribute to the high levels of hunger in world’s leading food producer.
The ARP also sends money to state and local governments that have fallen into budget deficits with the recession. Other states, such as California, have been lucky not to have developed big deficits. But California still had to borrow more than $18 billion from the federal government to pay for the historic surge in regular state UI benefits. State and local governments have cut more than a million jobs to try to balance their budgets, and the aid will allow them to restore programs and services that were cut.
There is also a wide array of money for institutions hit hard by the pandemic from schools to transportation agencies to retirement funds. The ARP also beefs up health care funding, mainly for vaccine distribution and COVID testing and tracking, but also in other areas.
COVID-19 also accelerated the increase in economic inequality that has been growing in the United States for the last 40 years. The pandemic led to historic lines at food banks, while the stock market hit record highs. Tens of millions of working people saw their savings and small businesses decimated even as total wealth increased and the wealth of billionaires skyrocketed. The estimated wealth of U.S. billionaires increased 44% to a total of $4.3 trillion, even as tens of millions lost their jobs, their businesses, and have their homes put at risk.
The ARP makes some short-term steps towards addressing economic inequality. The most popular one is the $1400 per person checks for about 85% of the people. These will start hitting people’s bank accounts this week. This round of relief checks includes adult dependents such as parents and college students that were left out of the checks under the Trump administration. However, it still does not include undocumented immigrants, as the checks require a Social Security number, while undocumented pay taxes using a Taxpayer Identification Number or TIN. However the legal resident and citizen members of a mixed household with an undocumented are eligible this time around.
The United States has the highest poverty rates for children among middle- and high-income countries, with more than one in every seven children living in poor households even before the pandemic began. The U.S. official poverty rate, on which this number is based, is way too low. It was designed in the 1960s based on data from the 1950s, and is centered around the cost of food. But in the last 50 years, rent, childcare, health care and other necessities have risen in price much faster than food, leading to a falling ‘official’ poverty rate even as inequality and homelessness grow.
The ARP marks a step in the fight against child poverty by expanding the child tax credit, increasing the Earned Income Tax Credit for the working poor, and increasing the childcare tax credit for working parents. While these actions could cut child poverty by as much as half, these provisions only apply to 2021; but permanent changes are needed.