Congress passed the $1.9 trillion Covid-19 stimulus bill on Wednesday in a 220-to-211 vote, which is projected to boost the U.S. economy and extend financial relief to many Americans. President Biden signed the bill on Thursday as part of his American Rescue Plan of 2021, an expansive and sweeping economic recovery plan that will likely create significant and long-lasting economic and political implications.
In particular, the bill includes funding for COVID- 19 vaccine distribution and expands child tax credits for lower-income families. The biggest provisions of the package include $1,400 direct payments for taxpayers who earn less than $75,000 per year or couples who earn less than $150,000, and expanded federal unemployment benefits of $300 per week through September.
The massive fiscal stimulus package is expected to boost U.S. employment, reduce poverty, and pick up inflation. In particular, the stimulus bill is intended to target American economic inequality, and economists have maintained that increased government spending can help lessen inequality by creating a more even and quick economic recovery. Columbia University researchers have estimated that the support for low-income families could cut the poverty rate from 12.3 to 8.3 percent.
Economists have also predicted that the U.S. GDP will grow 5.95%, which would be the fastest U.S. economic growth since 1983. In fact, the Organization for Economic Cooperation and Development has maintained that the latest stimulus package, coupled with increased and faster vaccinations, could drive the U.S. GDP up by 6.5% in 2021. In effect, the U.S. economic growth could drive demand up for goods from U.S. trading partners, although it may also have the potential of taking capital away from emerging markets where economic recoveries may take longer.
There have also been concerns that the stimulus could create a spike in inflation and eventually heightened interest rates. In addition to risk of inflation, the growing debt burden is also a concern, as the series of relief bills has increased the publicly held federal debt level by nearly $4.5 trillion over the last year. As of March 1, the debt in the United States is the highest it has been since after World War II, and is roughly the size of the nation’s entire economic output at $21.9 trillion. Republicans criticized the legislation as excessive spending, and have cautioned against the nation’s debt burden that arises from the bill.
Although issues relating to inflation, debt, and spending have warranted concerns, the bill’s potential to create employment, reduce poverty, and quicken economic recovery may outweigh these negatives. Regardless of the uncertainty in the horizon, the bill will likely have broad-reaching and massive market impacts on U.S. economic growth, and may even set the foundation for long-term expansions that could alter the landscape of U.S. policies regarding child care costs and poverty. Whether considered pioneering or reckless, Biden’s bill will likely make its mark as historic and unprecedented spending in U.S. history.