President Joe Biden's American Relief Plan has a heavy lift to perform.
It must provide a lifeline to families buffeted by the ongoing pandemic and recession. It must revitalize a crippled economy, particularly helping those businesses that rely on in-person contact. States face the twin dilemma of falling revenue that, as in Minnesota, have triggered deficits, while pressured by the rising costs of dealing with COVID.
The $1.9 trillion price tag, while large, is necessary to make meaningful progress on all these fronts. Moreover, it is the kind of spending that will yield enormous benefits to all. Moody's Analytics said in its analysis that if enacted soon, the plan would provide a quick and powerful jolt to the economy, raising GDP for the year to 8% — double what it would be without federal intervention. Moody's chief economist Mark Zandy noted that the country could also expect a return to "almost full employment" by fall 2022. That, too, would be about a full year earlier than with no federal aid.
There are lessons to be learned from the Great Recession. We know that the economic stimulus provided then had a force multiplier effect, and that its main failing was in not being large enough.
Newly confirmed Treasury Secretary Janet Yellen has told Congress that failing to pass a large enough package "would likely leave us in a worse place fiscally and with respect to our debt situation." She speaks from experience. Yellen headed President Bill Clinton's Council of Economic Advisers in the late '90s, was deeply involved in formulating the Great Recession recovery strategy and led the Federal Reserve from 2014 to 2018.
Earlier this week, 10 Senate Republicans came forward to offer a relief plan less than a third of the size of Biden's. It fails to adequately fund what's needed for vaccinations, testing, tracing, individual aid, unemployment benefits and other stimulus needed for full recovery.
To his credit, instead of dismissing it out of hand, Biden sat with the senators for hours of listening and discussion. "The good news out of that meeting is that it was two hours of them being heard and listened to," said Minnesota Democratic Sen. Amy Klobuchar. That is a welcome change from the previous administration. And some points of common ground may yet emerge. One possibility: Biden should consider phasing out direct payments for those Americans at higher income levels to trim total costs without sacrificing the major elements needed for a robust recovery.
Norm Ornstein, a political expert with the American Enterprise Institute, said that "if you're getting money to people who don't really need it and aren't going to spend it, that doesn't help get the economy moving." Biden could go as low as $1.7 trillion and accomplish much of what is needed, Ornstein said. But he warns against dragged-out negotiations designed more to erode momentum than achieve consensus.
"Getting this accomplished is the most significant priority," he said.
Among the most important elements of the plan is aid to the states, and that should be nonnegotiable. Without it, states like Minnesota will find themselves hampered in their ability to vaccinate their own populations and to rebuild and reopen their economies. Gov. Tim Walz has proposed a tax hike on the state's wealthiest residents that Republicans oppose. Federal aid, delivered promptly, could lessen the need for tax increases at the state level.
The fact is, Democrats have the votes to ram through much of Biden's proposal in a complicated process called "reconciliation." Bipartisan support is preferable. But there is no time to waste. Biden should set a firm time limit and allow Republicans to make their best case. But the highest priority is to move quickly on the recovery that more than 81 million Americans voted for in making him president.