Time and money have always been the two scarcest resources throughout all of human history. These two have seemingly become rarer during the COVID-19 pandemic. The United States government can not do anything about lost time, but there has been a non-stop effort to improve the loss of revenue in almost every industry. Getting an entire economy back onto its feet has never been an easy task, but the plans offered by the government have often preceded success.
These economic recovery plans from times before the pandemic often focused on direct deficit spending. In an attempt to get America out of the economic crisis that was the Great Depression, the U.S. government dramatically expanded the bureaucracy. Former President Franklin Roosevelt created an extensive public works program, Social Security, and formed dozens of new government agencies all with the intent to improve the living conditions of American workers. The U.S. Government also started the Lend-Lease program that permitted the support of Great Britain before entering World War II. The Lend-Lease also required a massive amount of labor to manufacture the arms and supplies that Great Britain needed.
Barack Obama’s 2009 stimulus plan, the American Recovery and Reinvestment Act (ARRA), worked similarly. This deficit spending specifically targeted tax cuts, education, healthcare, and unemployment compensation. Each stimulus plan helped carry the United States out of two of the worst economic crises the country has faced: the Great Depression and the Great Recession. Because of the nature of economic turmoil, both plans operated in the realm of deficit spending, but these plans were more direct than Biden’s plan.
In March 2021, President Biden implemented his first stimulus plan. The Coronavirus Aid, Relief, and Economic Security (CARES) act is a 1.9-billion-dollar stimulus package directed towards American citizens who made less than $75,000 a year. The difference between the CARES act and the deficit spending of prior presidencies is their intended effect. The Lend-Lease, ARRA, and Roosevelt’s policies were all forms of direct deficit spending that aimed to improve certain areas or create specific jobs. The CARES act, however, does not have an explicit intention other than giving money to the people who are deemed to need it.
This indirect deficit spending is one of the first of its kind. The plan behind the CARES Act is that the Americans who are the most in need will take this money the government has supplied and spend it in industries that have suffered the most from the pandemic. The effect of the CARES act has helped the economy seemingly flourish so far. The increase in consumer spending from a greater supply of cash, however, has created a great concern for inflation. Despite the growing fear of inflation, however, President Biden has more recovery plans on the way.
The American Families Plan (AFP) has a more direct purpose than the CARES act. The AFP plans to supply American families who have children with the resources necessary to care for their children properly. Because of the pandemic, many families have had an uphill financial battle because their children require a significant amount of time and money, both scarce resources, especially during the pandemic. The AFP has not passed in Congress yet, and while negotiations are still taking place, the initial plan looks promising to parents across the nation. The AFP provides much support for families in need. An article published in The New York Times details precisely what the AFP may promise if passed by Congress:
“The proposal includes $1 trillion in new spending and $800 billion in tax credits, much of which is aimed at expanding access to education and child care. The package includes financing for universal prekindergarten, a federal paid leave program, efforts to make child care more affordable, free community college for all, aid for students at colleges that historically serve nonwhite communities, expanded subsidies under the Affordable Care Act and an extension of new federal efforts to fight poverty.”
The AFP is just one of two significant plans President Biden has in store for the coming months.
The other is the Bipartisan Infrastructure Framework (BIF) – also known as the American Jobs Plan or simply Infrastructure Plan. Regardless of its title, the BIF is a massive overhaul of American public transit.
The BIF is another trillion-dollar (1.2T) bill a part of Biden’s economic recovery plan. Although the bill primarily focuses on public transit, the White House details in a statement that the bill also will provide funding for “clean water infrastructure, universal broadband infrastructure, clean power infrastructure, remediation of legacy pollution, and resilience to the changing climate.” In addition to funding for public transit, portions of the bill will also go to environmental protection efforts. The statement continues to claim that the legislation aims to knock out two birds with one stone: improve infrastructure and environment by providing jobs in these sectors.
These two plans both look promising, but not everyone is satisfied. Larry Summers, former Director of the National Economic Council, claims that “the U.S. is suffering from the ‘least responsible’ macroeconomic policy in four decades” in an interview with Bloomberg. Summers goes on to criticize the Federal Reserve for its careless monetary policies during the pandemic. He also gives three equally possible post-pandemic scenarios because of lacking policies: One, the U.S. will experience increasing inflation and possible stagflation; two, inflation never fully forms, but the Federal Reserve stops its policies immediately, creating a recession; three, there is a possibility that both the Fed and Treasury grow without any inflation or further economic troubles.
Despite all of the opinions, there are a few things that the stimulus efforts show us.
Because members of Congress are still negotiating these two bills, there is no way of judging how either one will look once they are passed – if they are passed at all. If they are passed, however, there are a couple things that are expected to come out of each bill.
The American Families Plan pushes hard for educational funding for universal pre-school and some level of schooling following high school. This funding would, of course, come from taxpayer dollars, but the Biden administration has not stated from where exactly this funding would derive.
If this bill passes, funding for pre-school and post-secondary education is one of the top priorities. Another likely product of this bill is making four-year university more affordable. As the White House puts in its statement summarizing the bill:
“Direct public investment in our children’s future propelled U.S. economic growth and enhanced our global competitiveness. Now, mounting evidence suggests that 13 years of school is no longer sufficient to prepare our students for success in today’s economy. Research tells us that we must invest early to support our children’s development and readiness for academic success; our transforming economy requires that we provide every student the opportunity to obtain a postsecondary degree or certificate.”
Breaking down this quote, the writers of this statement use “direct public investment in our children’s future” to encourage the reader to pat themselves on the back. Realistically, government-mandated taxes to keep public high schools afloat is no achievement. This speaks to a larger issues of communities unable to sustain their schools.
The second premise of this quote makes the final conclusion comical. Following the statement that taxpayers should fund public high schools, is the claim that 13 years of schooling does not allow students to see the same success as they once had. The article then concludes that more public funding is the answer to the fleeting financial success for American students after an eloquent explanation of exactly why the education system has been failing them. The process of making each higher level of education free is a wild goose chase where bureaucrats will accept billions of dollars of funding just to claim that the next level of education is actually what is causing the education crisis.
There is not a single easy solution to solving the problems with the United States’ education system. In their article Educationalizing the Welfare State and Privatizing Education, Henry Kantor and Robert Lowe claim that public funding of education takes the blame for poverty from policymakers to the education system; it puts the blame onto schools and teachers. The attempt to solve poverty and financial inequality through the public school system is just too big of a task to rely on education, especially education that is funded by communities that are already stricken with poverty. The furthering of public education into higher education will only further shift the blame from politicians to teachers. Instead of investing directly into education in communities with high poverty rates, this furthering of public education takes money away from all communities. High-poverty communities are already suffering. If anything, this bill would hit these communities harder than any other.
The issue with the Bipartisan Infrastructure Plan does not necessarily lie in what the plan intends to do, but what Democrats plan to leave out. As of July 18th, Democrats are trying to push through two significant bills. One of them being the BIP and then a reconciliation bill sometime in the fall. Whatever does not get included into the BIP will almost be guaranteed to be put into another bill the Democrats plan to pass in the Fall. The issue for Republicans in Congress is that this reconciliation bill is protected from filibusters. As Republican Ohio Senator Rob Portman puts it, “If we don’t pass infrastructure, they’re going to put even more infrastructure in than we have and worse policies.”
Democrats are using the BIP as leverage to include whatever they can before the reconciliation bill later this year and passing it off as progressive move. This bill puts Republicans in a tedious and demanding position. On one hand, Republicans do not want most things in the BIP to pass as is, but the threat of a bill protected against filibusters casts its shadow over Capitol Hill. The simple name that legislators and the media use to refer to the BIP, “infrastructure plan” hides the deception Democrats are using to pass this bill. Even though the BIP plans to put more than a trillion dollars into infrastructure, at its core, the BIP is not much else other than billions of tax dollars and leverage to pass a stronger bill.
Despite the glaring problems with both bills, there is a crucial message that stands out more than any other.
These plans have shown a discouraging loss of faith in the public sector. The recovery methods have completely turned over the burden of rebuilding the economy to the private sector. Sure, the government has created the bills to help stimulate the economy, but these plans only allow consumers more money to spend in the private sector. Instead of fixing the economy from its core – the government – policy-makers have decided to start with the most affected – businesses. The U.S. government has turned to healing the economy from the outside-in rather than from the inside out. These plans may provide some stability, but they have revealed a dying core of the U.S. economy that is riddled with uncertainty.
The government has also shown that it believes it is just as capable of rebuilding the economy. Trillions of dollars is an unprecedented amount of money for the planned bills. Yet, the contradicting messages from the government over whether the public or private sector is better equipped to rebuild after the pandemic shows that nobody truly knows what is best. Republicans and Democrats are still negotiating over these enormous plans, but the future of the U.S. economy looks just as uncertain as it did a year ago.