The Good, the ‘Meh,’ and the Ugly in Biden’s $1.9 Trillion COVID Relief Plan

Last week, President Biden unveiled the broad details of a $1.9 trillion COVID-19 relief package he will push Congress to pass in the early days of his administration. This proposal comes mere weeks after Congress sent outgoing President Trump a $900-billion COVID relief package that he signed into law. (For NTU’s analysis of the latter package, see here.)

Much like we have done with every other major COVID relief proposal, NTU has analyzed the details of Biden’s opening bid for a fifth COVID-related legislative package. What follows is our take on the good and the bad in the new president’s first major proposed legislation.

The Good

Money for vaccines and testing: The rapid deployment of vaccines continues to be America’s fastest and most cost-effective way out of the pandemic. The tens of billions of dollars spent on vaccine development, deployment, and distribution pale in comparison to the trillions of dollars COVID-19 has cost the global economy. Biden’s $20 billion national vaccination program seems promising, and providing vaccine access free of charge to anyone living in the U.S. may make a difference for some people (including the uninsured) for whom the cost of a vaccine would otherwise prove a barrier.

Before the vaccine can get in the arms of hundreds of millions of Americans, though, the country will need a robust testing program to quickly mitigate outbreaks—especially as a more contagious variant of the virus spreads in the U.S. It is not clear if $50 billion is the right appropriation for a “massive expansion of testing,” but any committed and organized effort to expand testing—for standard PCR tests, rapid PCR tests, and COVID antibody tests—is promising, especially with the Biden administration tying this test expansion to “safe reopening” of schools. The sooner schools can safely reopen, the more easily tens of millions of parents across the country can return to work (either remote or in-person) and provide for their families.

Extension of the eviction moratorium: While some progressive calls to broadly “cancel rent” should give policymakers serious pause given the financial impact on small landlords and/or taxpayers, it makes sense to extend the current federal eviction moratorium beyond the end of January, given the pandemic will still present a major disruption to Americans’ lives and incomes in a few weeks’ time. No one should have to be kicked out of their home in the middle of a pandemic, which is why NTU has supported prior eviction moratoria and spoken favorably of means-tested housing relief for renters and homeowners struggling with payments.

The ‘Meh’

COBRA subsidies: Estimates of how many Americans have lost health coverage during the pandemic have varied widely, but December calculations from the Kaiser Family Foundation (KFF) indicate around two to three million Americans may have lost their health coverage due to their loss of a job between March and September. Though this is very concerning, these estimates also pale in comparison to earlier estimates from Kaiser indicating as many as 27 million Americans could lose coverage due to the pandemic. While these new estimates reduce the taxpayer cost of a 100-percent COBRA coverage subsidy, the estimates also suggest that a full COBRA subsidy may not be as necessary as it was nine months ago. Although, as we've written previously, a COBRA subsidy could prove acceptable relative to other options, NTU has also written extensively on the pitfalls of fully subsidizing COBRA coverage, especially since COBRA is much more expensive on average than most other health coverage options for Americans.

Expansion of the Child Tax Credit (CTC) which benefits high-income households: When House Democrats proposed permanently expanding the Child Tax Credit (CTC) in the HEROES Act—at the cost of $119 billion—we warned that this is “a highly consequential policy change with effects far outside any likely COVID-19 crisis period.” While President Biden’s plan appears to make CTC changes temporary rather than permanent, we are concerned about the aggressive expansion of a tax credit that households making hundreds of thousands per year can (and do) claim. According to the Congressional Research Service (CRS), more than 40 percent of CTC dollars in 2018 were claimed by households making $75,000 or more. One hundred percent of households with children making between $100,000 and $200,000 received the CTC in 2019, as did 98 percent of households with children making between $200,000 and $500,000.

Aid for child care providers: As far back as March, NTU wrote on the need to help child care providers stay afloat during the pandemic. With schools still widely impacted by COVID closures, some parents need to turn to child care providers in order to keep working. Biden’s plan includes $25 billion in emergency funds to help child care providers stay open and “operate safely,” along with $15 billion for Child Care and Development Block Grant funding directed to parents struggling to afford child care. Additional federal funding may be necessary given how much of a difference child care can make for working families hoping to get back on their feet, though the precise amount needed is unclear.

The Ugly

The nearly $2-trillion topline: NTU’s team will be the first to tell policymakers that the contents of a relief package are more important than its topline dollar amount. Nonetheless, we are concerned with Biden’s proposal to spend nearly $2 trillion more on COVID relief, just weeks after Congress spent nearly $1 trillion on a year-end package. Much of the money in the latter bill has yet to even go out the door, and both lawmakers and the Biden administration would be wise to give the latest ‘Phase 4’ deal at least a month or two to work. Should that legislation’s expanded UI, additional Paycheck Protection Program (PPP) allocations, and direct checks adequately support struggling families and businesses through the early spring, then an additional package may either not be necessary or may be reduced to a topline much smaller than $2 trillion.

$350 billion for states: For months, we have warned that any allocations to state and local governments should follow a few principles: 1) the total dollar amount should be strictly limited to immediate and expected shortfalls at the state and municipal levels, making $1 trillion or even $500 billion proposals seem way out of sync with budget shortfall realities; 2) any allocations should come with guardrails that prevent states from spending the money on problems that existed before COVID-19 (i.e., struggling state pension funds); and 3) any dollars distributed to states should come with transparency requirements for the recipients.

Biden’s recommended $350 billion allocation to states would appear to fail the first test, and we have read nothing in his plan addressing the second two principles. Policymakers should pay close attention in the coming weeks and months to states’ projected surpluses or shortfalls for fiscal year (FY) 2021; for example, both California and Connecticut have reported “stunning” projections for revenue that are much better than state policymakers expected. If more states report better-than-expected budget projections, a $350-billion outlay to states and municipalities would seem even more unnecessary and wasteful than it does at present.

$1,400 checks to those who don’t need it: Unsurprisingly, direct payments to Americans have been one of the most popular elements of recent COVID relief bills. The CARES Act provided $1,200 to individuals making up to $75,000 per year (with a phase-out up to $100,000 per year) at a cost of nearly $300 billion to taxpayers. The Phase 4 bill provided another $600 to individuals making up to $75,000 per year (with a phase-out up to $100,000 per year) at a cost of $164 billion to taxpayers. Now, President Biden wants to provide an additional $1,400 in direct payments. Some progressives are already calling for $2,000 payments instead of $1,400 payments, or even $2,000 payments per month through the end of the pandemic. Though Biden’s outline for $1,400 checks doesn’t address eligibility standards, the plan language suggests that the same people eligible for $600 last month would be eligible for an additional $1,400 in the Biden plan. As we have noted before, these standards include plenty of families making an above-average amount of income and/or still fully employed. Evidence shows that, above a certain income threshold, the majority of the CARES Act’s $1,200 payments were dedicated to savings and debt payments rather than essential payments like food and rent. The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimates that the Biden $1,400 payments will cost $465 billion. Some Republican Senators are already on board with the direct payments. It would be a serious mistake, though, to sink the U.S. further into debt in order to transfer hundreds of billions of dollars to households that do not need immediate assistance.

National $15 minimum wage: The Congressional Budget Office (CBO) estimates that raising the federal minimum wage from $7.25 per hour to $15 per hour by 2025 could result in 1.3 million workers losing their jobs (and could result in up to 3.7 million workers losing their jobs). Though the details of Biden’s plan to more than double the minimum wage are unclear (i.e., timing, or the types of businesses that may be exempt), it is concerning that President Biden proposes to more than double the minimum wage at a time when many businesses—large, mid-sized, and small—are struggling to open or reopen and millions of people are already out of work.

Raising the federal UI boost from $300 per week to $400 per week: NTU has spoken favorably of efforts to support the unemployed during an unprecedented pandemic and economic downturn—especially because many business closures and job losses are the direct result of government policies. At the same time we have warned that a UI boost that far exceeds replacement income for an excessive period of time could harm taxpayers and economic recovery efforts. We felt that the $300 boost from January through March passed by last month’s COVID relief bill struck the right balance, and we are concerned that President Biden’s support for a $400 boost from April through September is premature. While the proposed $400 amount may be questionable economic policy, the proposed extension to September is certainly misguided. Policymakers would be better off examining the unemployment situation over the next few months and then making a decision closer to the March expiration of current expanded UI benefits.

ACA PTC expansion that may be permanent: Though some of the specifics are unclear, it appears Biden’s $1.9-trillion COVID framework includes some version of his campaign plan to expand the Affordable Care Act’s premium tax credits (PTCs). Biden does not specify whether his ACA expansion plan is temporary or permanent, but NTU has written at length about the pitfalls of ACA PTC expansion. Of concern: 1) the House’s version of ACA PTC expansion legislation—similar to the Biden plan—cost $212 billion over 10 years; 2) ACA PTC expansion could result in six-figure households receiving subsidies for health insurance; 3) PTCs have never been designed to bend the cost curve for private health coverage, and will only increase in cost as premium hikes outpace wage increases.

$20 billion for transit agencies: The appropriations and relief legislation enacted in December provided $14 billion in emergency supplemental funding for transit agencies and boosted regular annual federal transit support to nearly $13 billion. An additional $20 billion would exceed the emergency request of $32 billion made by the transit industry for 2021.