Biden’s Relief Bill Is a Missed Opportunity

The federal government and the business community seem willing to let low-income and working-class Americans flail and fall behind indefinitely — a stance that may inflict long-term damage on the U.S. economy and continue tearing at the nation’s political fabric.

President Joe Biden’s $1.9 trillion relief package now under discussion in the Senate is just the latest reminder of how inequitable the economic rebound has been over the past year and how narrow ambitions are undermining a more constructive response.

Despite its shortcomings, the Biden plan may be Congress’s last muscular rescue effort of the Covid-19 era. It follows a series of fiscal responses to the pandemic that began with the Cares Act last spring and has involved spending or committing about $6 trillion in taxpayers’ money. While that financial support has undoubtedly helped millions of workers, families and businesses, it also represents a missed opportunity to address urgent problems that the coronavirus exposed but were escalating long before last year.

To be sure, there’s much to celebrate. With vaccine inventories and inoculations mounting, the pandemic’s end is in sight. The stock market, which has soared over the past year, has signaled for months that a return to normal is underway. Several economic numbers have also turned higher, including inflation expectations, manufacturing activity and consumer sentiment. Gross domestic product is expected to grow robustly again in the first quarter, rising back above its pre-Covid level. Some states have already moved to reopen despite ubiquitous guidance from the health experts that it’s still premature — and reckless — to rush full-blown reopenings.

But much of that bright news has, thus far, primarily benefited more affluent Americans. Those at the bottom, or just below the middle, of the economic ladder have fared much worse. If the federal rescue efforts had been crafted differently, they might have already gone a long way toward rebuilding the country’s crumbling infrastructure, improving public education and bolstering public health. They could have helped retrain millions of workers whose jobs have disappeared in recent years and who will have difficulty finding employment after the pandemic.

Beyond providing a much-needed floor beneath workers and some businesses, it’s not entirely clear what $6 trillion in federal spending has accomplished to level and improve the playing field. If there was a strategic philosophy underpinning the relief effort, it was the belief that broad swaths of individuals and businesses simply needed help — but not much more — to survive the pandemic. Yet there turned out to be a huge disparity in the hardship Covid-19 doled out.

Some workers and companies, such as those in travel, leisure and entertainment, were devastated, while those in other industries, such as technology and financial services, were largely unaffected and even enriched. High-skilled workers grabbed laptops and carried on as usual; many low-wage workers in nonessential industries were dumped. That reality has given rise to a K-shaped recovery, with those on the upper leg of the K thriving and those on the lower leg continuing to struggle. The pandemic’s uneven punishment has further widened what was already an alarming income and wealth gap. 

Congress can be excused if the Cares Act, its first attempted rescue last March, didn’t distinguish between the pandemic’s haves and have-nots. Those were early days. It wasn’t yet clear how the crisis would unfold, and speed was more important than precision. But by last summer, or fall at the latest, it became clear that the pandemic had split the country in two. Yet rather than take the time to fashion smart relief targeted at the most desperate people and public institutions while finding ways to invest in infrastructure, education and public health along the way, Congress kept repurposing the same blunt approach. Legislators squabbled endlessly about details without considering broader and necessary outcomes.

One telling result of that approach: The personal saving rate is at a record high, a testament to the millions who received a rescue they didn’t need, while tens of millions of Americans still face food insecurity, a sure sign that relief efforts have failed them.

Now we have the Biden plan, a package tailored to win bipartisan support but lacking enough punch to help reposition working Americans. Just listen to some of the arguments: Should supplemental unemployment insurance be pegged at $400 a week or $300? Should it extend through August or September? Should direct payments be targeted to individuals earnings more than $100,000 a year or $80,000? Meanwhile, the one thing in the original bill that might have helped close the suffering gap for more than a few months — an increase in the minimum wage — lies on the cutting-room floor. 

As we have said before, leaving tens of millions of struggling Americans to fend for themselves is deeply shortsighted. The U.S. has benefited historically from having an unusually large middle class, and consumer spending fuels roughly 70% of the country’s economic growth. But the American middle class has been eroding, and successive shocks, such as the 2008 financial crisis and the 2020 pandemic, have battered it, and the working class, even further.

The 2008 federal bailout helped some and neglected others, hampering the economic recovery that followed and planting the seeds of social and political unrest. That mistake is being repeated, and we should expect similar outcomes. 

It’s too late to turn the Biden plan into something it isn’t, and a meaningful chunk of federal aid is better than no aid at all. So lawmakers can take credit for its size, but we give them poor marks for vision and effectiveness. And, unfortunately, we may learn once again that a recovery that benefits the few is ultimately a setback for all.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.

Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.

©2021 Bloomberg L.P.

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