Dissecting President Biden’s $1.9 Trillion COVID Relief Package
On February 22, 2021, after over 100 hours of deliberation, The House Budget Committee moved President Joe Biden’s American Rescue Act Plan of 2021 to the House of Representatives for an official vote. The massive 591-page bill contains a multitude of measures: funding for COVID-19 vaccines and testing, support for struggling families, housing provisions, and much more.
“Give Her the Shot!”
Whenever I read about President Biden’s stimulus package, I immediately think of the living room scene in Quentin Tarantino’s Pulp Fiction. Vincent (John Travolta) and Lance (Eric Stoltz) are frantically trying to resuscitate Mia (Uma Thurman), who has overdosed. Lance instructs Vince to inject Mia with an adrenaline shot directly into her heart. Neither Lance nor Vincent know what to expect, but there's no other way to save Mia. After drawing a big red dot on Mia’s chest, Vincent plunges the syringe into her heart, jolting her awake.
“If you’re ok, say something,” Vincent says. “Something,” Mia replies, the needle still in her chest. The two men collapse in exhaustion.
President Biden is Vincent, and Congress is Lance. Mia is the United States economy. The adrenaline shot is the Rescue Act Plan of 2021. Every day this bill isn’t passed into law, more Americans go without the help they so desperately need. To recognize its importance, you must understand how COVID-19 has affected the economy.
In English, Please
The Opportunity Insights Economic Tracker helps answer that question. This Harvard-based research group used public and private data to determine COVID-19’s economic impact.
They found that high-income households had a significantly larger decrease in spending than low-income households. In fact, low-income households have increased consumption.
Source: Track the Recovery
This is highly illogical, as stated by the research team: “The pattern of spending reductions during this recession differs sharply from that of prior recessions, during which spending on services remained essentially unchanged while spending on durable goods (e.g., new appliances or cars) fell sharply.” Due to their suspension, high-income households have reduced their spending on in-person services.
This reduction affected small, local businesses the most severely. Small businesses in affluent areas lost more than 50% of their revenue, which led to 50% of low-wage workers losing their jobs. Meanwhile, in low-income areas, businesses lost only 30% of their revenue, leading to 30% of workers losing their jobs. Even worse, it seems abundantly clear that those jobs may not be coming back anytime soon. “Businesses in more affluent areas not only laid off more low-wage workers but are also posting fewer jobs to hire new workers, suggesting that the recovery may take longer in such areas.”
Short-Term Boom, Long-Term Bust
A critical component of President Biden’s stimulus plan is the $1,400 stimulus checks for individuals earning less than $75,000 annually. According to CNN, “Joint filers would receive $2,800 plus another $1,400 per dependent.” This may seem like a necessary measure to combat this recession. But the problem is that the money isn’t spent at struggling businesses.
Source: Opportunity Insights
The CARES Act cost taxpayers $300 billion. The most affected businesses received almost none of it. A majority of the money went to purchases that required no in-person contact. Small business recovery has continued to falter because the stimulus is not reaching them. Without more targeted aid or significant increases in consumer spending, unemployment in these areas will continue to rise.
This wasn’t Congress’s only failed attempt to reignite the economy. The Paycheck Protection Program (PPP) allocated $500 billion to small business loans. Companies with less than 500 employees were eligible so long as they kept employment rates at pre-crisis levels.
Hours worked decreased drastically, even after the PPP program was implemented. This implies that industries less affected by the pandemic soaked up much of this aid too, failing to help small businesses again. In fact, the research team found that “each job saved through the PPP program cost taxpayers more than $370,000.” These programs are an astounding waste of taxpayer dollars. Too much money is being given to people that don’t need it.
Think Outside the Box
President Biden’s relief plan is essential to repairing the US economy. But loans and stimulus packages aren’t enough. The virus itself must be dealt with. High-income consumers that are afraid of contracting the virus won’t use in-person services, which hurts low-wage workers.
President Biden’s bill allocated $400 billion to vaccine acquisition and distribution, but it falls on state and local governments to efficiently vaccinate their communities. So far, the process has been egregious.
A STAT analysis found that Connecticut had a 65% difference in vaccination rates between rich and poor communities, one of the highest in the US. New Jersey, Florida, California, and Mississippi also have alarmingly high disparities. Florida Gov. Ron DeSantis was scrutinized by his opponents for giving vaccines to political donors first. According to The Miami Herald, “nearly all those aged 65 years and older in a wealthy gated enclave in the Florida Keys had been vaccinated by mid-January.” One of those people was former Illinois governor Bruce Rauner, who donated $250,000 to Gov. Desantis’ political committee.
I’m cautiously optimistic that President Biden will lead the US out of this pandemic. But it must be combated with healthcare and economic policies, not just one or the other. There also needs to be a greater emphasis on gathering public data, so inequities can be addressed quickly.
If you liked this newsletter/blog post and want to hear more, check out my podcast The Whiskey Hue, a podcast from startup enthusiasts who are various shades of brown. You can learn more about my professional experience on my website. Sava360 Ventures colleague Harry Ortof | LinkedIn contributed to this article.