Equitable Growth responds to passage of American Rescue Plan

Drawing on lessons learned from Great Recession, legislation provides much-needed support for workers and families

FOR IMMEDIATE RELEASE
March 12, 2021
CONTACT:
Erica Handloff, 202-746-5747 ehandloff@equitablegrowth.org

WASHINGTON — President Joe Biden yesterday signed the American Rescue Plan, which provides $1.9 trillion in critical public health investments to fight COVID-19, support struggling families, and grant aid to states, localities, tribes, and territories. The Washington Center for Equitable Growth commends Congress and the president for passing a federal rescue package that meets the scale of the problem and for taking steps to put our nation on a path to recovery that is strong, stable, and broadly shared.

In particular, the plan provides a third round of critical relief checks in response to the coronavirus recession and extends enhanced Unemployment Insurance, ensuring workers who have lost their jobs or had their hours cut will continue receiving the supplemental $300 per week through September 6. Research supported by Equitable Growth shows that robust UI benefits and direct stimulus, scaled to meet economic needs, can help mitigate hardship for individuals and families while also boosting the wider economy, preventing a more severe downturn.

Also notable is the law’s commitment to invest so that our nation emerges from the coronavirus recession stronger, more resilient, and more equitable. Key investments include:

Nearly $100 billion to combat the public health crisis, including funding for vaccine development and distribution and a robust testing and tracing program. The coronavirus is, first and foremost, a public health crisis, and our nation’s economic recovery depends on getting the virus under control.
$350 billion in funding for state and local governments to strengthen employee-employer relationships and sustain aggregate demand in the face of budget shortfalls, which have already left 1 in 20 state and local workers unemployed.
More than $100 billion to expand and improve the Child Tax Credit and Earned Income Tax Credit, which will bolster family economic security for low- and middle-income families, reduce poverty, and improve families’ ability to invest in their children’s human capital development.
$130 billion to help schools reopen safely and $45 billion for child care relief so that students and teachers can return to school; child care workers can weather this crisis, especially in the face of declining enrollment fees; and women, who shoulder the bulk of care responsibilities and have disproportionately left the workforce during the pandemic, can return to work.
$12 billion for nutritional assistance, including the Supplemental Nutrition Assistance Program, or SNAP, which research shows pays health and economic dividends far into the future for both direct recipients and the economy at large.

But while the investments made in the American Rescue Plan are at an appropriate scale given current conditions, a growing body of research highlights the ongoing structural reforms that are necessary to address the underlying racial, climate, and economic crises laid all the more bare by the coronavirus pandemic. In the ongoing response, policymakers can address those fragilities by prioritizing the following:

Automate the recovery. Beyond this package, policymakers should continue to spend as much as is necessary to stabilize the economy and provide sustained relief. Congress has the ability to put economic relief on autopilot by tying it to economic indicators such as the unemployment rate, rather than arbitrary dates, so that relief keeps flowing until economic conditions improve.
Take action to improve U.S. economic measurements. To better reflect economic reality, Gross Domestic Product growth should be broken out for Americans in different income brackets and groups. Both Congress and the Biden administration should direct the Bureau of Economic Analysis to estimate the cost of producing these statistics quarterly and then include that amount in the president’s annual budget request. The administration should also ask Congress to permit the use of IRS tax return data to improve statistical reporting. To advance racial equity, the administration should equip researchers, agencies, and Congress with data tools that more accurately describe the experiences of workers of color and their families.
Tackle the climate crisis. Investments in climate and infrastructure are essential to ensuring long-term economic growth in the United States. Policymakers should prioritize funding to reduce greenhouse gas emissions by investing in technology and creating high-quality jobs, while also building out resiliency measures to mitigate the damage of future climate disasters. Without such investments, climate-related costs will continue to escalate, threatening both human life and economic growth.
Raise the minimum wage and improve enforcement of wage theft. Recessions have long-term negative effects on earnings for workers who are hit hardest, which can last long into the recovery, and evidence shows workers most exposed to income shocks during recessions are also key consumers. Policies that boost their incomes can limit the overall severity of recessions. Furthermore, this recession disproportionately affects workers of color, and research demonstrates that a robust and well-enforced minimum wage has the potential to reduce entrenched racial and ethnic wage disparities.
Provide federally guaranteed paid leave. Paid leave—including parental leave for new parents, medical leave to care for one’s own illness, and caregiving leave to provide care for loved ones—is a critical element of a well-functioning labor market and an important investment in the human capital of tomorrow’s workers. The next relief package should ensure every worker has access to a federal program that guarantees paid family and medical leave benefits so our nation fares better when the next crisis arises.

Following is a statement from Equitable Growth Vice President Casey Schoeneberger:

“I commend Congress and President Biden for passing the American Rescue Plan, which puts the United States on a path to make the necessary investments to address long-term structural inequality and allow for an economic recovery that is strong, stable, and broadly shared. Over the past four decades, the economy has become increasingly unequal, and the coronavirus recession has exacerbated those trends. Black, Latinx, and other Americans of color continue to be disproportionately affected by both the public health and economic crises.

The American Rescue Plan demonstrates a major step toward addressing these pressing burdens, providing much-needed support for families, small businesses, state and local governments, and the economy overall.

Critically, the law draws on lessons learned from the previous major downturn. Research shows that the Great Recession was prolonged and caused long-term scarring. In the decade following, wages stagnated, and working- and middle-class families had barely recovered when the coronavirus recession began, despite record-long economic growth. Indeed, younger workers, rural communities, and many families—especially families of color—never recovered.

The American Rescue Plan, with its sizable investment in supporting low-wage workers, demonstrates a commitment to fully addressing the consequences of the coronavirus recession with an eye toward a more equitable recovery.

Equitable growth will only be achieved if policymakers intentionally prioritize robust public investments in people and communities and sustain the workers and families who are the foundation of our economy. Even with the passage of this package, there is an ongoing need to address the structural fragilities in our economy that make us so vulnerable to economic shocks in the first place. Indeed, research shows that the risk of doing too little to support families and businesses far outweighs the risk of doing too much, and failure to invest enough will exacerbate systemic racial inequities and constrict broadly shared growth.

Congress and the Biden administration have taken an important step forward by providing workers and families with the support they need to weather this crisis and begin to rebuild. The passage of the American Rescue Plan provides a path toward our nation emerging on stronger footing with less economic inequality and more sustainable, equitable growth.”

###

The Washington Center for Equitable Growth is a nonprofit research and grantmaking organization dedicated to advancing evidence-backed ideas and policies that promote strong, stable, and broad-based economic growth. For more information, see www.equitablegrowth.org and follow us on Twitter and Facebook @equitablegrowth.