The COVID-19 pandemic and the corresponding economic crisis are devastating families across the world. In America alone more than 20 million people have contracted COVID-19, and at least 370,000 have died.
In releasing details of his coronavirus relief plan, newly elected President Joe Biden envisions a two-part response to the pandemic and economic crisis.
The first aspect builds on previous rounds of relief enacted in 2020, and would provide larger payments to individuals, expanded relief for households and small businesses, funding for vaccine distribution, and aid to state and local governments. In all, the first aspect—called the American Rescue Plan—contains about $1.9 trillion in relief.
The second aspect goes beyond targeted relief measures toward recovery, including infrastructure, green energy, health care, and education initiatives. It will focus on the longer-term recovery and be detailed later this year.
The size of the stimulus package will have likely have a positive impact on the share market and drive growth for a number of years to come. Who ultimately pays back the already high debt levels is yet to be worked out. It is likely to be decades before the US debt levels are under control.
Some of the key building blocks of the Rescue Plan are outlined below:
Direct Payments
Mr. Biden’s rescue plan includes direct payments of $1,400 per person for individuals earning up to $75,000 a year and a rapid phase out in payments so that no household with income above $200,000 a year receives a cheque. The Joint Committee on Taxation (JCT) estimated that providing a $1,400 payment on top of the $600 payment would reduce federal revenue by about $463 billion.
Raising the minimum wage from $7.25 to $15 an hour.
The President hosted a group of top executives from Walmart, Gap Inc. and JPMorgan Chase in the Oval Office as part of his push to rally support for his American Rescue Plan. One of the topics was raising the minimum wage to help improve inequality and those living below the poverty line.
Unemployment Insurance Benefits
Biden’s stimulus package proposes extending the enhanced unemployment support through to the end of August 2021 and increasing the benefit from $300 per week to $400.
Education Relief
The American Rescue Plan provides $170 billion to support school reopening and funding for post-secondary education and $25 billion in support of childcare providers.
Small Business Grants & Loans
Small businesses would be provided $15 billion in grants to help recover from the pandemic. Biden would also use $35 billion in government funding to provide $175 billion in loans to small businesses.
Expanded Paid Sick and Family Leave
The American Rescue Plan would expand and strengthen paid sick and family medical leave through September 30, 2021, for workers who need to quarantine, provide care to family members with COVID-19, or take care of children when day care or schools are closed. Expanded leave would include a maximum paid leave benefit of $1,400 per week for eligible workers, up to a full wage replacement of up to $73,000 annually. No American should have to choose between putting food on the table and quarantining to prevent further spread of COVID-19. And yet, nearly 1 in 4 workers and close to half of low-income workers lack access to paid sick leave. Lack of paid leave is threatening the financial security of working families and increasing the risk of COVID-19 infections, hospitalizations, and deaths.
Pandemic-Related Medical Aid
The American Rescue Plan also includes $160 billion for vaccine distribution, an expansion of testing, and support to reduce critical supply shortages. The Federal Medicaid Assistance Program (FMAP) would rise to 100 percent coverage for the administration of vaccines. The American Rescue Plan further supports health coverage by subsidizing continuation health coverage (COBRA) for those who lose their employer-sponsored health insurance through September 30, 2021. It would increase the value of the Premium Tax Credit used on individual health insurance exchanges to ensure individuals pay no more than 8.5 percent of income for health insurance coverage.
Rental Assistance
Renters and small landlords would receive $30 billion of support. The eviction and foreclosure moratorium and continued forbearance for federally guaranteed mortgages would be extended through September 30, 2021.
Further measured fiscal support can help people weather the ongoing pandemic and its economic effects. Policymakers should continue to work toward simple and efficient relief measures that are consistent with long-term objectives and cost-benefit analysis.
Please do not hesitate to contact us if you have any questions.
Kind regards,
The Coastline Private Wealth Team.
