February 25, 2021

Democrats' Flawed 'Relief' Plan


KEY TAKEAWAYS

  • Congress has provided unprecedented support in response to the COVID-19 pandemic.
  • The economy is bouncing back strongly, with GDP projected to return to its pre-pandemic level by the middle of this year.
  • Instead of focusing on overcoming the virus and supporting people who have been harmed the most by it, the Democrats’ $1.9 trillion legislation spends hundreds of billions of dollars on untargeted ‘relief’ and advances policies that have nothing to do with COVID recovery. 

In response to the COVID-19 pandemic, Congress has enacted the largest relief package in history: $4 trillion over five laws passed with bipartisan support. This dwarfs what the country spent in response to past emergencies such as supporting airlines after 9/11; the Troubled Asset Relief Program during the 2008 financial crisis; and the American Recovery and Reinvestment Act in the Great Recession. Instead of pausing to determine where more help is needed and to ensure the existing resources are spent effectively, Democrats are ramming through another $1.9 trillion bill on a partisan basis.

COVID Relief Already Far above Other Emergency Spending

Democrats' Flawed 'Relief' Plan

Thanks in part to the efforts of Congress, the economy is showing strong signs of recovery. The Congressional Budget Office projects that even without any additional federal spending “real (inflation-adjusted) GDP is projected to grow by 3.7% in 2021, returning to its pre-pandemic level by the middle of the year.” CBO predicts that the growth of real GDP will average 2.6% per year from 2021 to 2025 and 1.6% per year from 2026 to 2031.

The Economy Is on the Road to Recovery

Democrats' Flawed 'Relief' Plan

Further relief needs to be a bridge, targeted toward overcoming the virus and supporting people who have been harmed the most. The Democrats’ $1.9 trillion legislation fails this test. It includes $413 billion in direct checks, including payments for households that have experienced no financial hardship due to the pandemic. Congress already gave more than $450 billion in direct payments to Americans in 2020, which many people have just added to their savings. The bill also includes $350 billion for state and local governments, even though many of them ended the year with stronger-than-expected revenues. A recent analysis from Moody’s Analytics concluded that, after accounting for federal aid already provided, 31 states will have no revenue shortfall at all, and net shortfalls across the country will total just $56 billion. The authors noted, “Any additional aid to states and local governments should be smaller and more targeted than what has been proposed to date.”

Most States Are Expected to Have No Shortfall in Revenue

Democrats' Flawed 'Relief' Plan

In contrast to the bill’s excessive spending where there is no need, only 1% of the money would go for COVID-19 vaccines, and just 5% is focused on pandemic public health.

Democrats Are Focused on the Wrong Things

Democrats' Flawed 'Relief' Plan

The Democrats’ legislation claims to be emergency relief, but according to CBO much of the money would not be spent for several years. The bill includes $128.6 billion for schools but only spends 5% of it by the end of this fiscal year – just $6.4 billion. It would take another seven years for the rest of the money to be spent.

Emergency Funds for Schools Remain Unspent until 2028

Democrats' Flawed 'Relief' Plan

Democrats also miss the mark by using COVID-19 legislation to push policy priorities that have little or nothing to do with responding to the pandemic. The bill increases the value of Affordable Care Act subsidies and expands eligibility for them through 2022. It increases the federal minimum wage to $15 per hour by 2025, which CBO estimates will kill 1.4 million American jobs, disproportionately affecting young, less educated people. The bill creates a new program at the IRS to make monthly advance payments of an expanded child tax credit, raising the potential for fraud and abuse while diverting the tax agency from its core mission.

Non-COVID Democratic Priorities in the Bill

Democrats' Flawed 'Relief' Plan