President Joe Biden’s $1.9 trillion Covid-19 relief package is on the brink of becoming law. While it may not have been everything many Democrats hoped and dreamed of, the bill is a pretty big deal.
After days of wrangling over last-minute changes to the bill text, the United States Senate passed the relief bill midday Saturday. The vote was 50-49 along party lines. The bill includes $1,400 stimulus checks to millions of Americans, extends expanded unemployment until September 6, and doles out billions of dollars toward vaccinations, testing, state and local governments, schools, and businesses.
Much of the back-and-forth in recent days has been over making small changes to the legislation on the margins — margins that, to be clear, will affect millions of people.
The scope of stimulus check recipients was scaled back, so that they will go to people making up to $75,000 a year ($150,000 for couples) and phase out at $80,000 ($160,000 for couples). Previously, the phaseouts were set at $100,000 and $200,000, respectively. That change cuts eligibility for an estimated 12 million adults and nearly 5 million children, though it is worth noting this bill expanded check eligibility to adult dependents, such as college students and those with disabilities.
The president’s original plan was to extend expanded unemployment insurance through September, and to pay out an extra $400 a week instead of $300. There was some hope Democrats would put automatic stabilizers in the bill tying supports to economic conditions, but those didn’t make the cut, and a federal minimum wage hike will have to wait for another day.
The legislation will get much-needed help to a lot of people, and that is a win for them. That a bill this sweeping is happening at all was not guaranteed: Had Democrats not won both Georgia Senate runoffs in January, it would look far different, or maybe not exist at all.
Here’s a look at the winners and losers of the $1.9 trillion stimulus package, which is now headed back to the House of Representatives and likely to Biden’s desk in the days to come.
Winner: Social democracy
In 2014, sociologist Lane Kenworthy published an ambitious book titled Social Democratic America. In it, Kenworthy argues that not only would America benefit from a more expansive welfare state, but that it likely will adopt such a social democratic model in the coming years.
This prediction rests in part on a two-step theory about how the US welfare state expands. First, policymakers become aware of a problem that’s best solved by expanding social benefits — poverty and economic insecurity among older adults, for example. Second, the program designed to solve it — Social Security, in this example — becomes so popular and entrenched that it’s impossible to roll back.
Kenworthy’s analysis helps us understand why the consequences of the stimulus bill’s direct cash provisions — the $1,400 checks and the expanded child tax credit — could end up being even bigger than we think.
In theory, these programs are designed to address the specific problem of families suffering from the Covid-caused economic disaster. In practice, they’re likely to prove so popular that there will be increased demand for more direct government provision of checks, both in crises and outside of them. Proposals like Sen. Mitt Romney’s child allowance, in which the government would send monthly checks to families of young children in perpetuity, are all of a sudden looking more like plausible legislation.
Indeed, all of this was set up by the initial decision to include $1,200 direct checks in last March’s stimulus bill. As my colleague Dylan Matthews writes, it seems like we’re already seeing the idea of direct provision catch fire:
Cash’s bipartisan popularity, and its ability to muster large-scale public interest and support, suggests that the future might involve a lot more policies like checks — even when the pandemic has passed. Covid-19, in other words, may have done what years of basic income advocacy could not do on its own: convinced our political class that handing out cash is a good, popular, economically effective policy.
We could very well be seeing Kenworthy’s social democratic ratchet effect in real time: an economic crisis best solved by expanding government, and the popularity of this government expansion leading to its institutionalization. The US is certainly a long way from a European social democratic model, but the stimulus bill may prove to be a major step in that direction.
Loser: Deficit hawks
The Democratic left faced a few setbacks during the debate over the Covid-19 relief bill. Moderate Sens. Jeanne Shaheen (D-NH) and Joe Manchin (D-WV) successfully pushed to deny direct payments to individual Americans making over $80,000, a change that’s likely to make the bill less popular while only cutting $12 billion from a $1.9 trillion package. And the bill does not include a $15 minimum wage, a reform championed by Sen. Bernie Sanders (I-VT).
But these setbacks only marginally decrease the ambitiousness of one of the most aggressive spending bills in American history. In 2019, the last year before the pandemic, the federal government spent a total of $4.4 trillion. So this $1.9 trillion Covid-19 relief bill costs more than 40 percent of the total amount the government spends in a typical year.
If you lived through President Barack Obama’s first term, the extent of the Democratic Party’s turn away from deficit hawkery is nothing less than miraculous.
In 2009, at the height of the deep recession that began the previous year, Obama signed an $800 billion stimulus bill intended to jump-start a struggling economy. Economists now view this mix of spending and tax cuts as having been far too small. The US economy stopped hemorrhaging in the wake of Obama’s efforts to fix it, but the Great Recession gave way to years of sluggish growth.
Nevertheless, it’s unlikely that Obama could have secured significantly more funding given the politics of this era. Even his own advisers split on whether the Democratic Party should risk being labeled the party of fiscal profligacy.
Two years later, after Republicans took control of the House in 2011, Obama negotiated with Republicans for a “grand bargain” to slash the deficit. He even offered to cut programs that Democrats traditionally view as sacred and untouchable, such as Social Security. And it’s likely that Obama would have agreed to such cuts if Republicans hadn’t killed any chances of a grand bargain by refusing to allow higher taxes on the wealthy.
A decade later, fiscal politics has changed dramatically. Obama’s cautious approach in the 2009 stimulus bill did nothing to protect Democrats from brutal losses in the 2010 midterms. And, after Obama agreed to spending cuts in 2011 and 2013, the economy grew at a steady but unimpressive pace for the remainder of his presidency.
Biden, for his part, believes one of the lessons of the Obama years is that caution is no virtue in the midst of an economic crisis. “One thing we learned is, you know, we can’t do too much here,” Biden told reporters shortly after taking office. “We can do too little. We can do too little and sputter.”
The rest of the party appears to agree with him. Every single Senate Democrat and nearly every Democratic House member voted for the Covid-19 relief bill. Deficit hawkery has taken a back seat in the party, for now.
Loser: Moderate Senate Republicans
In early February, moderate Senate Republicans were riding high, confident they could strike a deal with Biden on Covid-19 relief.
A group of 10 Senate Republicans scored the coveted first Oval Office meeting with the new president, sitting down with Biden in person before even Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi. The Republicans thought Biden’s $1.9 trillion bill price tag was far too high, so they proposed a $618 billion counteroffer.
“I am hopeful that we can once again pass a sixth bipartisan Covid relief package,” Sen. Susan Collins (R-ME) told reporters as she exited the February 1 White House meeting.
That was about as far as bipartisan talks went. A few weeks later, Collins had pretty much soured on the prospect of getting a bipartisan deal done, telling Capitol Hill reporters that talks with the White House had “stalled.” There was no real middle ground to be had on Covid-19 relief talks; the administration was sticking to its opening bid.
“The administration has not indicated a willingness to come down from its $1.9 trillion figure, and that’s a major obstacle,” Collins told reporters in late February.
Though the White House had said it was willing to negotiate — and certainly, some things in the final bill were different, like the lack of a $15 minimum wage — the final bill’s price tag is, remarkably, about the same as when Biden first announced it.
Moderate Republicans who had gotten overtures from the White House found themselves largely left out of the process because public polling indicated the bill was broadly popular with voters of both parties. And Biden and his top economic advisers had absorbed the lessons of the Obama era on stimulus: that going big on the economy when you have the chance is preferable to going small.
Speaking to reporters, Collins blamed Biden’s top staff, namely White House chief of staff Ron Klain, more so than Biden himself.
“He’s doing a good job at outreach,” Collins said of Biden. “He was very attentive and gracious, into the details; there was a great discussion. And Ron was shaking his head in the back of the room the whole time, which is not exactly an encouraging sign.”
Moderate Republicans ended up losing out on the first major bill of the Biden era. The remaining question is whether this could come back to hurt Biden in future congressional negotiations on his forthcoming infrastructure plan, or other big legislative priorities.
Winner: Small (and big) businesses that fought a minimum wage hike
The Chamber of Commerce and businesses big and small have fought hiking the minimum wage for years. In the Covid-19 relief package, they racked up yet another victory on that front: not just with the Senate parliamentarian’s ruling that it couldn’t be passed through budget reconciliation, but also that the $15 federal minimum wage amendment was defeated with eight Democratic votes. The federal base rate will remain at $7.25, where it’s been since 2009.
That Democratic lawmakers gave up relatively easily on the “Fight for $15” for now draws attention to a glaring reality: There’s not consensus among the caucus that it’s a good idea. Manchin has been quite clear he’s not into the $15 idea. He’s not entirely opposed to raising wages at all; he’d just like something smaller, like, say, $11.
There’s no denying that many small businesses have struggled during the pandemic, and that even in normal times, running a business — including paying employees — is hard. But it’s also hard to argue that $7.25 is a living wage anywhere in America under any circumstances. Many cities and states are already requiring higher wages, and, again, any wage increase would phase in. It’s not like everybody would have to pay $15 tomorrow.
“Sometimes it’s lost on folks on folks that the wage increase is gradual,” said Rebecca Dixon, executive director at the National Employment Law Project. She also emphasized that a low minimum wage disproportionately impacts certain groups — namely, Black and Hispanic workers, particularly women. “More than half of Black folks live in the South, so when we’re talking about raising the minimum wage, that’s the only way it’s going to be raised in the South,” she said.
While Democrats say they’ll keep pushing on the minimum wage, if and when that push will turn into law remains unclear. They may find some consensus on the matter, but they haven’t yet — a Senate amendment to put a $15 minimum wage back in the Covid-19 bill was voted down on Friday, with 58 senators voting against it.
Winner: Joe Manchin
Sen. Brian Schatz walks past Sen. Joe Manchin in a hallway of the Capitol.— Sahil Kapur (@sahilkapur) February 2, 2021
“Your highness,” Schatz greets him.
Manchin acknowledges his colleague, keeps walking.
It’s good to be the king. And when you’re Sen. Joe Manchin (D-WV), the pivotal vote in a 50-50 Senate, representing a deeply conservative state and knowing Democrats are lucky to even have you, you’re the king.
The pandemic relief bill passed by the Senate unmistakably bears Manchin’s stamp. The Senate parliamentarian may have technically scuttled the $15-an-hour minimum wage increase by ruling it non-budgetary, but it was Manchin’s opposition to the underlying policy that doomed any chance of fixing it. It was Manchin, too, who insisted on capping check eligibility at $80,000 incomes (for childless single filers) rather than $100,000.
That was even before he decided to make a real spectacle on Friday, by threatening to derail a deal that progressive and moderate Democrats had struck that morning on changes to expanded unemployment insurance.
To satisfy the moderates, progressives had agreed to cut the additional UI benefits from $400 per week to $300 — but they’d last through September, and federal income taxes on the first $10,200 of benefits would be forgiven. The White House endorsed the deal, and the Senate seemed set to move ahead. But Manchin decided that deal wasn’t good enough for him, and that he might well vote for a competing Republican amendment on the topic.
For procedural reasons, Democrats held open their previous floor vote for more than 10 hours — setting a Senate record — so they could frantically negotiate with Manchin behind the scenes. In the end, Manchin agreed to their proposal with fairly minor additional changes (the tax forgiveness on UI benefits would not apply to wealthier households, and the benefits would cut off in early September rather than late September).
Some of his other demands may have been substantively, and perhaps even politically, ill-advised, as well. His changes to the checks created a situation where at least some upper-middle-income earners who received checks under President Trump will not get checks under Biden. The White House estimates 2 percent of households (3.5 million) who received at least some money from the December relief package won’t get any from this one. The Institute on Taxation and Economic Policy estimates 5 percent of adults are left out as compared to House Democrats’ bill. Disappointing those people shaved just $12 billion off what’s still a $1.87 trillion package.
So there’s a strong case that, as the Nation’s Jeet Heer writes, all this was “gumming up the work for the sake of gumming up the works, pure performative centrism without rhyme or reason.”
But removed from substance, the crux of what happened is that Manchin made demands, and Democrats agreed to them to secure his vote. Because of that, he gets to be covered in the press as having forced difficult changes to the bill rather than simply going along with what Biden wants — even though, in the end, he really did go along with the vast majority of what Biden wanted. He knew he had leverage, and he used it.
Winner: Millions of Americans who need the help
On Friday, as senators debated the relief bill, the Pew Research Center released a survey on how Americans are experiencing the pandemic economy. Its findings were pretty staggering: 39 percent of upper-income adults said their financial situations had improved over the past year, while 32 percent of lower-income adults said they’re worried about being able to buy food, and similar numbers said they’re worried about the cost of health care, paying their mortgages, and losing their jobs.
While the stimulus bill isn’t perfect and certainly could have been more generous — unemployment insurance benefits kept at $400 instead of $300, the stimulus checks with a higher phaseout — it’s going to get meaningful assistance to a lot of people. The US is still some 10 million jobs short of where it was pre-pandemic, and expanded and extended unemployment benefits will be there to support workers as those jobs begin to return.
The House version of the bill had $400 in UI benefits until August 29. Now the Senate version has $300 in weekly benefits until September 6. The package also contains an all-important provision that the first $10,200 in benefits won’t be taxable for households with incomes up to $150,000, protecting many workers from receiving a surprise tax bill they might not be able to pay.
Some people who qualified for stimulus checks before won’t this time around, because their incomes are too high, but adult dependents — including college students and those with disabilities — will be eligible for checks for the first time. The expanded child tax credit and earned income tax credit will mean real money gets to real people. And, of course, funds toward testing and vaccines will hopefully make the light at the end of the pandemic tunnel a little closer and a little brighter.
Democrats and many economists have warned that the risk on the economy is doing too little, not too much. We won’t know where this falls in all of that until years from now, but Biden set out to take a big swing to help a lot of people, and he did it.
Winner: Private insurance
The stimulus package would be the most significant step in the past 10 years toward patching some of the holes in the Affordable Care Act.
The most effective provision would be a two-year expansion of the ACA’s premium subsidies, which Americans can use to purchase private health insurance on the marketplaces the law established. The relief bill would increase the size of the subsidy for those already eligible for assistance (people making between 100 and 400 percent of the federal poverty level). It would also extend subsidies for people earning more than 400 percent of the poverty level, ensuring that nobody would pay more than 8.5 percent of their income for health coverage.
This would provide help to one of the populations left out of the ACA: the roughly 2.6 million people who make too much money to qualify for subsidies and are currently uninsured.
Based on prior estimates of such a proposal, somewhere between 4 million and 5 million people would be expected to gain coverage as a result of expanding the subsidies. The Biden administration has already opened ACA enrollment to everybody until May 15, which would give people an immediate opening to take advantage of the new benefits.
Loser: Expanding Medicaid to remaining Republican states
Democrats are also trying to plug one of the other biggest holes in Obamacare: the so-called Medicaid expansion gap.
The 2010 law was written with the intention that every state would expand the program to people living in or near poverty. But then the Supreme Court ruled that the federal government couldn’t force states to expand Medicaid; they must have a choice. As a result, 12 states have for the past decade refused Medicaid expansion, and an estimated 2.2 million Americans who otherwise would have been covered by the expansion are still uninsured and have no other realistic option for affording coverage. Most of them live in the South, and they are disproportionately Black.
Democrats now are offering a new enticement for the holdout states to expand Medicaid. Already, under the ACA, the federal government would cover 90 percent of the expansion’s costs. Under the stimulus bill, newly expanding states would also receive a 5 percent bump in the federal funding match for their traditional Medicaid programs for two years. Because the traditional Medicaid population is significantly larger than the expansion population, the funding bump is projected to cover a state’s 10 percent match for expansion enrollees and then some over those two years.
But conservative state officials don’t sound interested in taking it. Based on an informal survey of the states that have yet to expand Medicaid, the provision in the stimulus bill that provides increased funding for states that expand the program now may end up having no effect at all. That would mean millions of people in poverty remaining uninsured.
I hopped on a press call this week with Mississippi Gov. Tate Reeves, a Republican, to ask him whether the new funding incentive would prompt him to reevaluate the decision to refuse Medicaid expansion.
“No, sir, it will not,” was his answer.
I heard the same from other governors’ offices in the non-expansion states.
“The Governor remains opposed to the expansion of Medicaid in Florida,” Cody McCloud, spokesperson for Florida’s Republican Gov. Ron DeSantis, said in an email.
Laine Arnold, a spokesperson for Tennessee Gov. Bill Lee, also a Republican, said the governor was focusing on implementing the state’s new Medicaid block grant approved in the final days of the Trump administration.
“Governor [Kristi] Noem knows that expanding Medicaid is not the answer to accessing quality healthcare in South Dakota,” Ian Fury, a spokesperson for the South Dakota Republican governor, said in an email.
Their intransigence has created a bizarre disparity for the stimulus legislation, which will likely succeed in extending more generous premium tax subsidies to middle-class Americans but appears destined to fail in covering uninsured people in poverty.
If Democrats are serious about closing the Medicaid expansion gap now that they control Congress and the White House, they’ll need to find another way. The stimulus bill is not going to get the job done.