Biden economic plan to test Congress’ COVID relief fatigue

$600 stimulus payments will start going out tonight, Mnuchin says

President-elect Joe Biden’s ambitious economic recovery plan outlined Thursday met with plaudits from Capitol Hill Democrats, but much of its fate hinges on Republicans in a narrowly divided Congress.

And the sweeping nature of Biden’s $1.9 trillion plan, coming on the heels of Congress approving trillions in economic aid to offset the effect of the pandemic in 2020, will test Republicans’ appetite for spending more and potentially give Biden a political win early in his administration.

“With a COVID relief package President-elect Biden announced last night, he is delivering on what he said when he was elected: help is on the way,” said House Speaker Nancy Pelosi at a press conference Friday.

Sen. Pat Toomey, a Pennsylvania Republican, said the spending was unneeded, after Congress approved the $1.7 trillion CARES Act and other relief measures in 2020, including $868 billion in relief in December.

“Blasting out another $2 trillion in borrowed or printed money — when the ink on December’s $1 trillion aid bill is barely dry and much of the money is not yet spent – would be a colossal waste and economically harmful,” Toomey said.

And that view could well be the prevailing one among Senate Republicans when they return to Washington Jan. 20 for the swearing-in of Biden and the possible impeachment of Donald Trump.

“Socialism for rich people is a terrible way to help the American families that are actually struggling,” Senate Majority Leader Mitch McConnell said on New Year’s Eve in rejecting Democratic plans to boost stimulus payments to families from $600 to $2000. That boost is included in Biden’s plan.

McConnell has instead advocated for seeing how the economy responds to past stimulus bills before greenlighting a new one, but an economy at risk of a potential second dip in a double dip recession may force his hand.

U.S. payrolls declined by 140,000 in December and the unemployment rate held steady at 6.7%, breaking its string of improvements since spiking in the spring of 2020 after the first pandemic lockdowns.

Failure to woo Republicans in the Senate, where 60 votes are needed to break a filibuster means the package will either have to be slimmed down dramatically or possibly pushed through on a party-line basis using a process called budget reconciliation.

“Count us skeptical that Democrats can find enough bipartisan support to pass a $1.9 trillion deficit-financed plan by the end of February. If and when Democrats fail the bipartisan route, that leaves them having to use budget reconciliation,” said Washington-based Beacon Policy Advisors LLC in a note to clients.

Reconciliation allows bills to pass the Senate on a simple majority, which Democrats would have when Kamala Harris is sworn in as vice president, but it also restricts the scope and cost of legislation. To use it, Democrats would need to first pass a budget resolution setting out spending, tax and deficit targets for upcoming years, which will pose its own political risks.

But “going big” gave Biden some wiggle room in negotiations with either Republicans or moderates in his own party, like West Virginia Democrat Sen. Joe Manchin.

“We suspect that the President-elect deliberately included some provisions that will have to be whittled down. He might not get $400 billion for state and local governments, and the minimum wage might not rise to $15 per hour, at least not right away,” wrote Greg Valliere, chief U.S. policy strategist with AGF Investments.

Whether and how much Biden has to trim his sails could be up to an ad hoc bipartisan group of moderates in the Senate. The group, first organized by Alaska Republican Sen. Lisa Murkowski and with Manchin as its most prominent Democratic face, played a big role in the December stimulus package.

Requests for comment on the Biden plan Friday to Manchin and Murkowksi’s offices were not immediately returned.

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