American Rescue Plan Embodies and Is Likely to Create New Paradigms

March 11, 2021

At 8:00 tonight, U.S. President Biden will deliver his first prime time speech. While the timing of his talk coincides with the anniversary of the imposition of social distancing restrictions to counter the Covid-19 crisis, the address provides an opportune time to justify the American Rescue Plan, which sacrificed the initial desire that the law enjoy bipartisan support for the overriding mandate of taking action in an expedient way.

The new law redefines how one measures “bipartisan support.” To qualify now doesn’t mean pleasing the congressional segments of both political parties but rather to enjoy clear favorable support from voters aligned with each of the parties. Opinion polls consistently indicate the the ARP indeed meets this new standard and that overall is liked by more than two-thirds of the American people. Such appeal exceeds the standard for breaking a senate filibuster or passing a constitutional amendment. When every Republican in Congress refuses to endorse the bill, it’s not a lack of bipartisan support but rather proof that the GOP has become too party-centric and too extreme in holding views far out of step with the majority of the American people.

The ARP also creates a verifiable test for voters to decide which party offers more reliable stewardship for addressing an economic crisis. The new law provides infinitely more fiscal relief than the Obama Administration dared to use against the Great Recession. Republicans objected to a strong fiscal counter-punch in each instance, but Obama, unlike Biden, tapered the size of the stimulus in vain hopes of securing Republican votes that still proved elusive. Alas, the recovery coming out of the Great Recession was atypically gradual. This time, the United fronts of Democrats and Republicans again present very different visions about how best to lead the economy quickly back to pre-crisis levels and do so in a way that will preserve price stability.

In 2016 and 2020, everything was about identity politics, and policy differences hardly seemed to influence how people voted. But once the ARP plays out, voters will have a starker choice than in the recent past. If the U.S. economy springs back much stronger this time and does so without a sustained acceleration of inflation, Republicans may have to answer for their total opposition to the new law. If recovery proves stubbornly slow or inflation proves too rapid and fails to settle back, Democrats will likely be held responsible and voted out. The point is that ARP wasn’t watered down and sets up a test of two very different visions regarding the dynamics of deep recessions and what government ought to do when they occur.

There is another sense in which ARP may establish a new paradigm regarding responsible fiscal management. There are several reasons why U.S. economic growth has been slower in the 21st century than in earlierĀ  post-WWII decades, but empirical evidence suggests that one significant drag has been increasingly uneven growth in household income and wealth. Programs aimed at the middle class and those in poverty aren’t just an arbitrary exercise in redistribution that, as the modern Republican Party attest, slows growth in the overall size of the economy. On the contrary, deregulation and tax cuts that disproportionately benefit the rich increase the polarization of wealth and income. By so doing, that approach slows down U.S. potential economic growth, studies of this development suggest. The American Rescue Package, unlike the big tax cuts of 2001 and 2018, is constructed in a way that should promote some reversal of this toxic wealth and income disparity and set up a test of which political party offers a more compelling vision of how to meet the challenges of the 21st century.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




Comments are closed.