The America Rescue Plan Act was passed and signed into law earlier this month. Another bad short-term response to long-term issues.
The two lead items in most reports are a $1,400 per person payment and continuing the temporary increase in unemployment benefits – both requiring people to be unproductive in order to obtain the money. The means testing of benefits has got to go to incentivize productivity. Furthermore, the unemployment benefits were made more valuable since they are no longer taxable income, further reducing the incentive to be employed. I presume that is why so many businesses are having trouble finding employees; it pays so much better to not work.
It is sad that this $1,400 per person payment is just temporary support offered the citizens of this country, when this current situation is a chance to meaningfully reform government benefits. How long will $1,400 last? Then what? We need to decide as a country that no citizen is to go without certain basic resources — food, housing, medicine for examples. To do that, let’s provide benefits to every citizen. No waiting for some bureaucrat to decide you are worthy. No insecurity that you might do some otherwise reasonable activity that terminates the benefits.
A third flaw is found in the size of the bill. The $1,400 payment that gets the most press is less than a quarter of the amount appropriated. Generally, a temporary relief bill to get past a temporary disaster should not be larger than the lost economic activity. That tends to be quite inflationary, and shows that the bill is not really about relief. Even Larry Summers, a very liberal economist who was the Secretary of the Treasury under Clinton, uses this criteria to say that the bill is way too big. He suggest a maximum of $380 billion, or a little less than the direct payments to the citizens. See https://www.washingtonpost.com/opinions/2021/02/04/larry-summers-biden-covid-stimulus/.
Fourth, this bill includes so many things not related to COVID. Examples:
- Reduce flexibility of GI Bill education benefits.
- Aid to state and local governments when their revenues are only down .4% (Wall Street Journal, 3/13/2021) — certainly an amount that any budget should be able to handle as out of contingency funds.
- Doubling down on Obamacare, trying to rescue that failed program.
- $270 million to the National Endowment for the Arts and National Endowment for the Humanities.
- $50 million to the Environmental Protection Agency while lower economic activity has reduced pollution.
- $50 million to family planning services as outlined in Title X.
Fifth, we see that this bill shows that our representatives value teacher unions over the actual education of our children. This bill only supports government-run schools at a time when the pandemic has revealed the flaws of those schools to so many parents. Further evidence that this is not about the pandemic is that the aid to schools can run through 2024 — long after the pandemic is expected to be over. Note that schools have not yet spent all the money from pervious stimulus bills (Kiplinger Letter 2/26/2021).
This bill also increases the child tax credit. Again, this benefit is means tested, temporary, and there is no requirement to spend it on basic needs. We also would prefer to see an agency other than the IRS distributing benefits. They are not known as compassionate or timely — both important characteristics of agencies distributing benefits. (Note Romney’s recent proposal for child benefits would fix this last issue.)