'The Danger Is Going Too Small' With Stimulus, Says Biden Economic Adviser
by Dana George | Feb. 4, 2021
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The White House is concerned that doing too little to stimulate the economy is the real danger.
As some lawmakers balk at the price tag of President Joe Biden's $1.9 trillion stimulus proposal, his administration defends the amount. In a series of interviews this week, Jared Bernstein, a member of the White House Council of Economic Advisers, said going too small with the next stimulus package poses a greater risk than going big.
More than a stimulus check
The buzz around Biden's proposal -- called the American Rescue Plan -- is often centered on the issue of a third direct stimulus payment. While there is debate regarding how much those payments should be and which Americans' bank accounts should get another deposit, it's a small piece of the Biden plan.
Bernstein explained the American Rescue Plan is designed to provide resources to all sectors of society, based on the highest-priority needs. The plan puts significant money directly toward fighting the most significant threat of the moment, COVID-19 -- a portion of the proposed $1.9 trillion is slated for the manufacture and distribution of vaccines.
Once enough people are vaccinated and schools open, mothers who left their places of employment to care for children at home can get back to work. According to a White House release on Wednesday, more than 2 million women have left the labor force almost a year into the pandemic, with many staying home to care for children no longer in school or without childcare options.
Another part of the American Rescue Plan is focused on aiding the families and small businesses that need it most. In total, nearly 11 million workers remain unemployed, with 4 million out of a job for six months or longer. Job losses have been disproportionately concentrated in lower-wage jobs, and have disproportionately impacted Americans of color.
Scaled to meet the challenge
In an interview with PBS, Bernstein emphasized the danger of inaction or doing too little. He said that Biden will not settle for any stimulus bill that fails to "meet the urgency of the moment." That means distributing vaccines, getting shots into arms, reopening schools, getting people back to work, and steadying floundering businesses.
The White House release outlines specific hardships facing everyday Americans: At least 15 million adults are behind on rental payments; 24 million adults and 12 million children struggle with food insecurity; and an estimated 80 million adults are not sure how they will cover typical household expenses. According to Bernstein, that is why the American Rescue Plan requires such a high price tag -- swatting at the problem won't get the job done.
K-shaped recovery
The Congressional Budget Office (CBO) forecasts that gross domestic output growth will rebound in 2021, working its way back to 3.7% for the year. While that sounds like good news, Bernstein said tracking the gross domestic product (GDP) has been nothing more than a "spectator sport" for too many families. Even as the economy has expanded, millions of Americans have fallen behind, and GDP has little to do with their everyday lives.
Bernstein is one of the economists who refer to the current situation as a "K-shaped recovery," meaning Americans at the top who have never missed a paycheck are doing well. In contrast, tens of millions at the bottom have been hit hard by health and economic issues.
Bernstein described the American Rescue Plan as designed to impact the bottom leg of the K -- people not as often affected by things like Wall Street gains or the GDP number.
Summing it up
The White House release sums it up by saying, "Our economic strategy in response to this pandemic-induced economic crisis is centered around the belief that the costs of inaction are far higher than the costs of acting too aggressively."
What's clear is that the economy is floundering in rough waters. What's less clear is how willing lawmakers are to work together to steady the ship.
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About the Author
Dana has been writing about personal finance for more than 20 years, specializing in loans, debt management, investments, and business.
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