Biden has a $1.9 trillion economic recovery plan—and a path to achieve it

President-elect Joe Biden calls for a $15 federal minimum wage.
President-elect Joe Biden calls for a $15 federal minimum wage.
Image: Reuters/Tom Brenner
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With Democrats unexpectedly set to control both houses of Congress for the first time in over a decade, US president-elect Joe Biden has laid out an ambitious plan to right the economy in the face of a spiraling health crisis.

Biden outlined the details of his sweeping agenda against the backdrop of rising US jobless claims and Covid-19 deaths. “The crisis of deep human suffering is in plain sight. There’s no time to waste. We have act and we have to act now. This is what economists are telling us,” he said in a speech on Thursday night.

The $1.9 trillion aid package, which he called the “American Rescue Plan,” will include a new round of stimulus checks, more than $400 billion to accelerate vaccine production and distribution and safely reopen schools, augmented unemployment benefits, $350 billion to bolster beleaguered city and state government budgets, and expanded childcare subsidies.

Beyond the initial stimulus package, Biden’s team has said his administration will tackle a longer-term package later in the year targeting corporate tax hikes, infrastructure, clean energy, healthcare, and education.

A creature of Congress, Biden stressed his desire for lawmakers’ support. “I’m truly confident together, together we can get this done.”

The scope and expense of Biden’s plans will make passing legislation tricky, even with a majority in both houses of Congress after picking up two Georgia Senate seats in a special election last week. On the heels of last year’s costly Covid-19 relief measures, the price tag of Biden’s proposal far exceeds the Obama administration’s 2009 stimulus.

Here’s a look at what the incoming president could pull off quickly to boost the economy, and how he might go about it.

The cost of containing Covid-19

Containing the spread of Covid-19 is a top priority in Biden’s plan to revive the economy. He has proposed investing $20 billion to boost vaccine production and distribution through community vaccination centers across the country, a “public health jobs program” of 100,000 pandemic-response employees focused on vaccine outreach and contract tracing, and implementing mask mandates nationwide by imploring governors and mayors. He would also provide emergency paid leave to help Americans hobbled by the economic impact of Covid-related hospitalizations and deaths.

Some of this could be passed by executive order (for instance through the Defense Production Act), and some through the budget legislation process known as reconciliation, though Biden’s preference is to seek broad, bipartisan support.

Economic recovery

Biden wooed voters with the promise of $2,000 stimulus checks while stumping for newly elected Georgia senators Jon Ossoff and Raphael Warnock. “That $2,000 stimulus check—that money would go out the door immediately, to help people who are in real trouble,” Biden said in Georgia during the Senate campaigns. “Think about what it will mean for your lives—putting food on the table, paying rent.”

Incoming Senate majority leader Chuck Schumer has said the $2,000 checks (an upgrade from the already approved $600 in direct aid to all qualifying Americans) will be one of the Democrats’ first priorities, though it remains to be seen whether or how higher-income earners would be included.

Minimum wage and unemployment benefits

As part of the initial relief package, Biden is proposing to raise the federal minimum wage to $15 an hour. He wants to expand federal unemployment benefits to $600 per week, up from the current $300 per week, through the end of September. And he wants Congress to allow for the automatic renewal of emergency economic measures, depending on the state of the recovery.

Support for small businesses

Biden has proposed adding a $30 billion Small Business Opportunity Fund, to make investments in entrepreneurs and small businesses. Unlike the recently rebooted Paycheck Protection Program, this initiative would guarantee relief to all qualifying businesses.

Student loans

As part of Covid relief, the Trump administration, by executive order, deferred student loan payments until the end of January. Biden’s transition team has said extending this policy by executive action will be one of its first moves after Biden’s inauguration. “On day one, the president-elect will direct the Department of Education to extend the existing pause on student-loan payments and interest for millions of Americans with student loans,” David Kamin, incoming deputy director of National Economic Council, said in a briefing last week.

Beyond that, Biden has proposed forgiving $10,000 in federal student debt for all Americans. As with Covid relief measures, he said he prefers to work with Congress on loan forgiveness. Schumer and other Democrats have advocated for using executive authority to erase most or all of Americans’ student debt within the first 100 days. Since most of the $1.6 trillion in student debt is held by the US government, these advocates argue the education secretary has the authority to cancel it.

For his part, Biden has questioned the legality of such a move. “I’m not sure about that. I’d be unlikely to do that,” he told reporters on a conference call in December.

Corporate tax increases and household tax credits

Biden campaigned on raising taxes on corporations and high-income earners. His proposals would roll back tax cuts from the Trump administration’s 2017 tax overhaul, and raise the corporate tax rate to 28% from 21%. He has pledged not to raise taxes on people earning less than $400,000 a year, though analysts differ on how the hikes would affect different income levels.

Biden also proposed various tax cuts and credits for low- and middle-income families, including a tax credit for childcare, renters, and first-time home buyers. The childcare tax credit would total $8,000 per family for one child or $16,000 for two or more children. Families earning between $125,000 and $400,000 would receive a smaller share.

Getting past Congress

Biden now has the benefit of a 50-50 Senate (with the addition of vice president-elect Kamala Harris’s tie-breaking vote) and a slim Democratic majority in the House. This makes it likely that his economic cabinet nominations will be swiftly confirmed. It also gives Democrats the power to control the Senate’s schedule and pass some spending legislation with a simple majority using reconciliation, bypassing the 60 votes normally required to end debate and move to a vote.

As a result, Biden has more room to enact major legislation quickly, without resorting to executive orders and protracted bipartisan compromise. Calls for political unity could also play to Biden’s advantage, after last week’s storming of the Capitol that shook Republicans and Democrats alike.

Still, a razor-thin Senate majority could temper Biden’s ambitions, giving budget-conscious Democrats the power to wield outsize influence over spending in areas where Republicans are unanimously opposed. When senator Joe Manchin, a Democrat from West Virginia, bristled at the “trillions of dollars” Biden last week pledged to spend on an economic relief package, including $2,000 stimulus checks, markets shuddered. “I don’t know where in the hell $2,000 came from. I swear to God I don’t,” he told The Washington Post. “That’s another $400 billion.” Manchin later suggested he was open to stimulus checks if limited to households in need.