By GianLuca Moscheni ’22
On January 20th, Joe Biden was inaugurated as the 46th President of the United States, inheriting a number of unprecedented crises: the COVID-19 pandemic, social and political difficulties, and an unstable economy. Other challenges include passing COVID-19 relief bills, acquiring bipartisan support for his environmental agenda, and rebuilding the economy, and tackling both foreign and domestic security threats. Nevertheless, strengthening the nation’s economic health is crucial so that a more robust recovery can take hold.
Since the outbreak of the virus in the U.S. in March 2020, the federal government has assisted both businesses and individuals with various forms of relief. Examples of economic assistance programs have included stimulus checks, increases in unemployment benefits, and the Payroll Protection Program (PPP), which allows small businesses to apply for low-interest loans to assist with covering their operating expenses. These forms of stimulus and social-safety-net measures caused the national deficit to balloon to historic highs.
President Biden formally announced his COVID-19 stimulus plan in early January. The $1.9 trillion plan seeks to assist in a “K-shaped recovery,” a term economists use to describe plans designed to allow various parts of the economy to recover at different rates in response to a recession. When announcing his plan, the President explained, “There is real pain overwhelming the real economy…You won’t see this pain if your scorecard is how things are going on Wall Street.” Although the stock market has rebounded significantly from the sharp downturn during the spring and summer of 2020, Americans continue to face immediate financial hardships. With the current unemployment rate at 6.7%, President Biden’s plan seeks to create millions of jobs through investments in infrastructure, manufacturing, and green-energy projects.
David Oshinsky, a medical historian at NYU’s Grossman School of Medicine, stated, “In terms of direct federal involvement in the lives of ordinary Americans, there has been nothing like this since FDR and the first 100 days of the New Deal.” Certainly, many comparisons can be made between President Biden’s aspirations for economic recovery and FDR’s New Deal, in that the full force and resources of the federal government are required for an effective and timely national response.
A survey from the Center on Budget and Policy Priorities stated that 15% of American households with children currently struggle to have “enough to eat,” as opposed to the 3.4% of households that lacked enough food during 2019. While 20% of these people surveyed cited COVID-19-related reasons (i.e. lockdowns, health problems, etc) for their food insecurity, 80% blame their inability to purchase adequate amounts of food on financial hardships. Moreover, school closings have significantly impacted many families financially, as many students depended on their schools’ free or reduced-priced meal programs. Additionally, many parents have had to alter their work arrangements in order to care for their children participating in virtual schooling. The President has promised to address these issues through his American Rescue Plan, which seeks to administer 100 million doses of COVID-19 vaccines and push for most schools to reopen safely.
In other areas, President Biden has been under fire during the last week for his cancelling the construction of the Keystone XL pipeline, a project which was estimated to create 11,000 U.S. jobs, including 8,000 union jobs. When pressed by Sen. Ted Cruz on what these workers will do in order to support themselves, Secretary of Transportation nominee Pete Buttigieg suggested that workers now in the fossil-fuel industry will get “different” jobs as the green-energy industry continues to grow.
Biden’s tax proposals are largely in favor of making wealthy individuals and corporations pay their fair share. Interestingly, the resulting increase in tax revenue would not be earmarked to reduce the national debt. In fact, Biden’s proposed tax increases are intended to be spent on priorities like climate change, health care, education, and housing. Many Republicans would support some form of tax increases, but they have differing views on how the government should spend the additional tax revenue. A first bill sought by the President and Congressional Democrats is likely to be pandemic relief and changes in health care. With an evenly split Congress, the Vice President serves as the tie-breaking vote. As many of these potential bills pass through the House of Representatives (which is Democrat-controlled), it will be interesting to see what is passed, and how much bipartisan support President Biden’s administration garners.
Biden’s tax strategy is starkly different than that of former President Trump and the Republican-controlled Senate. Biden’s proposed tax plan will likely be heavily disputed in the split Congress (many predict that reconciliation will be the likely avenue to get any bill passed as each tax bill would need 60 votes to pass). Trump’s tax plan reduced the corporate tax rate from 35% to 21%, while President Biden’s plan is to increase the corporate tax rate to 28%. Furthermore, the President has called for a “minimum corporate tax” of 15% applying to book income for companies with net profits greater than $100 million. This minimum tax addresses public concerns that some corporations pay little to no tax, yet reflect significant profits in their SEC filings and publicly available financial statements.
For individual taxpayers, President Biden has proposed to return the top income tax rate from 37% to 39.6%, as well as to repeal the 20% rate on capital gains and qualified dividend income for those individuals whose income exceeds $1 million. Additionally, the estate tax exemption is currently $11.5 million and the excess would be taxed at a flat 40% rate. President Biden’s plan would look to return to the 2009 scheme of a $3.5 million exemption and 45% rate. The President has made clear that his goal is to shift tax increases to high earners, as he has stated that tax increases won’t impact families earning less than $400,000 annually.
With all the turmoil the United States is currently facing, President Biden has much to consider, as the decisions he and his cabinet make will have long-term impacts on the financial health of the nation. There is only so much a President can accomplish via the Executive Order; members of Congress must put aside partisan blinders to do what is necessary and expedient. Most of America faced hardships in 2020. Hopefully, 2021 is a year in which Americans can rebound from the crisis and move towards a better economic future.