In March of this year, President Biden signed the American Rescue Plan, a massive 1.9 trillion dollar stimulus package into law, providing checks to millions of Americans, giving funding to vaccination efforts, and providing money to state governments and local communities.
At the time, the country was recovering from COVID as vaccination rates were starting to increase. According to critics of the plan, the bill would inject unnecessary funds into the economy and would lead to inflation at a time when the economy is recovering from a deadly pandemic. However, proponents say that the money provided to communities would be a lifeline for those who have been treated harshly over the past year, and could stimulate the economy through massive consumer spending.
The Center on Budget and Policy Priorities is very supportive of the bill. In an article, the website says that minorities, such as Black, Latino, and Indigenous people experience greater economic hardship, including higher unemployment rates, than the national average. Additionally, millions of families report that food insecurity is an issue for them, and millions more have problems with rent and general expenses. The article explains that the American Rescue Plan would be able to offer these families assistance.
To combat poverty in the COVID-19 pandemic, the bill extends federal unemployment benefits to help unemployed workers cover expenses such as rent and food. This would especially help those who had previously worked a low-wage job, as this category of jobs had accounted for over half (55%) of all job losses since the pandemic began in earnest in March.The Wharton School of the University of Pennsylvania largely corroborates these facts, saying that job losses are “concentrated largely among lower-income workers”, and stating that unemployment benefits would largely be beneficial to jobless workers.
Gross domestic product, or GDP, would sharply increase during 2021 as growth rates spike due to consumer spending, according to the Wharton report. However, in later years, GDP growth will shrink a bit because of the crowding out effect, where the government has to borrow lots of money in the loanable funds market to finance its spending, leading to a reduction in private investment. (This is called the crowding out effect in macroeconomic theory.)
Overall, it seems like a short burst of high spending that would pull us out of this recession from an economic standpoint, and provide funding for essential services that would get us out of this pandemic. My only concern is deficit spending, but I don’t think it would be too bad, especially considering the positive aspects of the bill (now law.)
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