March 02, 2021
The “American Rescue” Train is on Track
The first significant legislation of the Biden Administration, the American Rescue Plan Act of 2021, is on the move from the House to the Senate, with a partisan 219-212 vote by the House early in the morning of February 27. All Republicans, joined by two Democrats, opposed the package.
The House’s $1.9 trillion package is largely based on priorities included in the Biden Administration’s American Rescue Plan, which FBIQ summarized in its January edition. Several shifts from the Biden plan have emerged, as have partisan divides over policies and funding. Those divides have been evident in party-line committee votes in the House and will be highlighted in debate and floor amendments as the Senate considers the COVID package. Here we cover the major elements in the $1.9 trillion House bill and how the Senate may change those priorities through the twists of the budget reconciliation process.
The American Rescue Plan Act is focused primarily on individual and community assistance, in line with the Biden Administration proposal. Together that accounts for over 80% of the funding. For context, the $160 billion in the package for COVID-specific health funding—including vaccine purchases, testing and tracing, and Federal Emergency Management Agency (FEMA) costs—comprises less than 8% of the total.
Half of the funds—over $900 billion— are intended for individuals (see Chart I), comprised of a third stimulus check of $1,400 for those eligible; extended unemployment benefits; a graduated increase to a $15 per hour minimum wage; assistance for housing, nutrition and child care; and tax credits. This mix generally tracks the Biden plan; however, the House increased funds for housing, heat and utilities and child care assistance, while decreasing some tax credits. The most contentious item is the minimum wage increase, which the Senate Parliamentarian ruled late on February 25 violates Senate reconciliation rules. This means the minimum wage provision will be removed from the bill in the Senate. The parliamentary ruling is a major defeat for Senate Budget Committee Chairman Sanders (I-VT) and the administration. It could lead to a scramble of late Democratic amendments to accomplish similar goals.
One-third of the Rescue Plan, over $600 billion, is targeted to community assistance, including funding for states and localities, assistance to schools and universities, community programs, and public transit.
Education grants to support school reopening total $169 billion: $129 billion for K-12 Elementary and Secondary Schools (ESSER grants) and $40 billion for Higher Ed (HEER grants). These amounts are in line with the administration’s proposal for school funding, although the House did not include the Biden-proposed funds for Governor’s education grants.
A new addition is the House’s proposal for $7.6 billion for remote learning equipment purchases including Wi-Fi hotspots, modems, routers, tablets, and laptops for K-12 schools and libraries. The purchases will be made through a new Emergency Connectivity Fund using the E-rate program. The legislation specifies that the equipment can be used off-premises, necessitating an FCC regulatory change that is in process. The funding was opposed by Republicans in the committee and an amendment to restrict the funds to schools with in-person instruction was defeated on a party-line vote.
State and local aid is funded at $350 billion, as the administration proposed. This funding remains as controversial as it was in the fall of 2020. Ultimately, no unrestricted state and local funding was provided in 2020, although states had access to a $150 billion fund for specified coronavirus needs. States and localities are strongly advocating for additional funding that will support public services. Countering the states and localities’ position, opponents, including House Republican Leader McCarthy (R-CA), term the money “blue-state slush funds that are not needed.” In short, any funding for states and localities will be hotly debated in the Senate, and the amount may be reduced from the House recommendation.
Federal agencies receive about $150 billion in the House bill, including specific COVID health funds for vaccine purchases, testing and tracing, research and development, and therapeutics. Much of those funds ($69 billion) will pass through federal agencies for COVID-related and other costs, as will the $60 billion slated for FEMA for the Disaster Relief Fund and Defense Production Act manufacture of necessary supplies.
The remainder would provide direct funding to agencies including:
- $14 billion for Veterans Affairs for patient care, including $100 million for supply chain modernization
- $1.9 billion for IRS for program administration and system modernization
- $1.5 billion for the Small Business Administration for COVID-related costs and to administer disaster loan programs
- $600 million for the National Science Foundation to support COVID research
- $500 million for CDC for public health data modernization to support surveillance and analytics
- $500 million for FDA for pandemic-related mission requirements
- $400 million for Health and Human Services for COVID-related costs in programs for children
- $150 million for the National Institute of Standards and Technology for COVID-related research and manufacturer testbeds
The House bill eliminated Biden’s proposal for $10 billion for federal information technology to protect against cyber attacks that featured $9 billion for the Technology Modernization Fund (TMF). One example of the significant differences that may be in the Senate version of the bill is the inclusion of $1 billion for the TMF (seen in an early draft of the Senate bill).
The Biden rescue plan included $15 billion for PPP loans. In contrast, the House bill carries a variety of direct aid for businesses, including PPP expansion, loan assistance, and direct purchases totaling nearly $100 billion. Specifics include $22 billion for PPP small business grants and targeted Economic Injury Disaster Loans; $25 billion for restaurants; $26 billion for airlines, airports and aviation jobs; and $1 billion for performance venues. The agriculture sector would receive $9 billion, about half for loan forgiveness and direct assistance for farmers and the remainder for commodity food purchases. Additionally, the House bill includes $85 billion in grants to multi-employer pensions.
For economic and political reasons, the Biden Administration, Speaker Pelosi (D-CA), and Senate Majority Leader Schumer are intensely focused on getting the American Rescue Plan legislation to President Biden’s desk by March 14. Failure to do so would slow COVID-19 relief and the economic recovery and limit Biden’s legislative prospects for the remainder of the 117th Congress. With enactment of the “rescue” package, the Biden Administration will next focus on “recovery” in a rebuild/infrastructure package and on constructing the President’s FY22 budget request to Congress.
85%The nearly $2 trillion American Rescue Plan Act will be enacted by mid-March.
Editor’s note: this article is an excerpt from February’s FBIQ monthly report.