Democrats are giving average Americans a load of cash, setting up a clash with Republicans over the social safety net

Joseph Zeballos-Roig
·6 min read
Biden Schumer Pelosi Harris Democrats
Vice President Kamala Harris, President Joe Biden, Senate Majority Leader Sen. Chuck Schumer (D-NY) and Speaker of the House Rep. Nancy Pelosi (D-CA) host a press conference on the stimulus law at the White House. Alex Wong/Getty Images
  • Democrats are pouring stimulus cash onto Americans, selling it as part of an anti-poverty crusade.

  • But those provisions will expire later this year if Congress takes no further action.

  • Experts say the child poverty rate could double next year.

  • See more stories on Insider's business page.

President Joe Biden secured his first major legislative victory on the 51st day of his new administration. He signed a $1.9 trillion economic aid bill into law Thursday, paving the way for a large infusion of federal cash onto middle-class and lower-income Americans.

The package includes various measures to help struggling households a year into the pandemic: A wave of $1,400 stimulus payments, beefed-up tax credits for children and adults, larger food-stamp assistance, and enhanced unemployment insurance. Democrats cast it as among the most historic pieces of legislation that Congress has taken up in many years.

Speaker Nancy Pelosi compared the relief bill to the Affordable Care Act (ACA) passed a decade ago under President Barack Obama, which provided health coverage to millions of Americans. "I think I can safely say, and I've said this to my colleagues in the House on the Democratic side, this is the most consequential legislation that many of us will ever be a party to," Pelosi said on Thursday.

Unlike the ACA, though, the stimulus package does not permanently strengthen America's social safety net. Passed via reconciliation on a party-line vote to bypass a Republican filibuster, all the government aid expires in 2021. It's one reason Wall Street analysts are projecting a strong economic recovery in 2021 - but it may prompt clashes on Capitol Hill.

The law's provisions are designed to provide a temporary boost now or expire later this year. The stimulus checks are one-time payments; $300 federal unemployment benefits are set to lapse on Labor Day; advance child tax credit payments for parents will last only a year.

"I think the fundamental choice policymakers will face then is whether or not they want to swing from maybe the largest one-year child poverty reduction in US history to the largest one-year increase in child poverty," Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty and Inequality, told Insider.

Numerous studies indicate the legislation will make a major dent in the nation's poverty rate, cutting the overall level by one-third and slashing it by half for children. Experts also project millions of Black and Latino kids will be lifted out of poverty due to the child tax credit expansion. The bottom 20% of Americans are estimated to receive a 20% boost in their incomes, per a Tax Policy Center analysis.

Republicans have uniformly opposed this bill as too large and stuffed with progressive priorities. No Republican lawmaker in either chamber of Congress voted for it, viewing it as a slippery slope towards bigger government.

In control of Congress and the White House for the first time since Obama took office, Democrats appear to consider the moment as an opportunity to wage a fresh assault on poverty and leave their mark while in power. Without further action in Congress, child poverty will double next year.

"This package sets a new and powerful precedent, especially for helping children and their families when they have limited or no income," Dutta-Gupta said, adding it was an "earnest attack" on the racial inequalities that the pandemic worsened.

FILE PHOTO: U.S. Sen. Marco Rubio (R-FL) speaks during a Senate Intelligence Committee nomination hearing for Rep. John Ratcliffe (R-TX), on Capitol Hill in Washington, U.S., May 5, 2020. Andrew Harnik/Pool via REUTERS
Sen. Marco Rubio (R-FL). Reuters

The Democratic push to make permanent changes

Democrats are starting to become vocal about pressing to make at least some of the provisional parts of the law enduring - the child tax credit in particular. It would annually provide up to $3,600 per child age 5 and under, and $3,000 for each kid between ages 6 and 17. It also expands it to millions of families who previously did not qualify because of low or zero tax obligations.

Many Republicans oppose it. "If pulling families out of poverty were as simple as handing moms and dads a check, we would have solved poverty a long time ago," Sen. Marco Rubio of Florida wrote in a National Review op-ed. However, they may begrudingly support the measure given its wide scope once it's up and running.

"Republicans will probably end up voting to extend the child credit because they understand it would be political suicide not to," Brian Riedl, an economist at the right-leaning Manhattan Institute, said in an interview. "Once a middle-class benefit is created, it is nearly impossible to let expire. This is so broad, and it is going to be received by so many families."

Democrats appear to be betting enough Republicans will come onboard with an expansion. It may be a risky one given GOP opposition to green-light more government spending after Congress approved $5 trillion in emergency aid over the last year. Sen. Mitt Romney of Utah rolled out a child benefit plan, one paid for by cutting some social programs.

Rep. Richard Neal, chair of the House Ways and Means Committee and an architect of the measure, told Insider this week that he believed the child benefit expansion would establish a pillar of support. "Once it becomes policy, I think there's an acceptance level for it," Neal said.

The shift in Democratic messaging, however, appears to lend credence to GOP arguments that the stimulus law veered from providing immediate pandemic relief to enacting lasting safety net changes.

"Republicans feel vindicated in their opposition," Riedl said. "The ones I've talked to - they've been saying all along that this bill was never about the pandemic or stimulus, this was about permanently expanding the federal government."

Some, like House Minority Leader Kevin McCarthy, are wagering voters will grow disillusioned once they learn more about the law's sweeping reach. He labeled it "a payoff for Pelosi's political allies," though the GOP has struggled to arrange a consistent response.

In 2009, Congressional Republicans' attempts to paint Obama's $800 billion stimulus law as a huge waste contributed to Democrats losing the House in the midterms the following year. That dealt a crippling blow to Obama's ability to push his legislative agenda in a divided Congress.

"I'm a lot less worried about the negative response as people learn what's in the package," Dutta Gupta said. "The depths of the crisis is far worse, the popularity of the bill going through is far greater. I think the benefits seem more salient this time around."

So far, the Biden stimulus law has drawn broad support in multiple polls and surveys. It remains to be seen if other provisions, such as stronger unemployment benefits, could form part of a follow-up economic recovery package.

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