Biden’s COVID Relief Plan: Where Is The Money Actually Going?
WASHINGTON, DC - JANUARY 22: U.S. President Joe Biden speaks during an event on economic crisis in the State Dining Room of the White House January 22, 2021 in Washington, DC. President Biden spoke on his administration’s response to the economic crisis that caused by the COVID-19 pandemic and signed two executive orders.
Alex Wong/Getty Images

In the days before his inauguration, President Biden unveiled the American Rescue Plan — an emergency legislative package to address the COVID-19 pandemic.

Boasting that its $1.9 trillion price tag is “ambitious, but achievable,” the Biden administration’s proposal includes a new round of stimulus checks, eviction moratoriums, tax credits, vaccination funding, and many other initiatives. The Biden team also called $600 stimulus checks — signed into law in December as part of a $2.3 trillion omnibus bill — a “step in the right direction,” but “only a down payment.”

Throwing any concern of a balanced budget to the wind, the American Rescue Plan is rife with exorbitant spending items that will directly and indirectly drain the coffers of the federal government — in addition to the American economy as a whole.

Here are some of the details of President Biden’s American Rescue Plan.

$11 Billion for Other Countries

The omnibus bill passed by Congress last month drew mockery and outrage for allocating billions of dollars to foreign aid — including $10 million for “gender programs” in Pakistan. However, this bipartisan outcry over foreign spending evidently fell upon deaf ears in the Biden administration.

The American Rescue Plan insists that addressing COVID-19 in the United States “requires a global response.” Accordingly, it allocates $11 billion to support “international health and humanitarian response.”

Beyond the immediate impacts of the virus, Americans will watch their taxpayer dollars address “global health, food security, and gender-based violence” overseas, even as they face the same challenges at home.

$130 Billion for K-12 Schools

President Biden’s plan to reopen primary and secondary schools will cost $130 billion — a price tag equal to 195% of the United States Department of Education’s last proposed budget.

Besides improving ventilation, reducing class sizes, hiring janitors, and making socially distant learning possible, the American Rescue Plan suggests that districts should “ensure that funds are used to not only reopen schools, but also to meet students’ academic, mental health and social, and emotional needs” in light of COVID-19. 

For instance, the legislation suggests that schools should use the funds to hire additional guidance counselors.

The most basic premise of the $130 billion price tag — that aggressive sanitation and social distancing is a prerequisite for children to resume their education — may be inherently flawed. 

According to the American Academy of Pediatrics, children composed between 0% and 0.2% of COVID-19 mortalities, with eighteen states reporting zero COVID-related child deaths between March and September.

Data from the CDC confirms that children between 5 and 17 years of age underwent a death rate 16 times lower than that of adults between 18 and 29 — a demographic that likewise experiences slim odds of hospitalization or death from COVID-19.

$35 Billion for Universities

In addition to the $130 billion for K-12 schools, President Biden aims to pump taxpayer dollars into the education sector via colleges and universities.

The American Rescue Plan would allocate $35 billion to the Higher Education Emergency Relief Fund — which already received $14.2 billion from the CARES Act and $22.7 billion from the December stimulus package.

The funds would favor “public institutions, including community colleges, as well as, public and private Historically Black Colleges and Universities and other Minority Serving Institutions.”

Governors will receive an extra $5 billion through the Hardest Hit Education Fund, to be used on the K-12, higher education, or early childhood programs of their choosing.

$20 Billion for Public Transit

Biden’s plan suggests $20 billion in relief for public transit — an industry that already received $14 billion from Congress in December.

Cato Institute senior fellow Randal O’Toole noted that urban transit — which handles less than 1% of passenger travel and represents less than 0.08% of the American economy — received 1.5% of the latest round of Congressional aid. 

“This is testimony to transit’s successful effort to portray itself as essential to urban living even though, outside of New York, it is actually pretty irrelevant,” he wrote in a recent Cato Institute blog post. “It is also testimony to the fact that transit, like someone whose job has been outmoded by automation and who refuses to learn new skills, is pathetically depended on public relief in order to survive.”

O’Toole pointed out that $5.5 billion of the $14 billion package was directed toward the New York City metropolis alone. Los Angeles received nearly $1 billion and San Francisco received $800 million.

Replacing 100% of Wages for Vast Majority of Workers

The Biden plan prides itself on completely replacing the wages of every American who earns less than $73,000 per year — representing more than three-quarters of the entire workforce — through $1,400 weekly paid leave benefits.

Encouraging over 75% of Americans to hang up their work boots indefinitely would deliver a massive blow to the United States economy. A Heritage Foundation report published in April found that “higher unemployment benefits translate into higher levels of unemployment claims and longer durations of unemployment, which translate into lost goods and services.” 

The authors noted that $600 weekly unemployment benefits would discourage Americans from returning to work, increasing unemployment by 13.9 million in the process. As a result, GDP would drop by up to $1.49 trillion.

Even without the massive budget deficit that would result from the federal government directly subsidizing over three-quarters of the population, the United States economy would take a severe productivity hit as a result of disincentivizing work.

$15 Federal Minimum Wage

Perhaps the most audacious portion of the American Rescue Plan is a proposal to increase the federal minimum wage from $7.25 to $15 per hour.

A Congressional Budget Office analysis from 2019 expressed several concerns with federal minimum wage increases. Besides requiring the government to increase pay for federal employees, a wage hike would “also indirectly affect the budget by boosting the prices of some goods and services purchased by the government.”

The analysis also found that a $15 per hour minimum wage would be largely misdirected in its attempt to help those struggling to make ends meet.

“Low-wage workers are not necessarily members of low-income families,” stated the analysis. “Many low-wage workers are in families with high incomes — for instance, some low-wage workers are teenagers in high-income families. 

The agency wrote that about 40% of low-wage workers “are in families with income three times the poverty level or more.”

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