Biden unveils $1.9trillion economic plan as US recovery buckles

President-elect Joe Biden will propose injecting $1.9 trillion into the US economy when he takes office next week, as evidence mounts that the recovery from the sharp downturn caused by Covid-19 is flagging.

With his fellow Democrats narrowly controlling both houses of Congress, Biden has a shot at passing what would be the United States' third massive pandemic aid package.

Dubbed the American Rescue Plan, the proposal released Thursday includes a host of measures aimed at revitalizing the world's largest economy.

Biden aims to raise the federal minimum wage to $15 an hour, help struggling state and local governments, safely reopen schools, roll out a massive Covid-19 vaccination campaign and raise the size of stimulus checks Congress approved last month.

"The return on these investment in jobs, racial equity will prevent long-term economic damage, and the benefits will far surpass the cost," Biden said during a speech in Wilmington, Delaware. "In this moment of crisis... we cannot afford inaction."

Top Senate Democrat Chuck Schumer and House Speaker Nancy Pelosi embraced Biden's plan, vowing to put it before lawmakers.

"We will get right to work to turn President-elect Biden's vision into legislation that will pass both chambers and be signed into law," they said in a joint statement.

But this is just the first step, and the officials said Biden intends to present a second "recovery" plan to lawmakers soon after his inauguration on Wednesday aimed at spurring hiring and fighting climate change.

"We'll use taxpayers' dollars to rebuild America. We'll buy American products, supporting millions of American manufacturing jobs, enhancing our competitive strength in an increasingly competitive world," Biden said.

Uncertain path

The government on Thursday reported a spike in new jobless claim filings in the first week of 2021 to nearly a million, its highest level since August, while official data last week showed the economy shed jobs in December.

Biden, 78, will take office after a tumultuous transition that saw a violent mob invade the US Capitol, egged on by outgoing President Donald Trump, as lawmakers were meeting to certify the Democrat's election victory.

His stimulus proposal builds on two massive relief packages Congress approved in 2020, both increasing and extending through September unemployment benefits that have helped tens of millions of people pay their bills after losing their jobs during the pandemic.

It additionally calls for devising a way to maintain those programs if unemployment stays high, and also continues expanded government food assistance as the country struggles with some of its highest hunger levels in modern times.

But controversy could await the plan's provision of $350 billion in funding to state and local governments, which Republican lawmakers blocked throughout last year.

Also potentially challenging is the president-elect's move to increase the size of stimulus checks Americans received in the December package to $2,000, which would fulfill a campaign promise.

But with only the slimmest of majorities in Congress -- including an evenly split Senate where Vice President-elect Kamala Harris could have a tie-breaking vote -- Democrats will have to woo some Republicans if anyone in their party breaks ranks.

One Democratic senator has already expressed hesitation over increasing the payments, but earlier this week Republican Senator Marco Rubio told Biden he would back the additional aid.

The proposal also calls for $160 billion to fight Covid-19, including through a national vaccination campaign, and $170 billion for schools, with the goal of getting most institutions with students in kindergarten through eighth grade open in the first 100 days of his administration.

Would it work?

Prior to the release of the specifics, Michael Feroli of JP Morgan predicted Congress could pare Biden's plan down to the $900 billion range, matching the measure approved last month.

Even the smaller amount would boost GDP growth this year to 5.3 percent and in 2022 to 2.6 percent, he said, a "remarkable expected turnaround" aided also by negligible inflation and the Federal Reserve's maintenance of low borrowing rates.

Other aspects of Biden's plan include expanding tax credits aimed at fighting poverty and helping working parents afford childcare, plus extending a moratorium on evictions.

The plan offers flexible credits and grants for the small businesses that are major employers but have struggled to survive as states imposed restrictions to stop the virus.