Passage of the nearly $2 trillion American Rescue Plan should be counted as a political victory for President Joe Biden, there’s no doubt about that. The sheer volume of money directed to Americans should provide a near-term economic boost. There’s no doubt about that.
St. Joseph alone stands to get $39 million, according to the Missouri Budget Project. So it’s no surprise that a majority of Americans give Biden good marks for his handling of the coronavirus.
The question for Biden and the Democrats, who passed this bill without Republican support, is whether this translates into a long-term political advantage. The rest of us are left wondering if this unpreceded government stimulus creates a sustained economic recovery after the euphoria of $1,400 government checks wears off.
On both accounts, the economic stimulus approved more than a decade ago should provide a cautionary tale. The genesis of this current rescue plan is not the pandemic but the American Recovery and Reinvestment Act approved in 2009 to get the country out of the Great Recession.
For years, Democrats grumbled that the stimulus under President Barack Obama wasn’t big enough. Biden, as president, agreed and made it his priority to “go big” instead of work with Republicans on this current round of coronavirus relief.
It’s hard to see how $800 billion in 2009 wasn’t big enough. Commentators noted at the time that, adjusted for inflation, the Obama stimulus was five times more expensive than the Works Progress Administration and was bigger than the Manhattan Project and the Marshall Plan.
But the recovery remained painfully slow in the first years of the Obama presidency, something that wasn’t lost on those eager to get an extra zero on the current stimulus tally. Throughout the Obama years, surveys showed small business optimism mired at recession levels. In 2015, only 38% of the nation thought Obama’s policies made the economy better.
Will it be different this time? A recent bond sell-off points to a whiff of inflation that didn’t exist in 2009, with $1.9 trillion set to pour into the economy along with $1 trillion in unspent savings during the pandemic. But the economy is on stronger footing today than it was in 2009, with unemployment due more to government-mandated shutdowns than underlying weakness in demand.
Perhaps it’s possible to look to a different president, George W. Bush, to understand the sprawling nature of the $1.9 trillion stimulus bill. The pandemic, to some extent, gave progressives a chance to use a crisis to implement long-cherished domestic spending policies in the same way that 9/11 allowed hawks to achieve their foreign policy agenda in the Middle East.
Let’s hope it works out better for us this time.