President-elect Joe Biden lays out his plan for combating the pandemic and jump-starting the US economy at The Queen theater in Wilmington, Delaware, on January 14, 2021. Photo: AFP / Alex Wong / Getty Images

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.

His proposed measures, Biden argued during a speech in Wilmington, Delaware, “will prevent long-term economic damage, and the benefits will far surpass the cost.” He added: “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.

Here are the main provisions of his American Rescue Plan:

Direct payments

Biden said the $600 in direct payments to all individuals in the country that Congress approved in December was simply not enough, so his plan adds another $1,400 to bring the total to $2,000.

His plan also would raise the minimum wage to $15 per hour to help the lowest paid frontline workers, who are predominantly minorities. 

Massive vaccine plan

The incoming president has pledged to massively ramp up nationwide vaccination to deploy 100 million in 100 days.

His plan provides $20 billion to accelerate vaccine distribution and $50 billion to expand Covid-19 testing.

“The Biden Administration will take action to ensure all people in the United States – regardless of their immigration status – can access the vaccine free of charge,” according to a summary put out by the transition team.

Struggling state & local governments

Biden calls for $350 billion in emergency funding for state, local, and territorial governments as well as $170 billion for K-12 schools and institutions of higher education so they can reopen safely.

Throughout the pandemic, state and local governments have struggled to provide aid to residents, and because they cannot borrow money to finance operations, they could be forced to lay off thousands of teachers, police and firefighters.

Expanded unemployment

The plan expands supplemental unemployment benefits to $400 a week to help hard-hit workers who lost their jobs due to Covid-19, and extends the payments through September.

It also extends aid for workers who do not typically qualify for regular unemployment benefits, and provides up to $1,400 a week in emergency paid leave to 106 million more Americans to reduce the spread of the virus.

Housing assistance

Biden would provide an additional $25 billion in rental assistance to American families and extend the eviction and foreclosure moratoriums through September to avoid a wave of families losing their homes.

Help for low-income families

In a bid to help more low income working families through tax policy, Biden expands the Earned Income Tax Credit raising the maximum benefit for childless adults from roughly $530 to close to $1,500, and raises the income limit from about $16,000 to about $21,000.

Child care

Millions of women have been forced to leave the workforce to care for children after childcare centers were forced to close.

Biden’s plan aims to address both issues – first with a $25 billion emergency stabilization fund to support childcare providers, including home-based centers.

In addition, he expands the tax credit to reimburse families for half of their childcare costs, so they would receive up to $8,000 for those with two or more children.

Supporting small business

Biden builds on aid provided in previously stimulus packages for small businesses, with $15 billion “in flexible, equitably distributed grants will help small businesses get back on their feet, put the current disaster behind them, and build back better.”