Congress Must Apply Common Sense Principles to the American Rescue Plan Act

COVID-19 AnalysisCongress Must Apply Common Sense Principles to the American Rescue Plan ActEmergency spending must focus on emergency needs

Budget & Tax,  | Analysis
Feb 24, 2021  | 4 min read | Print Article

The House of Representatives is preparing to vote on The American Rescue Plan Act of 2021 (ARP). This will be the sixth “emergency” spending bill to address the health and economic consequences of the COVID-19 pandemic. Clocking in at more than $1.9 trillion, if enacted it will carry the highest price tag of all the billsexceeding even the CARES Act (P.L. 116-136) passed last March. The CARES act, however, did contain an additional nearly $1 trillion in borrowing authority for the Federal Reserve, that was tapped to infuse more cash into the economy through various loan programs. 

Since the beginning of the pandemic, Taxpayers for Common Sense has supported efforts to address this pressing health emergency and subsequent financial crisis. Nearly a year into the public health crisis, and with more than $3 trillion in spending authorized in response there are continued needs for assistance. The past year, however, has also provided an opportunity for policymakers and the public to evaluate initial responses, hone programs, and to differing degrees of success, mitigate the worst effects of the pandemic. 

In evaluating the provisions of the American Rescue Plan Act, we continue to apply our principles for pandemic response. 

  • Do What’s Necessary Not What’s Advantageous  
  • Deficits Still Matter In The Long Run 
  • Prioritize Response on Mechanisms with the Greatest Positive Effects 
  • Emergency Legislation Should Not Make Permanent Changes or Create Long-Term Liabilities 
  • Transparency and Accountability are Key 

The sheer size of the bill, $1.9 trillion, and timing of spending require scrutiny.  The package is coming at a time when the Congressional Budget Office predicts that even if “no significant additional emergency funding or aid is provided”  real Gross Domestic Product (inflation-adjusted GDP) would reach pre-pandemic levels by mid-year. Similarly, that unemployment gradually declines and that inflation and interest rates gradually creep up. Yet only 63 percent of funds (approximately $1.2 billion) in this bill will be spent before September 30th. And nearly $330 billion is projected to be spent in the years 2023-2031. It is very important that the bill not overshoot the economic mark and, instead,  focus on pressing COVID-related needs. The provisions and programs should have triggers and off-ramps and policymakers should be prepared to claw back funds if necessary. The CBO also assumes that vaccinations continue apace and there isn’t a set-back from the new variants of the novel coronavirus.  

Finally, unlike other COVID-19 response bills, the ARP is being considered under the reconciliation process. This allows expedited consideration in the Senate and allows passage by a simple majority. However, the “Byrd Rule” requires that only spending, revenue, or debt limit related provisions be included. In other words, no policy provisions as determined by the Senate Parliamentarian. This is one of the issues that may nix a possible increase in the minimum wage, for instance. 

We will continue posting analysis of the bill as we dig into the details. Please follow along here    

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