The economy is bouncing back. The announcement of 850,000 new jobs in June adds to other signs that people are aggressively looking for work and that wages are going up. This recovery is different from the anemic growth that followed the Great Recession, thanks to the $1.9 trillion in spending allocated in the Biden administration’s American Rescue Plan. The legislation expanded aid to states and municipalities, extended unemployment insurance benefits, sent people $1,400 checks, and far more. The plan is expected to get us back to the country’s pre-pandemic employment levels by the end of 2022.
The success of the American Rescue Plan is such that it’s already receiving blowback. The criticisms, however, often contradict one another. Some detractors argue that the money was too front-loaded and will be spent too fast, while others say that too many people benefited and that the funds will largely be saved. It is difficult for both of these claims to be true, but the arguments will blur and fuel attacks that the government shelled out too much. Yet it’s important to remember the plan’s political brilliance: By eliminating the need to go back and secure more funding later, the American Rescue Plan took the question of recovery off the table, so that the Democrats can focus now on passing large-scale economic reforms.
This is where it contrasts the most with President Obama’s American Recovery and Reinvestment Act of 2009, which was too small and a mix of short- and long-term investment efforts. Many in the Obama administration assumed they’d be able to go back and pass an additional stimulus bill if necessary. But high unemployment and weak job growth intensified discontent with the Democratic Party, and austerity programs imposed by the states offset the federal response. The Democratic Party had to split its priorities between transformative change and simply getting the economy going again. Centrists and Republicans, in turn, used their power to block bills that would increase temporary spending as leverage to demand long-term cuts and austerity.
The American Rescue Plan does the opposite. By spending at the scale of the problem, it takes pressure off the tense political negotiations that are consuming the Senate. As Jake Blumgart, a reporter at Governing, noted, this has left the Democrats free to focus on trying to overhaul the economy for the future. No one knows what will happen in the Senate, or whether the administration will be able to spend enough to address the long-term problems we face. But the mere fact that President Biden and the Democratic leadership can attempt to secure trillions of dollars for these priorities without having to debate how to address the unemployment rate is a massive political win. To the extent that the Democrats—and Joe Biden—accomplish anything, addressing stimulus spending first will have played a central role.
In this sense, the most obvious political comparison is to another Democratic senator turned president, Lyndon B. Johnson. Taking office after John F. Kennedy’s assassination, Johnson wanted to push for a major civil rights bill. But he had seen how, for decades, the racist Southern Democrats in the Senate had kept bills from passing whenever it seemed as if civil rights legislation might move. And Johnson also needed a tax plan to boost the economy and cement the budget. As LBJ biographer Robert Caro described the situation, the “most important hostage being held to stop the civil rights bill was of course [Johnson’s] tax cut bill.” This had happened with Kennedy’s tax plan as well. As vice president, Johnson had tried to warn him, advising Kennedy to get his bills “down in the storm cellar and get it locked and key, and then…I’d make my attack” on civil rights.
Johnson, using his mastery of Senate rules and the relationships he’d built over the years, persuaded the conservative Virginia Democrat Harry Byrd, chair of the Senate Finance Committee, to let the tax bill pass in early 1964. To do so, he had to accept a smaller budget than he’d wanted. But Johnson was able to then clear the way for a showdown over the Civil Rights Act.
Unlike Johnson’s tax plan, the American Rescue Plan doesn’t sell anything short. It spends enough to get the economy back on track, and the investments in climate, care work, and the extension of child allowances being considered this summer would help sustain the recovery. But the fact that we are even in this position speaks to the genius of putting full employment priorities first.