State of the Facts
H.R.1319, also known as the American Rescue Plan Act of 2021, narrowly passed the Senate with an amendment on March 6 and was approved by the House on March 10. The bill as originally passed by the House on February 27, 2021 contained a host of relief packages to address COVID-19's impact on “the economy, public health, state and local governments, individuals, and businesses.” The original bill from the end of February also included several provisions less directly tied to the pandemic, such as raising the federal minimum wage to $15 an hour by 2025 and increased Medicaid coverage. While not all provisions made it through the Senate—the minimum wage amendment was removed and certain spending amounts were slightly reduced—many of the provisions in the original House bill remain.
The Congressional Budget Office (CBO), a nonpartisan agency dedicated to estimating costs for legislation, stated that the version of the bill originally passed in the House at the end of February would cost $1.2 trillion in fiscal year 2021 and a total of $1.9 trillion over the next 10 years. The CBO has not yet released revised cost estimates for the Senate version of the bill, which eliminated the minimum wage provision, cut spending on stimulus checks, unemployment benefits, and several other items while leaving other large expenditures intact, such as assistance to state and local governments. This article explores the spending breakdown in the original $1.9 trillion version of the bill as passed by the House on February 27, 2021, though this total cost estimate and specific components may change as estimates are revised to incorporate amendments to the bill, such as the elimination of the minimum wage provision.
The American Rescue Plan Act is the third major pandemic stimulus package, following the $2.2 trillion CARES act passed in March of last year and the $900 billion plan signed into law in December.
This new bill focuses on different areas of spending than the CARES Act. Over 60% of the CARES Act funding supported four major focuses: $500 billion to support businesses through the Treasury, $350 billion to support small businesses through the Paycheck Protection Program and other initiatives, $300 billion for stimulus checks, and $250 billion for unemployment insurance.
The American Rescue Plan Act also prioritizes direct payments and unemployment assistance, even providing for larger stimulus checks — $1,400 compared to the $1,200 granted to qualifying people by the CARES Act. But it also focuses on several areas that got less attention from the CARES Act. It will funnel $350 billion to support state and local governments, over twice the CARES Act’s $150 billion, despite the fact that state and local tax revenue fell less than was originally expected. The American Rescue Plan Act will also spend over $170 billion on education, which received only a small amount of direct funds through the CARES Act.
The American Rescue Plan Act also addresses various areas not included in the CARES Act. As one example, the bill makes several modifications to the tax code to increase credits. It allocates $88 billion to the Child Tax Credit, $21 billion to the Earned Income Tax Credit, and $24 billion to the Premium Tax Credit, which helps qualified individuals cover the premiums for their health insurance purchased through the Affordable Care Act marketplace.
The bill also provides an $83 billion bailout of multi-employer pension plans, which generally pay benefits to union workers. It provides $28 billion to the Federal Transit Administration’s grant program to support public transit and $41 billion in housing support like emergency rental assistance and housing vouchers.
The American Rescue Plan Act’s estimated 2021 $1.2 trillion outlay is equivalent to 18% of the record $6.6 trillion the federal government spent in fiscal year 2020 (and 27% of the $4.5 trillion spent in fiscal year 2019). The federal government spent 91% more than it collected in revenue in fiscal year 2020, creating a $3.1 trillion deficit. At the same time, federal debt grew to $26.9 trillion.
Many Americans are struggling to make ends meet as the pandemic continues to impact the economy. Thirty-five percent of households reported having difficulty paying for usual expenses in the most Census Household Pulse Survey. The American Rescue Plan Act contains several provisions to stay accountable to hurting Americans, including $3 million to the Department of Commerce’s Inspector General for oversight, $40 million to the Pandemic Response Accountability Committee, and $77 million to the Government Accountability Office. Over the coming months, check the indicators on how the nation is fairing at the COVID-19 Impact and Recovery Hub.
All budgetary estimates in this article are for the original House version of the bill passed on February 27, 2021 and are subject to change. The article also refers to the CBO's estimated outlays, not budgetary authority, unless otherwise specified.
Keep up with the latest data and most popular content.