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Analysis: How Democrats are using the Covid stimulus to fight income inequality

The $1,400 relief checks in Biden’s coronavirus rescue legislation have dominated the headlines. But less-familiar provisions in the giant $1.9 trillion package could have a larger long-term impact on the disparities of income and wealth that have animated Democratic politics for decades.
Congressional committees began assembling the pieces last week with public attention riveted on the Senate impeachment trial of former President Donald Trump. As currently drafted, they would rapidly lift material circumstances for working-class Americans by expanding health insurance subsidies, sending child tax credit checks to parents, defraying child care costs so parents can return to work and further subsidizing employment for low-income Americans without children.

That’s aside from the provision more than doubling the federal minimum wage to $15 an hour over the next five years — though Democratic lawmakers expect the minimum-wage hike ultimately to be stricken under the special budget rules they are using to avoid a Republican filibuster.

Even without it, the measure would slash the number of children living in poverty and families without health insurance. It reflects the consequence of last month’s Senate runoff victories in Georgia, which unexpectedly gave Democrats narrow control of the Senate as well as the House — a moment of pent-up demand, party solidarity, and legislative opportunity that former presidents Bill Clinton and Barack Obama could only envy.

“There’s more Democratic unity than ever on taking bold steps on an economic dignity compact,” said Gene Sperling, who authored a 2020 book on that subject after working for both previous Democratic presidents. “(It’s) possible for 2021 to be one of the greatest years of progressive accomplishment in the past century.”

Temporary changes with permanent effects

In a capital accustomed to legislative gridlock, the scale of Biden’s opportunity has largely escaped notice. That’s partly because those economic provisions in emergency legislation to combat the coronavirus pandemic are drafted to be only temporary.

But Biden and fellow Democrats don’t intend them to be temporary. Nor did President Donald Trump intend his 2017 personal income tax cuts to expire after 10 years. To conform with the budget rules that apply to Biden’s Covid relief package now, those tax cuts are set to expire after a decade to avoid an impermissible increase in budget deficits.

Like Republicans with tax cuts, Democrats will count on the looming expiration “cliff” to persuade Congress to extend those temporary benefits for low-income families when the time comes. However long they last, those benefits would have a major impact.

The Joint Tax Committee of Congress estimates that the expanded health insurance subsidies, child tax credit, child care credit and Earned Income Tax Credit would total more than $125 billion in 2022. That compares to the $190-billion average annual cost of the Trump tax cuts.

The Child Tax Credit would send $300 monthly checks to low-income parents with children under 6. The Center on Budget and Policy Priorities, a leading liberal advocacy group, says it would lift 4.1 million children above the poverty line, producing “historic reductions” of 40% in the number still living in poverty.

The expanded Earned Income Tax Credit would benefit 17 million low-paid workers without children, nearly tripling the maximum credit to around $1,500 and lifting the income cutoff to $21,000 from $16,000. The child care tax credit would cover half the cost of care for kids under 13, up to $4,000 for families earning less than $125,000 per year.

The health care provisions of the Covid relief bill would help Americans with incomes below 400% of poverty buy coverage from Affordable Care Act marketplaces and make such coverage free for unemployed and lower-income workers. The 12 states that have not yet expanded Medicaid under Obamacare would receive robust new financial incentives to do so.

Those provisions don’t represent the entire health care agenda Biden campaigned on last year, but analysts estimate they could reach 10 million of the 29 million Americans still without health insurance. “Half a loaf,” said Larry Levitt of the Kaiser Family Foundation, “but it’s a very significant half.”

Shifting to offense

It marks an abrupt reversal from defense to offense for Democrats who have spent the last decade fending off Republican attempts to curtail or repeal Obamacare. In his new book “The Ten Year War,” journalist Jonathan Cohn notes that “a Senate in which 50 members representing a clear majority of the population had the ability to pass legislation that could have produced a much more ambitious health care bill.”

That’s precisely the Senate the Georgia runoffs produced. Using the same filibuster shield that lets Democrats pass the Covid relief bill without Republican help, Biden could still pursue other big chunks of his health care agenda in the economic recovery package he plans to propose later this year.

Those other chunks include a government-run “public option” to compete with private plans on ACA marketplaces and a Medicare expansion lowering the age of eligibility to 60. Whether or not those eventually get enacted, there is no sign yet of Democratic fractures that would threaten passage of the Covid relief package in the next few weeks.

“One of the things I came to Congress for was to get to universal health care,” said House Budget Committee Chairman John Yarmuth of Kentucky, who sponsored the spending outline for Biden’s proposal. “The closer we get to that, I’m thrilled.”

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