After an almost 27-hour session of amendments, debate, and last-minute negotiations within the Democratic camp, the Senate approved President Biden’s $1.9 trillion American Rescue Plan on March 6, by a 50 to 49 vote. All Democrats voted in favor, while all Republicans voted no, with the exception of Senator Dan Sullivan of Alaska who was attending a family funeral.
The bill approved by the Senate largely resembles the original administration proposal, but contains several significant changes. Among the most important modifications are the following:
- The proposed increase in the minimum wage was deleted. The original plan, as well as the version approved by the House, included a proposal to increase the minimum wage from $7.25 per hour to $15 by 2025. The Senate Parliamentarian, however, ruled that the wage increase did not comply with the strict rules of the budget reconciliation process, which allows proponents of a bill to close debate with only a simple majority, instead of the 60 votes required under regular Senate rules. The Democrats abided by the ruling and deleted the provision from the final bill to protect it from a Republican filibuster. This issue will come up again. And while reasonable people can disagree about the effects of increasing the minimum wage, please keep this in mind: In 1963 when Martin Luther King Jr. spoke on the Mall in Washington, D.C., in addition to advocating for civil rights, he was also arguing for increasing the minimum wage from $1.25 to $2.00. Today, that $1.25 is equivalent to about $10.69, while the $2.00 Dr. King was advocating for are equivalent to $17.10 in 2021 dollars.
- The Senate imposed stricter income limits to qualify for the $1,400 stimulus payments. Both the House and Senate bills include $1,400 payments for individuals earning up to $75,000, single parents earning up to $112,500, and married couples with incomes up to $150,000. Those payments would gradually phase-out for those earning more, declining as income levels rise and phasing out altogether for those above a certain income cap. However, while the House set the cap at $100,000 for individuals, $150,000 for single parents, and $200,000 for couples; the Senate lowered the caps to $80,000 for individuals, $120,000 for single parents, and $160,000 for couples. The lower threshold will disqualify millions of people from receiving these payments.
- The federal unemployment insurance supplement will remain at $300 per week, as legislated last December. The administration’s proposal and the House bill both sought to increase this amount to $400 per week until August 29. The Senate bill, though, would provide $300 per week through September 6. This was a concession to prevent Senator Joe Manchin (D-WV) from voting against the bill. Senator Manchin argued, without providing any evidence, that increasing unemployment insurance by $400 per week would discourage unemployed workers in his state from taking jobs.
Notwithstanding these significant setbacks, the bill approved by the Senate is still one of the most important federal relief efforts ever enacted by Congress. In addition to the $1,400 stimulus payments and the increase in unemployment benefits, it would provide $350 billion for state, local and tribal governments, $130 billion to primary and secondary schools, $45 billion in rental, utility, and mortgage assistance, $14 billion for vaccine distribution, $12 billion for nutrition assistance, as well as additional funding to help struggling small and medium enterprises.
In addition, the bill also temporarily expands the Child Tax Credit to $3,000 from $2,000 — and to $3,600 for children under 6 — and expands the Child and Dependent Care Tax Credit up to $4,000 for the childcare expenses of one child, and up to $8,000 for two or more. According to an analysis by the Center on Poverty and Social Policy at Columbia University, the expansion of these two credits, which would benefit 93% of all children, would reduce child poverty by 45%. Furthermore, the new Child Tax Credit will be disbursed through monthly checks to provide low-income families with a more stable cash flow. This feature makes the program work more like a European-style monthly child allowance that will help millions of households to mitigate the expenses of raising a family.
Residents of Puerto Rico stand to benefit from many of these programs, including the $1,400 stimulus checks, the increase in weekly unemployment insurance, the additional funding for nutritional assistance, the new funding for vaccine distribution, and the full application of the Child Tax Credit to Puerto Rican Families. The bill also includes for the first time, federal funding to increase, in a ratio of 3 to1, payments made by the Puerto Rican government to beneficiaries of the local Earned Income Tax Credit.
In sum, the overall package is expected to lift more than 13 million people from poverty this year, while providing much-needed relief to the people hardest hit by the pandemic.