Biden’s American Rescue Plan: What it means for the US

Illustration by Christian Ayala

President Joe Biden announced his COVID-19 relief legislative package entitled the American Rescue Plan on Jan. 20. By March 10, congress adopted the $1.9 trillion stimulus plan after a 220-211 vote within the House of Representatives, as stated in a March 10 The Washington Post article. The American Rescue Plan includes a plethora of points and funding, with an aim to get the United States back on its feet, according to the White House Briefing Room

A brief overview of Biden’s plan requires a national vaccine program, safely reopening K-12 public schools, providing support to struggling small businesses and sending $1,400 stimulus checks to every citizen. Other aspects of the plan include increased funding for COVID-19 testing and pandemic supplies. 

However, Dennis Foster, an economist and senior economics lecturer at NAU, explained the funding for this plan may be problematic in the long run.

“The total now is up to $6 trillion of stimulus over the past year and that is a significant increase in money floating around,” Foster said. “The big question is: Where is that money going to go?”

Foster said the presumption is the funding will land in the pockets of everyday people and businesses in order to help with necessity spending. While this may be helpful in the short term to help those struggling due to the pandemic, Foster explained it may also be a precursor to an immense amount of inflation the U.S. has yet to see.

To finance the nearly $2 trillion worth of spending that Biden’s plan entails, Foster said there are several directions the government can take. Raising taxes is one option, but as Foster explained, while it would have no effect on inflation, it would harm the majority of people even more because of an overall increased tax burden. Secondly, Foster said the government could choose to borrow money in the form of government bonds, and then use the money however they see fit. 

Nevertheless, eventually that money would also have to be paid off in the form of taxes as it would simply add to the base of debt the U.S. already has. Both of these options avoid any inflation effects on the economy, but instead add to the country’s debt in the long run, Foster said.

Currently, the Federal Reserve has been following a process that essentially prints more money without taking it from anywhere else, Foster said.

“The Federal Reserve, for the last year, has printed up a couple of trillion dollars worth of additional money that didn’t exist before,” Foster said.

A prime example of this extra money circulating within the national economy is Flagstaff’s own housing market. Foster said he believes the jump in housing prices over the past year or so is a direct consequence of this new money circulation within the economy.

According to Flagstaff Business News from 2020 to 2021, Flagstaff real estate prices have leaped nearly 21% higher. 

Foster also said he believes that government politicians often fail to look at the future and how their decisions will affect the nation economically in the coming years.

“They’re OK with saying ‘Hey, I’m helping out today,’ and if three or four years from now it turns out to be an inflationary nightmare, they don’t really get blamed for it,” Foster said.

For Flagstaff residents and business owners, however, Biden’s newly approved act provides much needed help, Vice Mayor Becky Daggett explained. Many small businesses within the local economy have had to close their doors or struggle to remain open over the course of the pandemic.

“I applaud all the businesses that were able to keep people employed through the pandemic because I know it wasn’t easy, and I know that business owners did everything they could to keep their employees paid during this,” Daggett said.

Daggett also said she understands the difficulties and stress that most individuals have faced over the past year, but urges Flagstaff residents to continue following safety precautions and get vaccinated to ensure the city does not move backward. 

According to the Coconino County website,  the county is currently in Phase 1c of its vaccination process. As of March 19, the county announced COVID-19 vaccinations are available to everyone 18 years old and above. 

While in coming years, Biden’s American Rescue Plan may, as Foster said, cause several macroeconomic issues, the city of Flagstaff is grateful for the aid it will provide the local economy and business community.

“The city is very grateful to have this funding,” Daggett said. “And to have it come directly to the cities, rather than to the state and then handed out by the state hopefully means we can get it faster and put it to work … it’s just going to be a huge help to Flagstaff to keep us financially strong and rebuild quicker.”