Democrats Grapple With Mixed Covid-19 Stimulus Legacy on Anniversary

Now the Biden administration is stepping up efforts to credit the plan for the nation’s low unemployment and the economy’s strength while delinking it from soaring inflation and Americans’ souring view of the economy overall.

That effort has become more urgent for Democrats as much of the party’s domestic agenda has stalled. A plan that Democrats intended as a down payment on a broader economic overhaul has instead become one of the party’s main legislative achievements ahead of the midterm elections.

“I haven’t yet met a piece of legislation that I consider perfect. Again, you’ve got to recall that this was done in a hurry,” said Sen. Angus King, an independent from Maine who caucuses with Democrats. “Given the timing and the state of the economy and the emergency, it was better to err on the side of overspending, if you will, in some areas, rather than take a chance on not doing enough.”

Last year the economy grew at its best annual rate since 1984, and the economy added 6.7 million jobs, more than any year on record. President Biden, Treasury Secretary

Janet Yellen

and other administration officials are fanning out across the U.S. this week to draw attention to the role of the American Rescue Plan in that performance.

“Few pieces of legislation have done more in a critical moment in our history to lift us out of crisis,” Mr. Biden said during last week’s State of the Union address.

Their efforts to promote and defend the rescue plan come as U.S. inflation has reached a fresh 40-year high. The Labor Department reported Thursday that the consumer-price index—which measures what Americans are paying for everyday items—rose 7.9% in February from the year prior, the fastest pace since January 1982.

Americans’ confidence in the economy has dropped to its lowest level since April 2020, at the height of pandemic lockdowns, according to a recent Gallup poll. Republicans, who are considered likely to win control of the House later this year, have been quick to blame the legislation for the rise in inflation. The criticism has frustrated Democrats, who passed the rescue law without any GOP support, and many in the party hope to use the bill as a political asset as they try to maintain their control of Congress in the midterm elections.

“In a political sense, the jury is still out, and we can help shape how that shakes out,” said Rep.

John Yarmuth

(D., Ky.), the 74-year-old chairman of the House Budget Committee, who is retiring after this term.

Independent economists, including at Moody’s Analytics and the Federal Reserve Bank of San Francisco, say the rescue plan’s impact on inflation has actually been quite small. Administration officials have argued that the lion’s share of higher inflation is due to supply-chain disruptions and altered consumption patterns during the pandemic.

The rescue plan was the last of several hefty Covid-19 relief packages. Unlike in the previous rounds of aid, Democrats had control of Washington—and were eager to put it to use. The party quickly turned to blueprints previously opposed by Republicans, including a $2.2 trillion plan that House Democrats pursued in the fall of 2020.

One of the largest pieces of the bill was the $1,400 stimulus checks sent to many Americans, which represented about $400 billion of the cost. In late 2020, then-President

Donald Trump

prodded Congress to increase the size of the checks from $600 in a separate aid plan. Democrats then made a new round of checks a central component of their pitch in the Georgia Senate runoffs, which ultimately gave the party control of the chamber.

“The most potentially inflationary part of ARP was the $1,400 checks, something I was always a little reluctant about from day one,” said Sen.

Mark Warner

(D., Va.). “But I understand why they were popular.”

A small chorus of outside analysts and economists had warned that the package was too large and could prove inflationary given the state of the economic recovery at the time and the previous rounds of aid. “It was the right package, just not the right size,” said

Olivier Blanchard,

an economist and senior fellow at the Peterson Institute for International Economics.

Jared Bernstein,

a member of the White House Council of Economic Advisers, said the administration considered real-time and projected economic shortfalls for groups such as families and state governments when determining how to structure the package.

“Those kinds of estimates always have a confidence interval around them,” Mr. Bernstein said. “I would argue that confidence interval is probably wider in periods of great uncertainty, but that’s the nature of policy-making.”

The political and public concern over inflation means Mr. Biden has so far been unable to win final congressional approval for his follow-up, $2 trillion package for education, climate-change and healthcare programs, as well as its tax increases. That package, called Build Back Better, has stalled largely because of opposition by Sen.

Joe Manchin

(D., W.Va.). Mr. Manchin said in a West Virginia radio interview in February that coronavirus-relief aid that Congress had injected into the economy left it overheated, arguing against further large-scale federal spending.

Austan Goolsbee,

who served as chairman of the White House Council of Economic Advisers during the Obama administration, argues that the main impediment to passing Build Back Better wasn’t the American Rescue Plan’s supposedly inflationary effects, but the difficulty of passing a third major bill on top of both the rescue plan and the bipartisan infrastructure law. “Once it comes to a year in and you’ve already done two things, I think that’s what endangers the third thing,” Mr. Goolsbee said.

Write to Andrew Duehren at [email protected] and Amara Omeokwe at [email protected]