With Biden's 1.9-trillion relief plan aimed at recovery, long-term challenges remain

TOO BIG?

In recent speeches, Biden has repeatedly reflected on his time as vice president during the Obama administration which rolled out an 800-billion-dollar rescue package in 2009, saying the smaller-than-needed package to some degree impeded the recovery.

"It wasn't quite big enough. It stemmed the crisis, but the recovery could have been faster and even bigger," the US president said Friday. "Today, we need an answer that meets the challenge of this crisis, not one that falls short."

In his recent opinion on The Washington Post, however, former US Treasury Secretary Lawrence Summers argued that while the Obama stimulus was about half as large as the output shortfall, the proposed Biden one is three times as large as the projected shortfall.

Biden's rescue plan includes more than 400 billion dollars to directly combat the pandemic, roughly 1 trillion in direct relief to households, and more than 400 billion for hard-hit small businesses and communities.

It contains direct payments of 1,400 dollars per person for working families, which is on top of the 600-dollar check in the 900-billion relief. It would also boost federal unemployment benefits to 400 dollars per week and extend the measure through the end of September.

In normal times, Summers noted, a family of four with a pretax income of 1,000 dollars a week would take home about 22,000 dollars over the next six months, while under the Biden bill, if the breadwinner were laid off, the family's income over the same period would likely exceed 30,000 dollars.

"Judged relative to either the macroeconomic output gap or declines in family incomes, the proposed COVID-19 relief package appears very large," said Summers, treasury secretary for former US President Bill Clinton and economic adviser to former President Barack Obama.

Calling the relief plan "admirably ambitious," Summers cautioned that it also brings big risks, including the possibility of setting off inflationary pressures of a kind "we have not seen in a generation," with consequences for the value of the dollar and financial stability.

To the contrary, White House Council of Economic Advisers member Jared Bernstein on Friday quoted Fed Chair Jerome Powell as saying that he is more concerned about falling short of a complete recovery than about the possibility of high inflation.

"So, this is risk management. This is balancing risks," said Bernstein. "And in our view, the risks of doing too little are far greater than the risks of doing too much."