Joe Biden’s presidential campaign proposed a host of economic initiatives, and now that he’s in office, Michiganders are watching to see which pieces may have been empty talking points and which might come to fruition.
Back in November, when it looked like Republicans would keep the majority in the Senate, experts doubted Biden could implement much of what he’d proposed.
“If the Democrats don’t take both Senate seats (in Georgia’s January election), you can say goodbye to every single item on the Democratic wish list,” Wayne State adjunct business professor Matthew Roling said in November. “It’s just not going to happen.”
But the Democrats won both seats, giving them control of the presidency, the Senate and the House of Representatives.
“The markets cheered the Democrat wins in Georgia, because I think the expectation was, it would mean more stimulus, faster,” Roling said this month.
A robust stimulus package and other items on the “Democratic wish list” – like raising taxes for corporations, increasing the minimum wage to $15 an hour and mandating paid sick leave – have a far better chance of impacting Michiganders now, economists say.
Here’s a look at some of Biden’s economic plans – many of which were listed on his campaign website – and what economists say they could mean for Michigan, if approved and implemented.
Another round of stimulus
Biden has proposed and the House has passed a $1.9 trillion COVID-19 aid package, which could include $1,400 stimulus checks, unemployment money and vaccine distribution funding.
“First thing’s first – to get this stimulus package done,” Roling said.
Congress has spent weeks ironing out the details. While Democrats have a narrow majority in the Senate, Michigan State University economics professor Charley Ballard said the final plan could be smaller than $1.9 trillion.
“I think Biden would still love to have some bipartisan support for whatever goes through,” Ballard said. “But when he’s at $1.9 trillion and (Republicans) are at less than one-third of that, it’s not looking that good for working across the aisle.”
The potential for stimulus is good for the stock market, Roling said.
When former President Donald Trump tweeted in October that a stimulus bill wouldn’t happen until after the election, the stock market took an immediate dive. In addition to helping struggling families and businesses, the idea of stimulus funding is to encourage spending and stimulate the economy.
After the Georgia runoffs were called, the Dow and S&P 500 closed at all-time highs Jan. 7.
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There’s still debate about who should be eligible for the $1,400 checks. Lawmakers are considering dropping the income threshold for those eligible to get the full amount from $75,000 to $50,000.
After seeing how much of last spring’s stimulus checks were put into savings, Ballard said such checks only have a notable economic effect when they go to lower-income families. Unemployment money also has a strong economic impact, he said.
“A lot of the stimulus checks went to people who (A) didn’t need it and (B) didn’t have anything to spend it on,” Ballard said. “If you’re a low-income worker who’s just lost a job, those unemployment benefits are not going to go into a savings account. They’re going to go immediately into consumption expenditure. And that will be stimulative.”
Raising the minimum wage to $15 an hour
Mixed into Biden’s $1.9 trillion plan are some of his other policy proposals – which have less to do with COVID-19.
Raising the minimum wage to $15 an hour is one of those. Biden’s plan also proposes to end the tipped minimum wage and sub-minimum wage for people with disabilities, although it seems unlikely the proposal will be allowed into the bill.
Any issue that supports “essential workers” will be moved up the priority list, Roling said, while Biden’s other economic policies will likely be “punted” until after the pandemic.
The current U.S. minimum wage is $7.25 an hour and hasn’t been raised since 2009. With a 40-hour work week, $7.25 an hour adds up to $15,080 per year, while $15 an hour adds up to $31,200 annually. The current minimum wage in Michigan is $9.65. That’s $20,072 a year, full-time.
Hiking the federal minimum wage is another proposal that became more likely when Democrats won the Senate in January.
“I think the chance that we will get a $15 minimum wage is exactly zero,” Ballard said in November.
Now, he says the chances are slightly above zero, but still unlikely. Phasing in a compromise, like a $12-an-hour minimum wage, is possible, Ballard said.
One reason: Many minimum wage jobs are in restaurants, which are already suffering during the pandemic. Such a drastic jump in unemployment would hit small businesses disproportionately hard – potentially forcing price increases, layoffs or hiring freezes, Ballard said.
“$15 is probably not much of a stretch in San Francisco. How about Bad Axe, Michigan? How about Eagle or Ishpeming?” Ballard said. “I think some increase in the minimum wage would be fine and would have relatively few adverse effects. But the further you go, the more you’re likely to run into that kind of trouble.”
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Raising the minimum wage to $15 an hour is growing in its bipartisan support, however.
“Interestingly, that happens to be a really popular measure,” said Luke Shaefer, director of poverty solutions at the University of Michigan.
Shaefer notes 61% of Florida voters agreed in November to a constitutional amendment to raise the state’s minimum wage to $15, incrementally, by 2026. That happened during the same election in which Trump won Florida by 370,000 votes.
But ultimately, Roling agrees a compromise may be needed to force the minimum wage up, since some Democrats aren’t supportive of doubling the minimum wage.
Beefing up the Child Tax Credit
Biden’s stimulus plan also includes a temporary increase in the Child Tax Credit. Currently, qualifying families get $2,000 per kid every year, but the proposal would raise it to $3,000 or $3,600 for younger kids.
It’s a proposal Shaefer and the UM poverty solutions group have been lobbying for.
“Raising kids is expensive and the government has a reason to help people do it as well as they can,” Shaefer said. “Canada, the UK, Australia, they all provide a child benefit that might look like $250, $300 a month that families receive.”
The proposal is part of Biden’s stimulus plan, but has been on his campaign website since before the election. The change would cost the U.S. an extra $100 billion per year, Shaefer said.
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The program, Shaefer argues, should be tweaked to split payments into monthly chunks instead of one annual payment. Leaders also should ensure all low-income families are eligible, he said.
“Expenses don’t just all come at tax time,” Shaefer said. “We want to have benefits for them that can help them buy food and pay for utilities throughout the year.”
Shaefer believes it’s likely the tax credit will be boosted. And if it is, he hopes the change becomes permanent.
“We’re in a time of incredible anxiety, uncertainty,” Shaefer said. “But we’re also in a time when there’s a real chance to do something on child poverty that I think we would benefit from for a long time.”
Raising taxes on corporations, the rich
One of the most specific plans on Biden’s campaign website is raising the corporate tax rate and raising taxes for high-income families.
Trump’s Tax Cuts and Jobs Act of 2017 lowered the corporate income tax rate from 35% to 21%, among other changes. Biden proposes raising the rate back to 28% and taxing foreign earnings of U.S. companies at a higher rate.
“The overwhelming majority of its benefits went to very high-income individuals, especially those with large stock market portfolios,” Ballard said about the 2017 cuts. “Biden proposes to reverse some of that.”
Biden’s plan includes raising the top individual income bracket from 37% to 39.6%, as it was before Trump’s TCJA.
Biden’s campaign website also proposes tax penalties on businesses that ship jobs overseas; mandating a 15% minimum tax on book income so corporations don’t get away with paying zero taxes; and making people with more than $1 million pay the same tax rate on investment income as they do on wages.
His campaign website bills the changes as: “A tale of two tax policies: Trump rewards wealth, Biden rewards work.”
After Trump’s tax cuts, 91 Fortune 500 companies didn’t pay federal income tax in 2018, and another 56 of the companies paid less than 5% in taxes, Biden’s website notes.
“Joe Biden will not raise taxes on anyone making less than $400,000. Period,” the campaign website promises. “But he will ask wealthy Americans and big corporations to pay their fair share.”
Other economic plans
Here’s a look at some of the other economic plans on Biden’s website. Many are vague in nature.
- Put people to work by enlisting them to help fight the pandemic, including through a Public Health Jobs Corps
- Support the Paycheck Fairness Act to ensure women are paid equally for equal work
- Mandate companies offer universal paid sick days and 12 weeks of paid family and medical leave
- Offer a $15,000 first-time homebuyer tax credit
- Provide financial help to state and local governments through COVID-19 aid
- Spur development of affordable housing and offer tax credits to renovate homes in distressed areas
- Spend $50 billion in the first year to start repairing roads and bridges, as part of a $1.3 trillion infrastructure plan
- Restore the full electric vehicle tax credit and invest $5 billion over five years to boost their range and slash electric vehicle prices
- Invest $20 billion in rural broadband infrastructure
- Invest $100 billion to modernize the nation’s schools
- Make child care more affordable and offer universal preschool to 3 and 4 year olds
- Offer tuition-free college for families making less than $125,000
To see all of Biden’s plans – economic and otherwise – go to joebiden.com/joes-vision/.
Who are the winners and losers?
Biden’s economic policy resembles a bottom-up approach of boosting the economy by supporting the most vulnerable, as opposed to the trickle-down economics ideology of enriching high earners and business owners – who, in theory, would hire more employees and spread the wealth to their workers.
“There’s not a Democrat alive that can’t find something they like in this plan,” Roling said.
Biden’s plan focuses on helping the unemployed, steering money to low-income families, raising the minimum wage and aiming to offer more opportunities to people with few options.
“The winners would mostly be those in the bottom half,” Ballard said.
Meanwhile, business groups and high earners would likely oppose plans like raising the minimum wage and setting higher tax rates, Ballard said, since the costs would fall on their shoulders.
The COVID-19 relief package of 2020 helped the U.S. economy stay afloat when it easily could have “gone off an economic cliff,” Shaefer said.
“We’ve never taken on an approach that was primarily driven by providing cash transfers to families,” Shaefer said. “All the evidence looks to me like it worked and it worked really well. And I think the Biden plan is even more aggressive on that front.”
Letting the market play out without the government stepping in would have crashed the economy, Shaefer believes. He credits Trump and Congress for their actions last spring, sending money to those in need in hopes of keeping the economy moving. It’s a lesson Shaefer says applies beyond the pandemic.
“A rising tide does lift all boats,” he said.
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