Check Mates: US Stimulus Package​

By Robyn Ma​

The Story

President Joe Biden and the Democrats have started to roll out a £1.9 trillion stimulus package. The American Rescue Plan forms part of Biden’s strategy to inject cash into the economy and encourage recovery from the pandemic. It provides direct payments to "individual US citizens, tax credits for families with children, and hundreds of billions in bailouts for state and local governments, pension funds, small businesses, public schools, and healthcare providers" (Aljazeera).

Labelled America’s “most ambitious anti-poverty initiative in a generation”, individual recipients eligible for stimulus payments will receive $1,400 (New York Times; CNBC). For struggling families, the child tax credit will increase up to $3,600 (for children under 6) from $2,000 per child. For children ages 6 to 17, it will be $3,000 per child. This, alongside stimulus payments, “will phase out for individuals making more than $75,000 and married couples earning more than $150,000” (New York Times). The middle class will receive benefits too. The Tax Policy Center estimated that such families will “see their tax-income rise by 5.5%” from tax changes and stimulus payments (New York Times). Economists believe direct aid to the poorest will result in higher spending on necessities like groceries and rent. For middle-class families, they are hoping for a huge splurge on travel and dining once Covid-19 regulations are lifted. US Treasury Secretary Janet Yellen said the bill should help the US return to “full employment” next year (Aljazeera).

What It Means For Businesses And Law Firms

The aim of this package is to encourage robust economic growth and instill hope for businesses by facilitating a “strong consumer recovery” (Financial Times). Since signing this bill, Americans’ confidence has boosted; Morning Consult’s US consumer sentiment index jumped by 2.7%, in contrast to the measly 0.1% after the $2.2 trillion Cares Act last March. Deloitte reported that 29% of chief financial officers are happy with current conditions, compared to 18% previously (Financial Times).

Simply put, the government believes providing cash to citizens will help them back on their feet and contribute to the economy. Likewise, extending benefits to businesses and employees will boost revenue, create disposable income for citizens, and may lead to a quicker economic recovery. Take the public transportation system: transit agencies relying on the stimulus package have recently announced they will rid plans of “deep service cuts” and restore some transportation services (New York Times). Having taken a huge hit to revenue, they can now maintain their routes and support employees. This industry is critical to America’s economic recovery, as trains and buses carry riders to businesses, like supermarkets and restaurants.

Ultimately, if more confidence and business activity results from this bill, lawyers can expect to benefit from increasing investment and dealmaking.