Lessons for Congress from Biden's failed COVID 'American Rescue Plan'

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Last year, President Joe Biden signed into law the American Rescue Plan (ARP) — a nearly $2 trillion bill sold as a critical boost to a flagging economy, allegedly "focused on what people need most." In hindsight, opponents were right about the bill — and the legislators who supported this wasteful and damaging deficit spending should be accountable.

When the ARP was being debated, critics argued that numerous provisions were poorly crafted and were more likely to worsen the situation than improve it. Instead of starting with inexpensive, common-sense reforms that would spur growth and improve pandemic response, the ARP was built around a pre-existing partisan wish list with little consideration of the problems at the time. It’s no surprise the results have been disappointing.

Economists warned that the bill could push inflation higher — and inflation has indeed reached its highest level in 40 years. It hasn’t generated the promised millions of new jobs. Provisions that were supposed to lead to school reopenings and widely available testing did not deliver. States that were supposedly in desperate need of federal help now report huge federally-subsidized spending increases over the last year. And with more "excess revenue" projected in the months ahead, many states are likely to approve more new and wasteful spending.

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Where did Congress and the White House go wrong?

It was a mistake to provide more than $520 billion to states and localities that were already seeing a rebound in tax revenues when the bill was under consideration. A year later, many states are spending historic budget surpluses. Instead of refunding it to taxpayers who are still dealing with coronavirus concerns, some states regard tax reductions as something they may be "forced" into. 

The ARP also expanded unemployment benefits, extended eligibility for those benefits, and created a tax exemption that further increased their value. While well-intentioned, these provisions have delayed people returning to the workforce and contributed to a continuing labor shortage that hurts the economy and boosts inflation. 

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Congress and the White House took a similar approach to other programs authorized under the ARP. In rushing to approve more generous rules for Medicaid, the Paycheck Protection Program, and the child tax credit, little thought was given to targeting relief where it was needed, and avoiding unintended negative consequences. That has led to fraudulent claims, inflationary pressure, and taxpayer money going to people who did not need it. 

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The ARP also failed to deliver on the promises of supporters that it would help ensure students were educated despite the pandemic. Taxpayers were told it was crucial to provide billions in new spending on rapid and reliable testing, "to help schools reopen." Instead, more than one million public school students were dealing with district-wide school closures at the start of this year. And coronavirus testing remained a problem thanks to bad management and bureaucratic incompetence.

After signing the bill into law, President Biden noted the potential for fraud and misuse of these funds, and highlighted the need for oversight, transparency and accountability in implementing the law. A few months later, the U.S. Secret Service noted nearly $100 billion in potentially fraudulent activity related to COVID relief.

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Despite these warnings, leaders in Congress have largely washed their hands of oversight responsibility, with little effort to prevent waste or find better uses for dollars that go unspent.

That’s irresponsible. And it leads directly to reckless waste of taxpayer dollars. Congress needs to do a better job of managing our money, starting here and now.

Congress needs to do a better job of managing our money, starting here and now.

Legislators should initiate oversight hearings in appropriate committees to ensure a proper understanding of how this money is spent. The public should have access to relevant information in this area using tools such as Freedom of Information Act requests and fact-finding letter inquiries. Where appropriate, new legislation is needed to fix the problems that are identified. Lastly, the regulations should be streamlined to ensure transparency and proper use of taxpayer resources.

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The American Rescue Plan represents the latest case of a massive deficit spending bill that was sold as the answer to all our problems, but which turned out to be full of unaffordable boondoggles. Congress must reject this path in the future. And in the meantime, there’s still an opportunity to prevent waste of money that has not been spent and to learn and apply lessons going forward.