ICYMI: The Wall Street Journal: "The Vindication of Biden's American Rescue Plan"

In a column published by the Wall Street Journal yesterday, Senior Advisor to the President and American Rescue Plan Coordinator Gene Sperling makes the case that the remarkably resilient post-pandemic recovery America has experienced is precisely due to President Biden and Congressional Democratic leaders taking the right lessons from past downturns in crafting the American Rescue Plan. As Mr. Sperling writes, we must now be careful to not "under-learn" the lessons President Biden got right in his recovery plan.

Read more below:

The Wall Street Journal (Opinion): The Vindication of Biden's American Rescue Plan
[Gene Sperling, 2/15/24]

The criticism has been cast so often that it's become a cliché: President Biden's American Rescue Plan overlearned the lessons of the steep downturn in 2008 following the bursting of the housing bubble. Critics said that in trying to avoid being denied enough fiscal fire power, Mr. Biden overcorrected by going so big that his plan became the primary cause of excessive U.S. inflation.

This argument never deserved the credibility it initially received. Inflation—while painful for families here at home—soared globally due to pandemic shifts, supply-chain snarls and Russia's war, regardless of the individual fiscal policies of major economies. Now that the U.S. has maintained below 4% unemployment for 24 straight months and leads the Group of Seven nations not only in growth and real wages but also the lowest apples-to-apples core inflation, this critique rightfully has been buried.

What we must recognize is that this resilient recovery was possible because the president and Democratic congressional leaders incorporated four important lessons from past downturns into the Rescue Plan.

The first lesson, which we drew from the aftermath of the 2008 and 1982 recessions, is the need to supercharge a labor-market recovery to avoid lasting harm to millions of workers. Unemployment took six years to recover from the 2008 recession. Unemployment for younger workers entering the labor market stayed above 15%, while long-term unemployment remained stubbornly high. Economic studies revealed long-term scarring from both recessions well after gross domestic product growth recovered, including losses of earnings and increased depression, divorce and physical and mental-health challenges.

The Rescue Plan led to very different outcomes. Unemployment recovered to pre-pandemic averages a year after the Rescue Plan's passage. Black unemployment fell dramatically, hitting a record low in 2023, and Hispanic unemployment reached a record two-year low for 2022-23. Long-term unemployment had its fastest decline ever, while youth unemployment fell to 70-year lows. New policies helped millions of families avoid painful poverty and displacement. The expanded refundable child tax credit cut child poverty to record lows. And the plan included a first-ever national eviction-prevention policy that led to 20% fewer evictions than pre-pandemic averages instead of the projected tsunami of evictions.

Critics assumed that a tight labor market's gains for the bottom half of workers would lead to wage-price inflation that could be crushed only with a recession. The president never believed that. He bet that keeping record numbers of Americans employed while providing cushions such as the child tax credit would lead to a different R word: resilience.

Second, state and local economies can help strengthen, rather than weaken, a recovery. After the 2008 recession, state and local layoffs and budget cuts significantly hampered our recovery, lowering GDP growth by 0.4 percentage point for 14 quarters in a row and leading to 650,000 state and local jobs lost in the first three years of the recovery. While critics saw only excess in the Rescue Plan's state and local relief, it led to 1.2 million state and local jobs added over the past three years, with all the lost jobs recovered in one third the time it took after the 2008 recession. This added an average of 0.6 point to economic growth each of the past six quarters.

Third, beyond temporary revenue loss, state and local governments need resources to deal with harms arising from the downturn. After the 2008 recession, communities faced commercial blight, devastated small suppliers, foreclosure and long-term joblessness, yet the cupboard was bare because of congressional resistance to President Obama's requests for more recovery funding. The Cares Act in 2020 provided relief to only 154 cities and counties, and it prevented spending on longer-term pandemic challenges. President Biden, however, offered high levels of direct funding—to all 30,000 local governments and more than 15,000 school districts. Those funds helped communities address such things as learning loss, a pandemic spike in violent crime and rising mental health needs.

Finally, the Rescue Plan had the depth and breadth needed to provide "insurance" against unforeseen economic bumps in the road. As national economic adviser back then, I watched projections of 3.7% growth for 2011 get flattened by supply shocks from Fukushima, Arab Spring-driven energy price spikes and debt-default gamesmanship. When recovery was threatened this time by unexpected hits from Covid variants and an unthinkable war, the Rescue Plan provided the cushion to power through. The result: 2.5% growth in 2023, an average of 3.4% growth for President Biden's first three years, and consumer expectations about the economy up by 36% over the past two months. Instead of unemployment above 8%, unemployment has been below 4% for two full years.

We must examine what did and didn't work in the Rescue Plan and not assume that bigger is always better. But let's also not "underlearn" the lessons Mr. Biden got right, and recognize that his agenda has led to a remarkably resilient and equitable recovery.

Mr. Sperling is senior adviser to the president and coordinator for the American Rescue Plan. He served as director of the White House's National Economic Council, 1996-2001 and 2011-14.