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Joe Biden is inheriting an economic crisis as he assumes the presidency, just as he did when he became vice president a dozen years ago. But this crisis is different and, to the relief of many liberal economists, so is Biden’s response.

The $1.9 trillion economic rescue package that Biden proposed Thursday is significantly larger and more targeted toward the economy’s biggest problems than the stimulus he and President Barack Obama pushed through in 2009. It is not intended to generate enough consumer spending to jolt the nation into a rapid recovery, like a traditional stimulus would in a more normal recession.

It is meant instead to resuscitate economic activity by more aggressively attacking the COVID-19 pandemic through vaccines and testing, and to sustain hard-hit people and businesses until that job is done.

There are other updates to match the shifting politics of the last decade. The package is filled with easy-to-explain provisions, like direct payments to individuals and government subsidies for child care, that could prove more immediately popular with voters than the often-hidden tax cuts included in the 2009 stimulus. This irks some economists and budget experts, who complain that the $1,400 checks, in particular, are an inefficient use of government resources.

Those complaints do not bother Biden and his aides. The Great Recession and its plodding recovery, combined with more than a decade of historically low government borrowing costs and diminishing concerns about a ballooning federal budget deficit in Washington, convinced them that it is better to spend too much on recovery than not enough.

“Every aspect of this plan shows that Biden has learned the lesson from 2009,” said Jason Furman, a former top economist for Obama: “Go big, be explicit, expand what people think is possible.”

Biden’s economic team includes several Obama-era veterans who say they have learned from the last 12 years and the economic and health struggles of the pandemic.

“This plan reflects an assessment of the current economic moment, and when you do that, you end up with a plan that is quite different than prior recessions,” said Brian Deese, who is Biden’s choice to lead the National Economic Council and held several policy roles in the Obama White House.

“If we want to get people back to work, we have to get schools open. If we want to have schools open, we need testing,” Deese said in an interview. He added that “if we want to create a bridge to when the economy is recovering, then we need to provide significant quantities of direct relief. Those are different issues than we saw in 2009.”

Those differences can be seen clearly in large parts of Biden’s new proposal that would not be considered stimulative in any traditional sense of the word.

Its centerpiece is more than $400 billion in spending to fortify the nation’s defenses against the coronavirus. That includes accelerating vaccine deployment and ramping up testing and contact tracing for infections, partly through a federal jobs program that would hire 100,000 people in those areas.

Paul Romer, the Nobel Prize-winning economist from New York University who has urged lawmakers to significantly increase their spending on testing, said Biden’s call to put $50 billion toward testing efforts “would make a huge difference” to the economy. Such an investment, he said, “would probably get us to the point where it is actually true that for the next 12 months, anyone who wants to get tested really can get tested.”

The COVID-19 funding also includes more than $100 billion for safety measures in schools, with a goal of reopening most kindergarten-to-eighth-grade schools within 100 days. If that succeeded, it would help potentially millions of parents, largely women, return to full-time work.

The other $1.5 trillion in the package is meant to help individuals, governments and, to a lesser degree, businesses that have taken the brunt of the damage since the pandemic recession began last year. It includes expanded and extended benefits for unemployed workers, aid for renters facing eviction and help for low-income families facing food shortages.

The plan also mandates — and funds — paid leave for most workers and provides new help for people who lack or have lost health insurance. The $1,400 direct checks are meant to help people who lost hours or income amid the crisis, although they will go to a far wider group that includes people who have not suffered financially in the crisis.

Biden has stressed that such aid will support increased consumer spending, but he and his team cast the goal of distributing the money in more human terms: to ensure as many Americans as possible avoid the scarring damage of homelessness, hunger and the virus itself.

The Biden team and its allies are confident that, if they succeed, the economy will be poised for a roaring rebound. Other policymakers and forecasters, including Jerome Powell, the Federal Reserve chair, have predicted a swift rebound once the virus is under control.

“The recovery from the Great Recession was delayed by years because we failed to act at the scale of the problem,” said Heidi Shierholz, a former Labor Department chief economist who is now at the liberal Economic Policy Institute. “This is a huge break from past mistakes.”

The Biden plan is not, to be clear, the exact plan that many economists, including liberal ones like Furman, would have chosen. The direct checks, which proved a winning political message in the Georgia runoff elections that gave Democrats control of the Senate, will reach millions of Americans who have not lost income amid the pandemic and are most likely to sock the money away in savings.

And its price tag, along with the inclusion of provisions that conservatives have long fought, like increasing the federal minimum wage to $15 an hour, means the package is unlikely to draw much Republican support. Already, lawmakers are warning that it spends too much and is overkill on top of the $900 billion and $2.2 trillion packages passed in December and March.

Some conservative economists say the package spends far more than is necessary to fill what economists call the “output gap,” which is essentially the value of lost performance in the economy because of the recession. They are beginning to warn that pouring too much fuel on the economy risks runaway inflation — the same argument that many made in 2009 and that proved to be wrong.

“A package this size is inadvisable,” said Michael Strain, an economist at the conservative American Enterprise Institute. “It would fill the output gap several times over.”

Some on the left say the plan still does not go far enough. Mark Paul, an economist at the New College of Florida, who estimated last month that the economy needed as much as $4 trillion to fully recover, said that Biden risked Congress refusing to pass more aid if it was needed in the fall.

Biden’s aides say they proposed a package intended to meet the needs of this crisis, having learned from the struggles of the early vaccine rollout and the failure of policymakers to fully bridge people and businesses through months of dampened economic activity as the pandemic raged. They were encouraged to spend as much as they proposed, in part, by the low interest rates and historically anemic inflation that have persisted for more than a decade, which have brought about a change in many economists’ thinking about the advisability of big deficits.

The proposal earned praise Friday from a Federal Reserve official who has urged lawmakers to spend more to help the economy escape the crisis. “It is a big package, but I think it’s appropriate,” Eric Rosengren, the president of the Federal Reserve Bank of Boston, said in an interview on CNBC. “The economy is in a lull right now.”

Many lawmakers have changed their tune on deficits, too. Republicans downplayed deficit concerns while passing President Donald Trump’s signature tax cut package in 2017, and Trump signed trillions of dollars in economic aid packages into law last year, all of which were financed with borrowed money.

In 2009, after a campaign in which Obama had decried rising deficits under President George W. Bush, the Obama team limited its stimulus plans to less than $1 trillion, in part because they feared many Democrats would not go for more. Biden may yet have to scale back his ambitions to unify Democrats in the House and Senate, but even the most conservative members of his party are far more deficit-tolerant today than a decade ago.

“Whatever the combination is of lessons learned, new consensus on fiscal policy or the breadth of the pandemic, there is no question that the need to go big when you can is ingrained in nearly everyone on Team Biden and Democrats broadly right now,” said Gene Sperling, a former National Economic Council director for Obama who advised Biden in the campaign.

© 2021 The New York Times Company
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