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A High-Stakes Gamble: How the $1.9 Trillion American Rescue Plan Backfired on Democrats


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Nearly four years ago, the Biden administration and Congressional Democrats placed a massive $1.9 trillion wager on the American Rescue Plan (ARP), aiming to steer the nation through the pandemic's economic turmoil. Their goal was to avoid under-stimulating the economy, yet the scale of the ARP may have tipped the scales too far in the other direction, leading to inflation that discontented voters across the nation. The outcome of this gamble has reshaped economic policy discussions and could influence how future governments approach recession recovery.

 

The ARP was designed to push the economy forward quickly, addressing not only the crisis but the perceived missteps of the 2010s, when, after the Global Financial Crisis, high unemployment lingered for years. As part of their strategy, Democrats believed the risk of insufficient action was greater than that of excess. They aimed to avoid a prolonged recovery by providing direct financial relief: $1,300 checks to families already sitting on pandemic savings, extended unemployment benefits even as businesses started rehiring, and additional funds for state governments already stable.

 

This ambitious stimulus, enacted after former President Trump’s $2.7 trillion pandemic relief package, raised concerns among centrist and conservative economists who warned that such extensive aid could lead to inflationary pressures.

 

One of the most outspoken critics, Larry Summers, wrote in May 2021, "In general, increases in inflation disproportionately hurt the poor and are associated with reductions in trust in government." He warned progressives about the historical role inflation played in political shifts, reminding them that inflation concerns contributed to the election of Richard Nixon in 1968 and Ronald Reagan in 1980.

 

The spike in inflation that began in 2021 was indeed a global phenomenon, fueled by pandemic-related disruptions in supply chains and labor shortages, as many people opted to stay home. Even countries with limited fiscal intervention experienced similar issues, showing that inflation’s roots extended beyond U.S. policy alone. Nonetheless, the ARP’s scale likely had an inflationary impact. Analysis by the San Francisco Federal Reserve estimated that fiscal policy contributed around three percentage points to the total U.S. inflation rate in 2021, which reached 7%. Had the stimulus been more restrained, inflation may have peaked at a lower rate, reducing the Federal Reserve's need for such aggressive interest rate hikes and mitigating some of the recent economic pain.

 

The ARP’s benefits, including the direct payments, were largely forgotten as inflation took center stage in public sentiment. As inflation remained high, the connection between the Democrats’ policies and the cost-of-living increases became more apparent to voters. Although the U.S. experienced a rapid recovery, thanks in part to the ARP, inflation overshadowed these gains. By 2024, cumulative price levels were around 21% higher than in 2020, and many Americans felt this impact more than they appreciated the falling inflation rate, which had slowed to 2.4%.

 

In hindsight, the Biden administration has touted the ARP’s role in promoting fast economic growth and falling inflation rates. But for many Americans, especially those whose wages did not keep pace with inflation, these achievements seemed irrelevant in the face of rising costs. A “high-pressure” labor market and “running the economy hot” were the rallying cries of liberal economists at the time of the ARP’s inception, but for many, the resulting surge in inflation felt like a betrayal.

 

As the Biden administration faced the 2024 election, the memory of high inflation lingered more strongly with voters than the rapid recovery the stimulus intended to fuel.

 

Based on a report by Axios 2024-11-12

 

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Yup another left leaning media outlet trying to frame the election disaster as only due to cost of living from inflation.

Nothing to do with extended lock downs in left wing states, excessive bureaucracy in so many areas, (DC voted 92% Democrat), environmental extremism, pithy foreign affairs, woke everywhere including education and porous borders.

The left induced media continue to shoot own goals with their hubris, e.g. Biden was mentally fit as a fiddle, until everyone could see he wasn't and by then it was too late.

 

 

 

 

Edited by Donga
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The road to the WH went through Pennsylvania! 

 

Bias CBS put out a special 60 minutes !

 

Its the price of living , that p’ed many off.Low Information voters came out for Trump. Many rejected transgender’s being given payed care.Harris lost on abortion popularity!

 

 

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1 hour ago, Donga said:

Yup another left leaning media outlet trying to frame the election disaster as only due to cost of living from inflation.

Nothing to do with extended lock downs in left wing states, excessive bureaucracy in so many areas, (DC voted 92% Democrat), environmental extremism, pithy foreign affairs, woke everywhere including education and porous borders.

The left induced media continue to shoot own goals with their hubris, e.g. Biden was mentally fit as a fiddle, until everyone could see he wasn't and by then it was too late.

 

 

 

 

And It's not like cost of living had been one of the major GOP propaganda topic! It's also not like we had been flooded with posts from MAGA fans about it, including memes with fake prices!

Oh wait! 🤣

 

It's quite funny that, as Trump is going to implement inflationist policies the RW talking point is now to downplay the significance of the inflation topic for citizen! 😃

Edited by candide
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