Business & Economy

Mixed opinions on how to allocate Biden aid money

A man speaks on a stage.
President Joe Biden participates in a CNN town hall at the Pabst Theater in Milwaukee last week. Biden and other Democrats want the federal government to send most Americans another $1,400 to help them weather the pandemic. But some economists, and even some people set to get the cash, say a better approach would be to target those most in need.
Saul Loeb | AFP via Getty Images

On her way into a dollar store in Maplewood with her kids, 38-year-old Shemaca Rollins said she needs money from the government: “It definitely would help me.”

Rollins, an unemployed hairstylist from St. Paul’s east side, said she and her wife know exactly how they’ll spend whatever the federal government sends their way.

“Bills, bills, bills, food, bill,” Rollins said. “That’s it, pay a couple of bills up so you can get ahead instead of behind.”

Many people around Minnesota have plans for the money they’re expecting.

A woman in a mask stands on a sidewalk.
Shemaca Rollins, 38, says she needs the aid Democrats in Washington are pushing for.
Mark Zdechlik | MPR News

Vince Cook is an artist living up in Brainerd in central Minnesota. He makes custom furniture and wood art. But he’s has been out of work for the past year and he says his girlfriend recently lost her job, too.

“We’ve built up some bills certainly over the last year and it would help pay off some of those and that would definitely be a benefit in the long term for us,” Cook said.

President Joe Biden’s plan would give the lump sum to everyone who earns less than $75,000 a year — less than $150,000 for couples. Payments taper off past those caps.

Cook, and several others, however, say they think targeting the money to those who need it most would be a better approach.

“One of the things that’s concerned me,” says Doug Atkins, of White Bear Lake, “is throwing a bunch of money at people who don’t need it when there are greater needs that are out there in the economy.”

Atkins, a 52-year-old who works for a major medical device manufacturer, said his family and  most in his circle of friends don’t need help.

“Direct aid to the people that have been most adversely effected — that would be preferable to me,” Atkins said.

In Stewartville, south of Rochester, 34-year-old Sarah Solyntjes agrees some people will get help they don’t need.  But she says that does not matter.

“It doesn’t make sense to bicker and argue about, ‘Well, a couple people who don’t need it might get some money.’ So what? That doesn’t bother me,” Solyntjes said. “What bothers me is kids that are going hungry, the people that are going to lose their homes. Take care of your neighbors and we’ll worry about balancing the budget when this is over.”

Last week in Milwaukee, Biden pitched his COVID-19 relief package in his first town hall since he took office. He pointed to the success of the stimulus bill that came at the height of the banking crisis more than 10 years ago. Biden said today’s “American Rescue Plan” would create 7 million new jobs this year and help the economy come roaring back.

“In order to grow the economy a year two, three and four down the line, we can’t spend too much,” Biden said. “Now is the time we should be spending. Now is the time to go big.”

Biden also claimed there’s rare consensus among economists that his approach is the right path to take. But not all of the experts agree.

University of Minnesota economist V.V. Chari is also an adviser to the Federal Reserve Bank of Minneapolis. Chari says the $465 billion in relief payments — the biggest component of the Biden rescue package — are ill-advised.

“What I dislike about this proposal is that it’s large, it’s indiscriminate and it’s sold as a stimulus bill and I would argue that stimulus is not what this economy needs at this time. It is relief,” Chari said.

A headshot of a man.
University of Minnesota economist V.V. Chari.
Courtesy of V.V. Chari

Chari added that today’s economic difficulties are very different from the banking crisis that followed the housing finance collapse. 

“This is a pandemic. This is a public health problem,” which Chari says needs a different set if tools. “This is not a financial crisis. That’s what I think people are missing.”

Chari said if nearly $2 trillion more in coronavirus aid is needed, so be it — but the money should be spent wisely.

“There are some people in severe distress and so I think this particular part of the proposal the untargeted spraying of money is not something that’s particularly helpful,” Chari said.

In fact, Chari maintains sending so many people so much money could be harmful. What if, he asks, people who don’t need the money flood bars and restaurants and fill airplanes to go on vacation, spreading the virus?

And will another $1,400 really stabilize someone who’s been hit hard by implications of the pandemic? Maybe, Chari says, the people who need the help the most need more.

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