The Biden administration's first major resolution, a USD 1.9 trillion new bailout, has been narrowly passed the Senate. On the morning of February 5, the U.S. Senate passed the budget resolution to move forward on the economic relief plan without Republican support. The 100 senators from both parties voted 50-50, with all Democrats are in favor of it and all Republicans against it. Vice President Kamala Harris, who votes only when the Senate is tied, broke the deadlock and voted in favor of the Democrats' proposal, sending the resolution to the House of Representatives for final approval.
With the House of Representatives controlled by Democrats (who hold 218 seats in the House), it is all but certain that Joe Biden's USD 1.9 trillion economic relief package will pass in the next few weeks. U.S. House Majority Whip Jim Clyburn has stated that there are enough votes in the House to pass Biden's stimulus package.
Even though the Senate passed the USD 1.9 trillion relief package, the package remains controversial. Prior to the previous vote, the Senate went through more than 14 hours of heated debate. The huge controversy was not only a partisan battle, but also showed that the two parties in the U.S. have completely different philosophies, judgments, and policy ideas about the future of reviving the economy, which could have a significant impact on the future of the U.S. economy and capital markets.
The USD 1.9 trillion economic relief package was a package that the Biden administration pushed hard for during the election and was fiercely opposed by Republicans. Chan Kung, founder of ANBOUND, pointed out that the two sides are tit-for-tat because neither party has any room to back down.
The concern for Republicans is that the government will be too intrusive in the economy and could trigger a collapse in the capital markets if the bailout is implemented aggressively. Republicans have repeatedly voiced out that the USD 1.9 trillion relief package is too expensive and not very targeted in light of other relief measures approved by Congress. On February 1, a group of 10 centrist and conservative Republican senators unveiled a USD 618 billion relief plan, which is only one-third the size of Biden's stimulus plan. Similar to the USD 900 billion relief plan proposed by Donald Trump in the final stages of his presidency, the USD 618 billion relief plan significantly scales down or eliminates elements of Biden's relief plan.
The Democrats, on the other hand, believe that establishing a welfare state is the right way to go. In fact, Biden's relief plan would spend about the same amount as the Republicans' counter-proposal on the prevention and control of COVID-19, each offering USD 160 billion to fight the pandemic. The difference is that Biden's relief plan extends the bailout to a much broader scope. For example, the Biden administration will allocate USD 170 billion to schools and colleges to help them reopen safely. Biden also plans to provide USD 350 billion in emergency aid to the state, local and regional governments to help them keep their frontline workers on the job, distribute the vaccine, test for the novel coronavirus, and reopen schools. Funding aid for state and local governments is the biggest bone of contention between Democrats and Republicans. Biden also proposed raising the minimum wage to USD 15 per hour from USD 7.25 per hour, and raising the child tax credit to USD 3,000 for children under 17 and USD 3,600 for children under 6.
Democratic Senator Bernie Sanders has a rather representative view of the USD 1.9 trillion relief plan, arguing that the resolution could address several problems in the United States, including the those of economy and education, and give Americans hope and restore confidence in the government. As a matter of fact, the impact of Biden's relief plan has far outweighed the pandemic, becoming a plan to help Americans and the U.S. economy with widespread benefits (in effect, a comprehensive economic stimulus package). Once implemented, the plan will be an important turning point in the process of the welfare-orientation of the United States, which will set the U.S. economy on a new path (please refer to the report Welfare Transformation Ushers in "Super-Boom Period" in the United States for more details on this).
Chan Kung pointed out that public policy wise, Biden's USD 1.9 trillion economic stimulus package was passed under the situation of partisan politics, while the positions of the two parties in the United States are the opposite of each other. The result will make this economic stimulus package become more of a touchstone, where its success or failure will produce two completely different results in the U.S. stock market. If the Republican Party's view is correct, then the stock market will inevitably fall; contrarily if the Democratic Party's view is right, then the stock market would rise. However, although the stock market fluctuates, it is still closely related to the basic trend of the economy. To implement Biden's COVID-19 relief plan, more detailed legislation needs to be formulated and passed separately. However, once the Biden rescue plan is passed and implemented, the major impact on the U.S. economy will gradually become apparent.
Final analysis conclusion
The U.S. Senate has passed the budget resolution of Biden's USD 1.9 trillion rescue package after intense debate, clearing a key obstacle to its final adoption. The implementation of the plan will become a key turning point for the U.S. toward welfare-oriented society, and it will also become a touchstone that affects the U.S. capital market. If the Democratic Party is correct, it will bring about a sharp rise in the stock market; yet if the Republican Party is right, it will bring about a sharp fall.
