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Innovation proposals in Biden's COVID plan would provide emergency, long-term assistance

January 21, 2021
By: Jason Rittenberg

Last week, the incoming Biden administration announced an “American Rescue Plan” to address immediate health and economic threats from COVID-19. On the economic side, the plan goes further than immediate relief and begins to address some longer-term strength and resilience concerns. Among other provisions, it would provide $35 billion for a new business finance program that support venture capital, $350 billion for state and local governments to help address budget shortfalls, $35 billion for higher education and $3 billion for the Economic Development Administration.

In total, the package has an estimated price of $1.9 trillion. Much of the cost is driven by economic relief to individuals and households, including $1,400 checks and expanded unemployment insurance benefits. Other assistance initiatives include funding for vaccination programs, expanded childcare and SNAP benefits, and $130 billion to help reopen schools.

One of the plan’s most significant items for the tech-based economic development community is $35 billion for a program to help “successful” state, local, tribal and nonprofit small business financing programs leverage $175 billion in low-interest loans and venture capital. This description reads almost exactly like the Obama-era U.S. Department of the Treasury’s State Small Business Credit Initiative (SSBCI), although that was a $1.5 billion program that attempted to leverage 10 times that amount from the private sector. Factors that may account for the increased federal investment and lower expected leverage are that Biden’s plan calls for clean energy investments as part of this new program, and his campaign pledges included reauthorizing SSBCI for minority- and women-owned businesses. Details are not available at this time, but the administration’s thinking may be that the new policy targets may compel greater participation of public funds.

This new SSBCI-like program is not the only proposed initiative that would include clean energy as a policy target: Biden is also proposing a set-aside from a $30 billion rental assistance program that would fund clean energy and energy efficiency projects assisting families in disadvantaged communities.

The proposed $350 billion for state and local governments, which appears to be in addition to several dedicated relief efforts that would provide support to states, would be for “emergency funding for state, local, and territorial governments to ensure that they are in a position to keep front line public workers on the job and paid, while also effectively distributing the vaccine, scaling testing, reopening schools, and maintaining other vital services.” This phrasing suggests the funds would have fewer restrictions that the state support under the original CARES legislation, but this is currently uncertain.

The $35 billion for higher education would be to support public health, distance learning, and student funding. The plan states that millions of students would be eligible for up to an additional $1,700 in financial assistance.

EDA’s proposed $3 billion does not come with any additional descriptors on the funding. The amount is twice what EDA received under CARES.

Biden’s plan also includes a major priority of progressives: a $15 per hour minimum wage. Florida voters passed this standard in a ballot measure last November, although the state would increase to $15 by 2026. Increasing minimum wage is often controversial, despite research finding few resulting job losses from increases.

There has been less than universal support for the plan within Congress.

coronavirus, white house