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On The Money: Breaking down Biden's $1.8T American Families Plan | Powell voices confidence in Fed's handle on inflation | Wall Street basks in 'Biden boom'

On The Money: Breaking down Biden's $1.8T American Families Plan | Powell voices confidence in Fed's handle on inflation | Wall Street basks in 'Biden boom'
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Happy Wednesday and welcome back to On The Money, where we’re getting ready for a slightly different joint session experience. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL—Here's what's in Biden's $1.8T American Families Plan: President BidenJoe BidenKinzinger, Gaetz get in back-and-forth on Twitter over Cheney vote Cheney in defiant floor speech: Trump on 'crusade to undermine our democracy' US officials testify on domestic terrorism in wake of Capitol attack MORE on Wednesday will outline the American Families Plan, an ambitious package that would call for $1 trillion in new spending and $800 billion in new tax credits and aim to significantly expand access to preschool and community college, as well as child care and health care benefits.

  • Biden will detail the proposal during a speech before a joint session of Congress in which he is expected to lay out his agenda for the coming months. 
  • The centerpiece of the speech will be the families plan, which is being rolled out less than a month after Biden unveiled a $2.3 trillion infrastructure proposal.

But we’ve already got the details about what Biden plans to propose tonight. 

Education: 

  • The American Families Plan calls for a $200 billion program offering universal pre-kindergarten for all three- and four-year-olds.
  • $109 billion for tuition-free community college for any American who wants it.
  • $85 billion to increase Pell Grants to benefit low-income and minority students.
  • More than $4 billion in funding for larger scholarships, certification and support programs for teachers.

Tax credits:  

  • The plan would build upon provisions of the American Rescue Plan by extending the Affordable Care Act premium tax credits indefinitely and make the earned income tax credit expansion for childless workers permanent. 
  • It would permanently make the child tax credit fully available to the lowest-income families, while extending other aspects of the expansion of the credit, such as the increase in the credit amount, through 2025.

The proposal also calls for the creation of a national paid family and medical leave program, more funding for meal programs for children and low-income families, and unemployment insurance reform among many other items. The Hill’s Brett Samuels and Morgan Chalfant break it down here.

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The tax hikes: All of those new investments will come with a series of proposed tax increases for high-earners, which could be a heavy political lift in it’s own right.

The Hill’s Naomi Jagoda walks us through Biden’s tax plan here.

Read more about the American Families Plan:

  • President Biden heads into Wednesday night’s congressional speech on tense terms with the business community following proposals to raise the corporate tax rate and nearly double the capital gains tax for high-income Americans.
  • Key Democratic lawmakers on Wednesday said they were going to continue to push for the full expansion of the child tax credit (CTC) to be made permanent, after President Biden released a proposal that would only cement a part of the expansion.
  • The Treasury Department on Wednesday provided more details about President Biden's proposal to boost IRS funding and strengthen compliance with tax laws, saying that these initiatives would generate $700 billion in net revenue over a decade.

LEADING THE DAY

Powell voices confidence in Fed's handle on inflation: Federal Reserve Chair Jerome Powell on Wednesday expressed confidence that rising inflation would even out as the one-time, pandemic-related statistical quirks and supply chain disruptions driving it begin to fade.

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During a press conference, Powell argued that the recent rise in the rate of price increases is driven almost entirely by economic activity picking back up after collapsing amid the onset of the coronavirus recession.

“We are likely to see some upward pressure on prices,” Powell said after the Fed announced it would hold rates near zero percent and maintain the current rate of bond purchases, “but those pressures are likely to be temporary as they are associated with the reopening process.” I explain why here.

The background: 

  • The U.S. is expected to see growth between 6 and 8 percent in 2021 as it contains the spread of COVID-19 and brings millions of people back to work. 
  • Critics fear that Biden’s recent $1.9 trillion economic aid bill, plans for future spending and loose Fed monetary policy will spur rampant inflation as the U.S. is already booming.
  • The consumer price index (CPI), a closely watched gauge of inflation, rose 2.6 percent between March 2020 and last month, and 1.7 percent minus food and energy costs.

Powell, however, said Wednesday that inflation would rise further over the summer because of two short-term factors: The statistical effect of comparing a collapse in demand to a sharp increase in demand and bottlenecks created by the reopening global economy.

“An episode of one-time price increases as the economy reopens is not the same thing as and is not likely to lead to persistently higher year over year inflation into the future,” he said.

ON TAP TOMORROW:

  • The Senate Banking Committee holds a hearing on “The Dignity of Work” at 10 a.m.
  • The Senate Finance Committee holds a hearing on Social Security during the COVID-19 pandemic at 10 a.m.
  • A House Financial Services subcommittee holds a hearing on closing the racial and gender wealth gaps at 12 p.m.
  • A House Ways and Means subcommittee holds a hearing on infrastructure investments at 1:30 p.m.

GOOD TO KNOW

ODDS AND ENDS