An Urban Revival?
The American Rescue Plan provides much needed relief to cities, but will it help address systemic inequality?
Image: whitehouse.gov
A year ago, cities in the U.S. shut down. It was an eerie scene. Iconic sites like Times Square in New York, the Chinese Theatre in Los Angeles, and The Cloud Gate in Chicago – once bustling attractions – were deserted overnight.
Twelve months later, on March 11, 2021, President Biden signed the American Rescue Plan Act into law. The $1.9 trillion stimulus package, one of the largest of its kind in U.S. history, is a concerted effort to revive the economy after a year of lockdowns. With $1,400 stimulus checks for 85% of the population, income and child tax credits, and billions in relief for small businesses, the package is primarily expected to benefit low and middle-income families.
Image: Screen capture Tax Policy Center, Urban Institute and Brookings Institution
In addition, the plan is set to pump millions of dollars into cash-strapped cities across the country. The challenge now facing municipalities nationwide is to ensure the funds afforded them are put to good use making up lost revenue. But with the American Rescue Plan being hailed as a once in a generation economic “revolution” that reverses decades of fiscal conservatism, the question is whether President Biden’s relief package will address systemic urban inequalities that have existed long before the pandemic.
Urban-omics
Cities are more than just a set of zoning laws regulating life in a densely settled place. Instead, as Saskia Sassen pointed out years ago, they are nodes that facilitate the flow of information, capital, and people in a global economy. As massive economic engines, urban areas drive national growth through tourism, services, and real estate. When cities suffer, the impacts are felt nationwide.
This is exactly what happened last year. The largest recession since the Great Depression was caused by lockdowns causing a loss of revenue in cities like New York and Los Angeles which, with a combined GDP of over $2.5 trillion between them, accounted for nearly 12% of the U.S. economy in 2019.
It is no surprise that large and small cities are looking forward to the $65 billion coming to them as part of the relief package. According to a National League of Cities March 11 press release:
The American Rescue Plan will spark new life into our nation’s hometowns and offer hope to those who need it most. Local governments will put this urgently needed aid into action for residents, households and small businesses that are at the heart of our nation’s cities, towns and villages everywhere.
Nor is support for the package partisan, somehow evincing a divide between blue cities and the swathes of red heartland that separates them. Both Democratic and Republican mayors have come out in support of the legislation.
Political barbs aside, the American Rescue Plan is a lifeline for an economy where metropolitan areas make up roughly 90% of the GDP. A cash infusion that prevents budget cuts, rescues flailing public transportation, and generally helps cities return to normal, while not sufficient, is a necessary condition for economic recovery.
Source: Statistica
Beyond recovery
But returning U.S. cities to normal is the first step in achieving post pandemic prosperity. One year of the coronavirus has exposed pockets of poverty in cities across the world. From access to healthcare and housing, to food insecurity and municipal neglect, much of the world’s urban population lives in an increasing state of precarity. In the U.S. specifically, urban poverty has been steadily rising since 1980.
The bigger question – one that is likely to hang over the Biden Administration in the coming days and beyond – is whether government spending will help reduce this systemic urban inequality. And this is where the American Rescue Plan becomes spotty in its coverage.
There is no doubt that the package provides immediate relief for many vulnerable urban populations. Funds for a national vaccination campaign and community health centers, for instance, will help counter the pandemic’s unequal effect on communities of color. In the coming year, child and income tax credits, an extension in unemployment benefits until September, and $30 billion earmarked for rent relief programs will insulate low-income communities from further hardship.
But what happens when these provisions expire? Assuming cities across the country are once again open for business in the coming year, will the return to normalcy come with a long-term net reduction in urban poverty?
For instance, of the $47.6 billion allocated to housing programs in the package, $26.6 billion is set aside for emergency aid and housing vouchers for families who have lost income, been evicted, or are at risk of becoming homeless. A mere $5 billion is reserved for developing affordable housing through the HOME Investment Partnership Program. In other words, over half of the funds earmarked for housing policies are for short-term assistance – designed to guarantee shelter in the last months of nationwide lockdowns.
To be sure, this immediate assistance is necessary. But it is unlikely to solve a longstanding affordable housing crisis which is the result of cuts in public programs, rising construction costs, and strict zoning regulations.
Meanwhile, the act’s two main tax changes – expanded child and earned income credits – are temporary. If enacted permanently, these changes would go a long way in lifting millions out of urban poverty. For now, they skirt the thorny issue of reforming the current tax code amended in 2017 by the Trump Administration, which, according to a 2017 Brookings Institute report is a “petri dish for increasing inequality.” Then there are provisions, like a $15 minimum wage, that the Biden Administration tried but failed to include due to opposition by Republicans and some cautious Democrats.
In short, the American Rescue Plan in its current form is geared towards addressing immediate urban problems caused by the pandemic rather than structural inequity in U.S. cities.
Looking ahead
For a year, people across the planet have been yearning for normalcy. With a global vaccination campaign underway, that possibility seems closer than ever. But for many, a return to the way things were doesn’t necessarily entail increased economic security, better housing options, or higher than poverty-level wages. For them, government support is a way to survive the pandemic, not thrive in its wake.
To be fair, while the American Rescue Plan doesn’t address the root causes of urban inequality, it does flip the script in terms of fiscal policy; the plan is turn away from Reaganomics’ preoccupation with gutting public programs and cutting funding for urban areas.
Whether this is a stepping-stone towards expanding social security permanently remains to be seen. For now, the American Rescue Plan, timely and lifesaving as it is for the U.S. economy, expects that vulnerable urban residents will again have to make their own luck once the pandemic is over.
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