Politicians pass $1.9 trillion pandemic aid package in US Senate, causing retailers to celebrate
The U.S. Senate's $1.9 trillion COVID-19 relief package, known as the American Rescue Plan Act (ARPA), has had a significant positive impact on small businesses and the retail industry. This comprehensive legislation, passed on Saturday, has provided much-needed financial aid, supported unemployment benefits, and enhanced credit opportunities, helping these sectors navigate the pandemic's challenges.
One of the key areas of impact is the support provided to small businesses. The Act included $10 billion allocated through the State Small Business Credit Initiative (SSBCI), which has been utilised by states, territories, and tribal entities to support business finance programmes. For instance, Minnesota used $33 million from this funding to assist around 225 small businesses in expansion and development, benefiting industries such as manufacturing, healthcare, hospitality, and clean technology [5].
The relief package also extended unemployment benefits, adding $300 per week, and kept these benefits running through September 6, 2021. This expanded assistance, including Pandemic Unemployment Assistance (PUA), covered self-employed individuals, freelancers, and gig workers who faced significant challenges during the pandemic [1].
To further aid small businesses, the relief package featured tax provisions beneficial to these entities. For example, the first $10,200 of unemployment income was made tax-free for households earning under $150,000. Additionally, tax credit expansions for workers with children and enhancements to the earned income tax credit boosted disposable income, indirectly benefiting both workers and the retail economy [1].
Related legislation, the “One Big Beautiful Bill Act” signed in July 2025, built on this foundation by permanently extending 100% bonus depreciation and increasing Section 179 expensing limits to $2.5 million. These changes aid small businesses in investing in equipment and other growth initiatives, indirectly supporting the broader retail and service sectors as businesses upgrade and expand [3].
The ARPA aims to stabilise struggling small businesses and households through direct financial assistance and incentives, thereby sustaining retail operations and consumer spending during pandemic disruptions. This support has been crucial in maintaining employment, encouraging economic activity, and fueling local business recovery [1][5].
The positive impacts of the ARPA are reflected in various economic indicators. For instance, Wells Fargo economists have revised their forecast upward for U.S. real GDP growth this year, expecting it to rise 6.2%. The economy added 379,000 jobs last month, pushing the unemployment rate down to 6.2% from January's 6.3%, according to the Bureau of Labor Statistics [2].
Traffic to apparel and luxury retailers has improved in recent weeks, according to a client note last week from Morgan Stanley. The swift development of vaccines, with their deployment set to speed up, only adds to the momentum already building in retail [4].
The improving public health picture and the promise of further fiscal relief are providing an increasingly optimistic outlook for the economy over the next two years, according to Wells Fargo economists [6]. The House is expected to approve the Senate's changes early this week, and President Biden made remarks about the bill on Saturday [7].
References:
- CNN
- Bureau of Labor Statistics
- National Retail Federation
- Morgan Stanley
- Star Tribune
- Wells Fargo
- White House
- The American Rescue Plan Act (ARPA) is unprecedented in its support for small businesses, allocating $10 billion through the State Small Business Credit Initiative.
- This funding has enabled states and tribal entities to support business finance programs, helping industries like manufacturing, healthcare, hospitality, and clean technology.
- The ARPA also extends unemployment benefits, adding $300 per week, benefiting self-employed individuals, freelancers, and gig workers.
- To further aid small businesses, the Act includes tax provisions and tax credit expansions, indirectly benefiting the retail economy by boosting disposable income.
- Related legislation signed in 2025, the “One Big Beautiful Bill Act,” extends 100% bonus depreciation and increases Section 179 expensing limits, helping small businesses invest in growth initiatives.
- The ARPA's financial assistance and incentives are expected to maintain employment, encourage economic activity, and fuel local business recovery during pandemic disruptions.
- Economic indicators, such as the U.S. real GDP growth, job creation, and retail traffic, reflect a positive impact from the ARPA.
- The improving public health picture, swift development of vaccines, and the promise of further fiscal relief promote an optimistic outlook for the economy in the near future.
