U.S. President Joe Biden signed the new $1.9 trillion bailout bill, known as the American Rescue Plan, into law, marking its official entry into force. The bill is biden government’s first major legislation project, but also marks the biden completed the previous commitment to voters – 100 days in office as qualified americans directly to issue $1400 cheque, moreover also includes extending unemployment insurance, to state and local government funding, improve the ability of vaccination and detection, and many other aspects.
Repeated rounds of fiscal rescue spending have led to an explosion in U.S. government debt. The US federal fiscal deficit climbed year after year from $585 billion in 2016 to $984 billion in 2019, and the US federal debt hit a record high in 2020 as hundreds of millions of dollars were spent on financial bailouts. Federal government spending rose 47.3 per cent to $6.55tn in fiscal 2020 and the deficit more than tripled to more than $3.1tn, according to Treasury Department data. The deficit jumped to 15.2 per cent of GDP, the fifth consecutive increase and the highest level since 1945. By the end of November 2020, the total federal debt of the United States has reached $27.4 trillion, accounting for 134% of GDP.
And there is no end to the rise in U.S. federal debt.
The epidemic left tens of millions of Americans homeless, facing food insecurity and unable to pay their rent. Since June 2020, about 8 million Americans have fallen below the poverty line, and more than 10 million Americans are still unemployed, according to the Labor Department.
Is $1.9 trillion too much?
Former U.S. Treasury Secretary Larry Summers published an article “Biden’s Stimulus Plan is Brave, but Riskful” in the Washington Post on February 5 this year, which caused a lot of controversy within the Democratic Party. Summers served as Treasury secretary under President Bill Clinton and as a top economic adviser to President Obama.
“I also agree that when it comes to fiscal stimulus, the risks of doing too little are higher than doing too much,” Mr Summers said. He also pointed to the serious problems that could result from the $1.9 trillion stimulus package: First, inflation. While there are plenty of uncertainties, a stimulus of this magnitude, close to that of the second world war, is likely to generate inflationary pressures not seen in a generation, with consequences for the value of the dollar and for financial stability. The second is how to ensure that stimulus does not squeeze critical public investment in the future. Even before the outbreak, the U.S. economy was facing many fundamental problems, including economic inequality, slow growth and insufficient investment in all public sectors, including infrastructure, preschool education and new energy.
In short, Mr Summers emphasised the potential costs of “doing more” : economically, there is the risk of a sharp acceleration in inflation and a stock market bubble; Politically, this could reduce the appetite in Congress for future fiscal action to address long-term priorities such as infrastructure spending and climate change.
In an interview on CNN’s “State of the Union,” U.S. Treasury Secretary Janet Yellen acknowledged that rapid inflation is a risk to consider. But policymakers should have the tools to deal with this danger.
“As Treasury secretary, I have to worry about all of the risks to the economy,” she said, “the most important risk is that we let the workers and community because of the pandemic and the resulting economic loss and fear, we didn’t take enough measures to solve the pandemic and public health problems, and we don’t have to let our children back to school.”
Martin Wolf, chief economics commentator of the Financial Times, said in a telephone interview with thepaper.cn that, although it has not been officially acknowledged, when we find that there is no ceiling on government deficits, we are in fact in the world of modern monetary theory (MMT). And it’s hard to know for sure in advance, because people’s behavior can change. But for now, at least, central bankers are not admitting it.
A number of global financial experts confirmed to thepaper.cn the inflationary risks posed by uncapped deficits. In particular, Wolf said it would put at risk the reliability of Western currencies, including the dollar.
In Wolff’s view, modern monetary theory (MMT) is a relatively extreme version of Keynesianism — the prescription is to keep running fiscal deficits, keep interest rates low, and monetize debt by printing as much money as possible to ensure government financing. Before the economic woes caused by the epidemic, MMT remained on the margins of macroeconomics for a long time.
Ms Yellen, the current US Treasury secretary, is the heir of Keynesianism. Yellen’s doctoral advisor, James Tobin, was a leading Keynesian, and her own academic work is clearly Keynesian, with an emphasis on unemployment and wages.
Barry Eichengreen, a professor of political economy at the University of California, Berkeley, who is one of the most influential economists on the international financial and monetary system and financial crisis theory, said in a written interview with thepaper.cn that there is no doubt that Keynesian “blood” flowed in Yellen’s academic training. But he rejects the notion that modern monetary theory (MMT) has taken hold in the developed world. He believes it is more accurate to say that many mature market governments have responded to COVID-19 with unprecedented relief and incentives. But they also realize that there are limits to these measures and that they cannot go on forever. And the debate about where that line should be drawn, and how long these measures should last, is valuable.
Mr Eichengreen further emphasised that the limits of monetary policy in the developed world – not only interest rates close to or below zero, but also the continued growth of central bank balance sheets – mean that the current problems of excess capacity and unemployment must be addressed through fiscal policy. However, this is the current situation, does not mean that the future will be the same. At some point, budget deficits will have to shrink again and monetary policy will come into play again.
Will “Biden economics” deliver growth?
Even before he became president, Biden has proposed a $1.9 trillion stimulus package to be followed by more than $3 trillion in infrastructure spending. Thus, the US government’s huge deficit and debt surge are still on the way.
At a conference on infrastructure investment in March, Mr. Biden also tried to use China’s impressive achievements in infrastructure to underscore the urgency of pressing ahead with a U.S. infrastructure investment package.
Biden and Vice President Harry Harris met with a bipartisan group of four senators in the Oval Office and made a pitch for infrastructure spending. Mr Biden said there had not been enough bipartisan communication on infrastructure in the past and he hoped to reach “some consensus” with Congress on the issue now. Mr. Biden singled out China as evidence of the urgency of strengthening U.S. infrastructure. Biden said China has made rapid progress in areas such as railways and electric car technology.
In their platform, Biden and Vice President Harris made clear the need to invest in modern, sustainable infrastructure and sustainable engines of growth, including roads and Bridges, energy grids and schools, universal broadband, and more. Biden also plans to confront the climate crisis and build a clean energy economy.
Faced with similar dilemmas and political ambitions, some critics have compared “Biden economics” to the “New Deal.” The difference is that FDR’s deficits were not comparable in size.
The comparison, according to Eichengreen, is the desire to spend on innovative projects. The Biden administration’s proposals include school subsidies for children and job training for workers.
Wolf agreed that Roosevelt was still trying to maintain fiscal balance. What is certain, however, is that the Biden administration would like to be as radical (to the left) as FDR and to bring change to America before a crisis of equal magnitude.
“To Joe Biden and the people on his team, Roosevelt was their hero. Biden clearly looked to Roosevelt as a role model.” “Mr. Wolf said.
Under the epidemic, the new economy has also gained considerable development.
Professor at the university of Hong Kong feng fund professors with Asia global institute, the original Yale university finance professor Chen zhiwu accept surging news video interview, according to all the people are not allowed because the new crown epidemic isn’t at home, so many had no desire to try new technology, there is no way had to crustily skin of head to learn, understand and adapt to these new technologies. In this sense, especially for the American society, the adoption and acceptance of new technologies, big data and other technologies in the whole society has been unexpectedly improved, thus providing a greater impetus for the development of many high-tech industries and enterprises. Further sublimation of innovation based on this mass base, and so on, will drive productivity growth over the next decade.