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The Biden administration is riding a wave of growing optimism that the COVID-19 recession will resume, with the president and key surrogates taking to the road to sell their relief plan.
Economists say the United States is set to rebound quickly thanks in part to the $ 1.9 trillion relief bill signed on Thursday, which sends out yet another round of stimulus checks, extends expanded unemployment benefits and authorizes hundreds of billions of dollars to support local governments, small businesses and hard-hit industries.
White House hopes to lead momentum for bill passage behind President Biden
Joe BidenPentagon Takes Heat To Extend Guard’s Time At Capitol Booker To Try To Make Child Tax Credit Expansion Permanent Sullivan Says Tariffs Will Not Be Central Talks With China READ MOREOther initiatives, such as a faster vaccination campaign, a package to rebuild the country’s infrastructure and additional measures that the administration and some economists see as essential to improve the long-term trajectory of the economy.
“After long dark years – an entire year – there is light and hope for better days if we all do our part,” Biden said in a speech to the nation Thursday night. “This country will soon be vaccinated. Our economy will be on the mend, our children will be back to school.”
“Over a year ago, no one could have imagined what we were going to experience. But now we are going through.
Analysts predict gross domestic product (GDP) growth of between 5 and 7% in 2021, after a drop of 3.5% in 2020. The unemployment rate of 6.2%, already well below its crisis peak of 14.7%, could fall below 4.1% by the end of the year, according to Goldman Sachs.
The new aid injection also comes amid signs of an accelerating economic recovery. The United States added 379,000 robust jobs in February, consumer and business sentiment is soaring, jobless claims are below expectations this week, and inflation has remained well below the 2% target range from the Federal Reserve.
The United States still has a strong climb ahead of them. About 9.5 million jobs lost due to COVID-19 have yet to be replaced, millions of households still struggle with food and housing insecurity, and much of the workforce American work will have to find new careers as entire industries attempt to rebuild themselves from scratch. .
Even so, many economists are convinced that Biden’s bill started the process, with crucial lifelines for sinking families, help for states to fund essential services, and enough support to last well into the future. beyond the direct payments to Americans that will be sent from this weekend.
“The White House and the Democrats on the Hill have done an outstanding job in ensuring that the combination of immediate aid and additional aid … will combine with abundant household savings to at least support the economy over the three years. next few years, ”said Joe Brusuelas. , chief economist of the audit and tax firm RSM.
Biden is eager to show how he kept his election promise to adopt a major back-up plan, which polls show is supported by around 75% of Americans. Biden is heading to the major swing states to sell the package, which passed Congress without a single GOP vote.
The president will travel to Pennsylvania on Tuesday and host an event in Atlanta with Vice President Harris on Friday. First lady Jill biden
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Republicans, however, say the huge increase in debt, the potential for inflation and rising taxes will come back to haunt Biden – especially as he tries to push through a massive infrastructure bill.
“There isn’t a country that sees this growth in debt and doesn’t end up with high interest rates and inflation,” Candidate Senator Rick Scott (R-Fla.) Told The Hill. potential for the 2024 GOP presidential nomination.
“If you look at history, when you end up with an administration focused on raising taxes, you don’t end up with a growing economy. The only way out is to elect someone who knows how to grow the economy, ”he said, dismissing predictions that the 2021 economy could grow at its fastest pace in almost 40 years.
As deficits and debt soared under the old President Trump
Donald TrumpPentagon Takes Heat For Extending Guard’s Time At Capitol Fundraising Spits Points At Trump-GOP Cracks Trump Rally Organizer Says Alex Jones Threatened To Take Her Off The Stage: Report READ MORE, including $ 1.9 trillion in tax cuts and significant increases in domestic spending, Republicans denounced Biden’s $ 1.9 trillion bailout, saying it was poorly targeted and much too important.
They got the backing of Larry Summers, who served as Secretary of the Treasury under President Clinton and argued that the massive bill could overheat the economy.
With freshly filled pockets, consumers would scramble for goods and services from companies that lack capacity, leading to price hikes and possible interest rate hikes, which could deflate the economy.
In the past, entrenched expectations that prices would continue to rise have kept borrowing costs high for homeowners, car owners and businesses.
Inflation fears pushed bond yields to their highest level in a year on Friday.
But many experts, including Federal Reserve Chairman Jerome Powell, have argued those fears are overblown.
“The economy is far from our targets for jobs and inflation, and it will likely take time for further substantial progress to be made,” Powell told the Senate Banking Committee last month.
He added that two decades of low inflation and a weaker relationship between public debt, low unemployment and price hikes mean that the risks of overheating are now low.
February’s inflation figures are only 0.4%, and the March Consumer Confidence Survey found that people only expect prices to rise temporarily.
Lindsey M. Piegza, chief economist at Stifel, says a little inflation won’t be the end of the world.
“With an average inflation of 1.3% over the last five years, it is possible that inflation will reach nearly 3% during the next five years without exceeding a long-term average of 2%,” he said. she declared.
Scott, however, says Powell’s assessment misses the mark.
“He’s not looking at history. He’s clearly not looking at what happened in the past, ”he said.
Debt can still come to haunt Biden.
Even before the signing of the COVID-19 bill, debt levels were already on track to exceed their World War II peak by the end of the decade. The cost of servicing the debt alone already amounts to some $ 300 billion a year, or about 9% of annual revenues.
“In the future, we have to start paying for new priorities with new income and budget savings. And finally, once the economy recovers, we will have to reduce our deficits to more sustainable levels, ”said Maya MacGuineas, chair of the Committee for a Responsible Federal Budget.
It could curb the appetite for deficit-funded infrastructure on the part of centrist Democrats and Republicans.
“They’ve already maximized the credit card. It will be very difficult for them to spend on things that are important to us, ”said Scott, adding that taxpayers did not want to raise taxes.
Biden is still expected to push forward an infrastructure bill this year, and economists across the ideological spectrum have long viewed these upgrades as critical to accelerating the economy for years to come.
Brusuelas said without a significant infrastructure package, the US growth rate could return to its long-term trend of 1.8% per year.
“This is something that I think, for most Americans, is not acceptable,” he said. “The stakes are extremely high here to take advantage of what will be several good years of growth, while continuing and leaving a legacy.”
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