Biden's $1.9 Trillion Rescue Plan Set To Turbocharge U.S. Economy - NPR

Economy

Biden's $1.9 Trillion Rescue Plan Set To Turbocharge U.S. Economy – NPR

Published

3 years ago

March 10, 2021

Harry Miller

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A pedestrian on Feb. 25 walks past the window of a restaurant with a sign promoting its re-opening in Boulder, Colo. Congress on Wednesday passed a $1.9 trillion stimulus plan, which is expected to provide a strong boost to economic growth.

David Zalubowski/AP

David Zalubowski/AP

The U.S. economy is about to get a shot of its own.

The $1.9 trillion relief package passed by Congress on Wednesday is expected to give a substantial boost to the world’s largest economy once it’s signed by President Biden, putting more money in people’s pockets just as an improving pandemic outlook opens new avenues for them to spend it.

According to the Centers for Disease Control and Prevention, 61 million people in the United States have gotten at least one shot, with 32 million already fully vaccinated.

The rollout of vaccines offers the promise of more normal travel and entertainment options later in the year, further boosting the outlook of an economy already showing signs of improvement.

“The key engine of growth is going to be that powerful cocktail of both a healthier economy along with fiscal stimulus,” said Gregory Daco, Chief U.S. Economist at Oxford Economics.

The Organization for Economic Cooperation and Development projects the U.S. economy will grow by 6.5% this year. That’s more than twice the growth rate it was projecting in December — thanks in large part to more robust federal aid.

Daco himself believes the U.S. economy will grow by 7% this year, while also adding 7 million jobs – a level of growth not seen since about the 1980s.

“It’s been about four decades since we’ve seen such strong growth in real GDP,” he said. “But you have to remember that we’re coming out of a very deep hole when it comes to the damage that’s been done by the COVID crisis.”

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A sign is shown at a COVID-19 vaccine site in San Francisco on Feb. 8. The rollout of vaccines is raising the prospect of increased travel and spending by Americans.

Haven Daley/AP

Haven Daley/AP

Also helping turbocharge growth is how President Biden’s plan is structured, according to experts.

The American Rescue Plan — which Democrats pushed through Congress with no Republican support — includes $1,400 payments for most Americans, extended unemployment benefits and increased subsidies for children.

The benefits are heavily weighted towards low- and moderate-income families, in marked contrast to the 2017 tax cut, which Republicans championed on a similar, party-line basis.

Rather than waiting for benefits to trickle down, the COVID relief package showers money on lower-income households, boosting income for the poorest 20% of families by an average of 20%, according to the Tax Policy Center’s analysis, while top earners would see their income rise less than 1%.

Because low-income families are more likely to spend the extra money, it’s expected to provide a significant lift to the broader economy.

“There was a big question about the [2017] Tax Cut and Jobs Act, whether or not it would over time have much of a stimulative effect,” said Howard Gleckman, a senior fellow at the non-partisan Tax Policy Center. “This one, there’s no question. Everyone agrees it will stimulate the economy. The question is will it stimulate the economy too much?”

Lower-income families get the biggest boost from the tax benefits in the American Rescue Plan, in contrast to the 2017 tax cut which primarily benefited the wealthy.

Tax Policy Center

Tax Policy Center

The center’s analysis looked only at the tax provisions of the latest bill, not measures like unemployment benefits or aid to cities and states.

But the question of whether it will prove too stimulative and trigger inflation has raised concerns among other analysts.

Former Treasury Secretary Larry Summers, who served in different positions in the Clinton and Obama administrations, has been one of the most prominent Democratic critics of the plan.

Summers is concerned that with consumer spending already on the rise, a surge in new federal spending could overwhelm businesses, triggering a rise in prices.

“We need to make sure we’re concerned with not overheating the economy,” Summers told NPR’s Weekend Edition last month.

Summers also warned that deficit-financed spending now on a short-term relief package could make it harder for the Biden administration to find money later for long-term investments in things like infrastructure.

The Labor Department said Wednesday that consumer prices had risen just 1.7% in the last year — below the Federal Reserve’s annual target of 2%.

While prices are expected to increase faster in the months to come, Fed officials have said repeatedly they expect that acceleration to be temporary.

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Economy

China Wants Everyone to Trade In Their Old Cars, Fridges to Help Save Its Economy – Bloomberg

Published

8 hours ago

April 24, 2024

Harry Miller

China’s world-beating electric vehicle industry, at the heart of growing trade tensions with the US and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That’s one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It’s widely expected to be one of this year’s main stimulus programs, though question-marks remain — including how much the government will spend.

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Economy

German Business Outlook Hits One-Year High as Economy Heals – BNN Bloomberg

Published

9 hours ago

April 24, 2024

Harry Miller

(Bloomberg) — German business sentiment improved to its highest level in a year — reinforcing recent signs that Europe’s largest economy is exiting two years of struggles.

An expectations gauge by the Ifo institute rose to 89.9. in April from a revised 87.7 the previous month. That exceeds the 88.9 median forecast in a Bloomberg survey. A measure of current conditions also advanced.

“Sentiment has improved at companies in Germany,” Ifo President Clemens Fuest said. “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

A stronger global economy and the prospect of looser monetary policy in the euro zone are helping drag Germany out of the malaise that set in following Russia’s attack on Ukraine. European Central Bank President Christine Lagarde said last week that the country may have “turned the corner,” while Chancellor Olaf Scholz has also expressed optimism, citing record employment and retreating inflation.

There’s been a particular shift in the data in recent weeks, with the Bundesbank now estimating that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic.

Even so, the start of the year “didn’t go great,” according to Fuest.

“What we’re seeing at the moment confirms the forecasts, which are saying that growth will be weak in Germany, but at least it won’t be negative,” he told Bloomberg Television. “So this is the stabilization we expected. It’s not a complete recovery. But at least it’s a start.”

Monthly purchasing managers’ surveys for April brought more cheer this week as Germany returned to expansion for the first time since June 2023. Weak spots remain, however — notably in industry, which is still mired in a slump that’s being offset by a surge in services activity.

“We see an improving worldwide economy,” Fuest said. “But this doesn’t seem to reach German manufacturing, which is puzzling in a way.”

Germany, which was the only Group of Seven economy to shrink last year and has been weighing on the wider region, helped private-sector output in the 20-nation euro area strengthen this month, S&P Global said.

–With assistance from Joel Rinneby, Kristian Siedenburg and Francine Lacqua.

(Updates with more comments from Fuest starting in sixth paragraph.)

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Economy

Parallel economy: How Russia is defying the West’s boycott

Published

15 hours ago

April 23, 2024

Harry Miller

When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment’s delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.

“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.

But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

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