Following positive statistics and forecasts, the US economy continued to receive positive signs of recovery over the weekend as the US Department of Labour announced that the number of initial jobless claims in the US totalled just 406,000 for the week ending May 22, a new low since the outbreak of the pandemic and below the estimate of analysts. Most of the US stock indexes also increased in the face of the positive employment news and US President Joe Biden on May 28 proposing a US$6 trillion budget to “reimagine” the US economy and enhance the country’s competitiveness in the future.
Assessing the US economic situation in an announcement on May 28, President Biden emphasised that a post-pandemic US “cannot afford to simply return to the way things were before.” He added that the US must “seize the moment to reimagine and rebuild a new economy.” To power the US’s huge economic engine, the federal spigot would unleash US$6.011 trillion in 2022, with increases gradually rising to US$8.2 trillion in 2031.
The US government will also adjust major spending plans with a greater focus on education and social security. Accordingly, spending on the infrastructure bill will be trimmed from the originally proposed US$2.3 trillion down to US$1.7 trillion. Another US$1.8 trillion will go towards increasing state-funded education and social services, as part of building a better 21st century workforce. Speaking at an event in Ohio about the ambitious plan, President Biden said that increasing investment in education and social services are “generational investments” akin to state-funded electrification in the 1930s and building of highway networks in the 1950s. He highlighted the plan’s goal of making the US the leader in the 21st century.
However, analysts said the US$6 trillion stimulus package proposed by the US President is unlikely to be adopted by the US Congress for fears of increasing debt burden and inflation. The US Department of the Treasury warned that the Biden administration’s upcoming spending plans will bring the US public debt, which is already at a record level, to a new height. The US Congressional Budget Office (CBO) estimates the US national debt will grow to US$22.5 trillion, or 102.3% of GDP in 2021, and 116% of GDP in 2027.
In addition, analysts are also concerned that large economic stimulus packages will cause inflation to rise and pose risks to the US economy. A recent report by the US Department of Labour showed that the US consumer price index (CPI) in April 2021 increased by 4.2% over the same period in 2020, which was the largest year-on-year surge since 2008. Although the US Federal Reserve (FED) officials reassured the public that the CPI increase is only provisional when the economy is recovering strongly from the pandemic. However, most observers believe that the aforementioned inflation could hinder President Biden’s massive spending proposals.
“Reimaging” the US economy, developing the middle class, improving the quality of human resources, and modernising infrastructure are currently the top concerns of the Washington administration, and certainly the desire of millions of US voters who always want the country to be “great again” in the 21st century. Nonetheless, in order to realise this desire, President Biden must bring this plan past the “gate” of the Congress, and this may be an “impossible mission” in the context that the Democratic forces in Congress are not in an overwhelming position compared to Republicans.