Biden's new vision is Keynes' old vision

The world, which has its own economic speed depending on each country and region, has taken various decisions to first withstand the direct and dry hit of the pandemic in the health sector and in the macro and microeconomy; and then to develop its own plans, programmes and policies to rescue people, families, companies and to sustain the economy in intensive care.

Now it has to be revived, reanimated, and the vaccine comes in the form of stimulus packages, subsidies, transfers, wage and unemployment support cheques, soft loans and a temporary debt freeze. 

But the response has not been the same everywhere: in Europe, some economists complain that the EU has proved anything but united, noting with derision how, in "disunited Europe", every nation has said every man for himself.

To date, the EU has failed to share the $2.1 trillion bailout fund approved last July, a historic fund known as NextGenerationEU.

Meanwhile, on the other side of the Atlantic, in the US, President Joe Biden has proposed a massive $1.9 trillion stimulus package and a $2 trillion infrastructure rebuilding and modernisation programme.

No other country, no other economy, has such a broad and aggressive programme based on two clamps to revive GDP and sustain growth over time: stimulus stimulus encourages spending and consumption; and infrastructure investment creates jobs.

Neither Russia nor China has implemented such a large and well-linked package; President Biden maintains a statesmanlike vision and is determined to carry out the "structural reforms" necessary for the US economy to emerge stronger and more robust in order to remain a global economic leader. 

In the Great Recession, in 2008, then President Barack Obama, also a Democrat, implemented a $787 billion stimulus programme consisting of $300 billion in tax incentives for individuals and businesses; a total of $250 billion in direct aid for struggling individuals and families; and $200 billion to improve a range of infrastructure in the US, among other things.

At the time it was said to be the largest programme since President Franklin Delano Roosevelt established his own, and also in extraordinary times, to counteract the rapid effects of social deterioration by affecting individuals, families and businesses.

This firewall was formulated on the basis of two frameworks known as the New Deal between 1933 and 1938, a response to the damage caused by the Great Depression of 1929.

Well, it is now Joe Biden's administration that is pushing the largest and most ambitious stimulus and investment programme ever known, so large that its $1.9 trillion stimulus plan alone accounts for 40% of the federal budget and nearly 9% of GDP. 

The battery of measures are vitamins to get the sick out of intensive care and into shape at full speed: there are bonuses, in subsidies, for 300 dollars in unemployment; checks of 1,400 dollars for the least well-off; tax deductions for families and people with children, as well as soft credits, aid and subsidies for businesses, especially small and medium-sized enterprises.

The government's plan does not forget indigenous communities, school canteens, the lonely or disabled; there are even rent subsidies and many cheques and money transfers that go directly to individuals and families. On social issues, Biden has put child poverty and health coverage as priority targets, a continuation of Obamacare suspended during Republican Donald Trump's four years in office.

"The rescue plan raises the annual child tax credit for children ages six to 17 to $3,000, which is $1,000 more than before the plan and $3,600 for children under age six; the measure is extended to lower-income households that were not participating in the bonus because they were not taxed or were minimally taxed," the White House said.

The introduction of this change will be a boon for the part of the middle class with annual incomes between $51,000 and $91,000 a year, and they will be able to experience a 5.5 per cent increase in their net income.

Everyone is talking about an unprecedented programme and hopes that it will sustain US growth in the medium term, although some warn of a way out of the crisis with a very high level of debt and an abrupt overheating of the economy with soaring inflation; recently, the Consumer Price Index in the US recorded its highest rise in April in more than 12 years, standing at 4.2%.

However, in the international arena, the economies most closely interrelated with the US production and export-import apparatus are celebrating the fact that this injection of resources is translating into consumption and that companies, given the demand, are once again reactivating their import orders. 

According to the report by Euler Hermer and Allianz, entitled "COVID-19: Quarantined Economics", for every 1% that the US increases domestic demand, its imports increase by 2.6%.

Then there is an ambitious infrastructure plan that calls for modernising the country and bringing it into line with a greener, less polluting economy. 

"China has been spending three times as much on public investment in infrastructure for decades, while the US has gone from spending 2.7% of its GDP to 0.7% of its GDP on infrastructure; there are decades of disinvestment, a huge deficit for the world power," says the American Society of Civil Engineers. 

It is 2 trillion dollars to be invested over three five-year periods, with several politicians sympathetic to Biden describing it as the great "Green New Deal" and others as a mechanism for regaining leadership over China.

What does the infrastructure plan consist of? In building roads, bridges, ports and airports with a budget of 621,000 million dollars; 165,000 million dollars have been earmarked for improvements in public transport and railways; stations for charging vehicles, drinking water, updating the electricity grid, extending broadband, 5G fibre, attending to rural areas without internet or with little supply and refurbishing public buildings; another relevant point is climate change with allocations of 174,000 million dollars, especially for electric vehicles; another R+D+i package with 180,000 million dollars. 

What is new is that 400 billion dollars will be earmarked for "human infrastructure" in order to address a deficit in family reconciliation and to grant paid leave at the national level for the care of children or family members.

Biden has decided that part of this "package" will be financed in part by an increase in the corporate tax rate from 21% to 28% and has openly stated that he favours the global minimum tax currently under debate in several countries and being promoted by international organisations. 

Biden's new vision is the old vision of John Maynard Keynes, the old formula of opening and closing wells to hire people, generate employment, provide income, stimulate consumption and reactivate the business cycle; generating a virtuous circle that later, as the economic literature itself warns and reality has shown, will bring with it periods of inflation and economic overheating in the medium term.