news

the stimulus plan runs the risk of “overheating the economy”, says Lenglet

This is the first significant act of the new President Joe Biden: 1.9 billion dollars, 1.6 billion euros, to support the economy. The US House of Representatives voted on a gigantic stimulus plan on Wednesday night, March 10.

Almost every household in the country will receive a check for 1,200 euros, spend. The unemployment benefit of one thousand euros per month is extended. And also included in this plan is enormous help for schools and universities, for local governments, for vaccination and testing populations.

A stimulus plan had already been launched fairly recently: 900 billion just before Christmas. And 2.3 billion released by Donald Trump, when the epidemic hit, a year ago. In total, the stimulation of the US economy for one year amounts to $ 5.1 trillion, that’s 23% of GDP. By way of comparison, in France, a country that nevertheless spends a lot and easily, we are rather at 10% of GDP. Less than half!

Enough to get the economy off the ground

Well, with all that the US economy is going to take off. We can even wonder if it won’t overheat.. Clearly, this plan runs the risk of putting gas on the barbecue. Because recovery is here. Even before this plan, the United States should return to the pre-epidemic level of activity in mid-2021, that is in a few weeks … While this is only expected in Europe in late 2022.

Last month, the United States recreated 380,000 jobs and the unemployment rate has fallen to 6.1%. And the problem is that this plan consists of a lot of aid for consumption and not investment. The likely result is the widening of the United States’ trade deficit, especially with China, which sells many consumer goods to the United States. The Chinese will figure in the front ranks of the beneficiaries of this recovery plan. It is not very useful in the long run.

How is this XXL plan financed?

So far, the trillions injected into the economy by Donald Trump have come from a single source: the deficit, that is, the deepening of the debt. There is a possibility that Joe Biden’s billions come from the same source. Yet America’s public debt is today at the same level, as a percentage of national wealth, as it was at the end of World War II, according to Congressional figures. Even more so if we trust the IMF, which predicts that it will come almost 140% of GDP in 2025, of the same order as France. Suddenly, the debate about raising taxes reappears.

Who will pay more taxes?

Are the income of the richest that they would tax more, and especially on corporate profits, taxes that had fallen dramatically under Donald Trump. It is the second most important country that plans to increase corporate taxes, with the United Kingdom. Two countries, the United States and England, which started the great cycle of corporate tax reduction forty years ago. Two still pioneering countries, which were imitated by the whole world in the following years. Two countries that are now retreating … As if the Covid crisis had started a new fiscal cycle, of increase.

The writing recommends you


Read more

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button