Везде
The Growing Ineffectiveness of US Federal Stimulus Programs
Table of contents
Annotation Estimate Publication content
References Comments
Share
QR
Metrics
The Growing Ineffectiveness of US Federal Stimulus Programs
Annotation
PII
S207054760019816-4-
Publication type
Article
Status
Published
Authors
Vladimir Vasiliev 
ORCID: 0000-0003-3131-9500
Occupation: Chief Scientific Researcher
Affiliation: Institute for the U.S. and Canadian Studies of the Russian Academy of Sciences
Address: Russian Federation, Moscow
Edition
Issue 2
Abstract

The effectiveness of the anticrisis programs of the US federal government to bring the American economy out of the 2020 crisis is analyzed. It is noted that the 2020 crisis was unprecedented in its scale and causes of occurrence, which practically did not occur in American economic history in the period after the end of World War II. The unusual nature of the crisis found its expression in the policy of introducing lockdowns as the main tool in the fight against the coronavirus pandemic, which led to unprecedented drops in the reduction and increase in real GDP over the course of six months. From the very beginning of the implementation of anticrisis fiscal programs, they were characterized by inefficiency in spending budget funds, which was due to several reasons. The main one was political, expressing in the fact that the crisis fell on the year of the Presidential elections. The Republican administration of D. Trump, who is in power, virtualy wasted budget funds «from helicopter» for the speedy overcoming of the crisis, the volume of which significantly exceeded the magnitude of the fall in real GDP. As a result, most of the funds went to support the incomes and, accordingly, the consumer demand of families, individuals, small and medium-sized businesses that received “free” funds that did not require reciprocal labor efforts on the part of  payments and benefits’ recipients. In the US economy, a syndrome of unprecedented cash pumping has formed, which by the beginning of 2021 naturally led to an “inflationary overheating” of the economy. Gradually, by the beginning of 2022, inflation, measured by the consumer price index, actually got out of control, which led the Federal Reserve System (FRS) to the decision to switch to a policy of raising the federal fund rate in 2022, which will certainly complicate the US exit to trajectory of sustainable economic growth. 

The Democratic administration of J. Biden, which took office in January 2021, put forward an ambitious program to overcome the crisis, called "Build Back Better." Initially, the total cost of the program was estimated at  $7.8 trln, however, as the program began to acquire legislative status, its cost started decrease sharply precisely because the negative elements of the program, which are reflected in the huge growth of budget deficits and the gross debt pyramid, began to clearly outweigh the costs associated with accelerating economic growth and increasing employment. As a result, in 2021, the US Congress refused to accept those components of the Build Back Better   program, which were aimed for a sharp expansion of the block of social programs, mainly in the field of health and education, as well as combating climate change and preserving environmental quality. A year after the publication of the Build Back Better program, a fairly stable stereotype of its public rejection has formed in American society as causing more harm to the American economy than providing tangible socio-economic benefits. 

 

Keywords
J. Biden Administration, economic stimulus, backward-bending curve, 2020 economic crisis, coronavirus pandemic, inflationary overheating of the economy, Build Back Better program
Received
26.02.2022
Date of publication
22.04.2022
Number of purchasers
12
Views
940
Readers community rating
0.0 (0 votes)
Previous versions
S207054760019816-4-1 Дата внесения правок в статью - 22.04.2022
Cite Download pdf

References

1. GDP & Personal Income. National Data National Income and Product Accounts. Table 1.1.1. Percent Change from Preceding Period in Real Gross Domestic Product [Percent] seasonally adjusted at annual rates // BEA. Available at: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey (accessed 26.02.2022).

2. IMF. World Economic Outlook. World Economic Outlook, October 2019. xviii + 188 pp. Available at: https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019 (accessed 26.02.2022).

3. Federal Reserve Bank of St. Louis. The COVID-19 Recession in Historical Perspective. November 12, 2020. Available at: https://www.stlouisfed.org/on-the-economy/2020/november/covid19-recession-historical-perspective (accessed 26.02.2022).

4. Galbraith J. The Great Financial Crisis and the End of Normal. A note prepared for the Association of Social Economics Session on the Economic and Financial Crisis after 10 Years. P. 1.//Philadelphia PA. January 7, 2018. 5 pp. Available at: http://utip.gov.utexas.edu › Speech › GFC and En. pdf (accessed 26.02.2022).

5. Ibid., p. 4.

6. Reinhart C. and Rogoff K. This Time is Different: A Panoramic View of Eight Centuries of Financial Crises. NBER Working Paper Series. Working Paper 13882. March 2008. I + 123 pp. Available at: http://www.nber.org/papers/w13882 (accessed 26.02.2022).

7. Rogoff K. Debt supercycle, not secular stagnation // VOX EU/CERP, 22 April 2015. Available at: https://voxeu.org/article/debt-supercycle-not-secular-stagnation (accessed 26.02.2022).

8. Harvard’s Reinhart and Rogoff Say This Time Really Is Different // Bloomberg, May 18, 2020. Available at: https://www.bloomberg.com/news/features/2020-05-18/harvard-s-financial-crisis-experts-this-time-really-is-different (accessed 26.02.2022).

9. Budget of the United States Government. Fiscal Year 2022. Historical Tables. Table 7.1 - Federal Debt at the End of Year: 1940 - 2026. Wash.: US GPO, 2021.

10. FRED. Economic Data. Federal Debt: Total Public Debt as Percent of Gross Domestic Product. Available at: https://fred.stlouisfed.org/series/GFDEGDQ188S (accessed 26.02.2022).

11. GDP & Personal Income. National Data National Income and Product Accounts. Table 1.1.1. Percent Change from Preceding Period in Real Gross Domestic Product [Percent] seasonally adjusted at annual rates // BEA. Available at: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey (accessed 26.02.2022).

12. U.S. Bureau of Labor Statistics. Databases, Tables & Calculators by Subject. Labor Force Statistics from the Current Population Survey. Available at: https://data.bls.gov/pdq/SurveyOutputServlet (accessed 26.02.2022).

13. Fandon. COVID-19 Lockdowns. Available at: https://yourstudent-gemini.fandom.com/wiki/COVID-19_lockdowns (accessed 26.02.2022).

14. GAO. COVID-19. Opportunities to Improve Federal Response and Recovery Efforts. June 2020, p.14. // GAO-20-625. XII + 392 pp. Available at: https://www.gao.gov › assets › gao-20-625 (accessed 26.02.2022).

15. Ibid., p. 15.

16. Committee for a Responsible Federal Budget. Covid Money Tracker. Available at: https://www.covidmoneytracker.org/ (accessed 26.02.2022).

17. NBER. Chetty R. (et.al.). The Economic Impacts of COVID-19: Evidence from a New Public Database Built Using Private Sector Data. P. 39. //WP 27431. November 2020. ii + 107 pp. Available at: https://www.nber.org/papers/w27431 (accessed 26.02.2022).

18. NBER. Holzer H., Hubbard G., Strain M. Did Pandemic Unemployment Benefits Reduce Employment? From Early State-Level Expirations in June 2021. P.7. //WP 29575. Desember 2021. 38 pp. Available at: https://www.nber.org/papers/w29575 (accessed 26.02.2022).

19. Ibid., p. 20.

20. Federal Reserve Bank of Chicago. Karger E. and Rajan A. Heterogeneity in the Marginal Propensity to Consume: Evidence from Covid-19 Stimulus Payments. P. 2. //WP2020-15. February 21, 2021. 53 pp. Available at: https://doi.org/10.21033/wp-2020-15.

21. Ibid., p. 3, 17.

22. Rasschitano po: BEA. GDP & Personal Income. National Data National Income and Product Accounts. Table 1.1.5. Gross Domestic Product. Available at: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey (accessed 26.02.2022).

23. Rasschitano po: BEA. GDP & Personal Income. National Data National Income and Product Accounts. Table 3.2. Federal Government Current Receipts and Expenditures. Available at: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey (accessed 26.02.2022).

24. Trading Economics. United States Gross Federal Debt to GDP. Available at: https://tradingeconomics.com/united-states/government-debt-to-gdp (accessed 26.02.2022).

25. Board of Governors of the Federal Reserve System. Money Stock Measures - H.6 Release. April 27, 2021. Table 1. Available at: https://www.federalreserve.gov/releases/h6/20210427/) (accessed 26.02.2022).

26. Rasschitano po: Budget of the United States Government. Fiscal Year 2022. Historical Tables. Table 1.2 -- Summary of Receipts, Outlays, and Surpluses or Deficits (-) as Percentages of GDP: 1940 - 2026. Wash.: US GPO, 2021.

27. NBER. Bordo M., Levy M. Do Enlarged Fiscal Deficits Cause Inflation? P. 11. //WP 28195. December 2020. 53 pp. Available at: http://www.nber.org/papers/w28195 (accessed 26.02.2022).

28. Rasschitano po: Federal Reserve Bank of Minneapolis. Consumer Price Index, 1913. Available at: https://www.minneapolisfed.org/about-us/monetary-policy/inflation-calculator/consumer-price-index-1913-. (accessed 26.02.2022).

29. Federal Reserve History. The Great Inflation. 1965-1982. November 22, 2013. Available at: https://www.federalreservehistory.org/essays/great-inflation (accessed 26.02.2022).

30. Rasschitano po: Budget of the United States Government. Fiscal Year 2022. Historical Tables. Table 1.2 -- Summary of Receipts, Outlays, and Surpluses or Deficits (-) as Percentages of GDP: 1940 - 2026. Wash.: US GPO, 2021.

31. Budget of the United States Government. Fiscal Year 2022. Historical Tables. Table 7.1 -- Federal Debt at the End of Year: 1940 - 2026. Wash.: US GPO, 2021.

32. NBER. Bordo M., Levy M. Do Enlarged Fiscal Deficits Cause Inflation? P.30. //WP 28195. December 2020. 53 pp. Available at: http://www.nber.org/papers/w28195 (accessed 26.02.2022).

33. Congress.gov. H.R.1319 - American Rescue Plan Act of 2021. Available at: https://www.congress.gov/bill/117th-congress/house-bill/1319 (accessed 26.02.2022).

34. CBO. Estimated Budgetary Effects of H.R. 1319, American Rescue Plan Act of 2021. Summary Table 1. March 6, 2021. Available at: https://www.cbo.gov/publication/57056 (accessed 26.02.2022).

35. Ritz B. Why Biden Has The Right Covid Relief Strategy. Feb 2, 2021. // Forbes. Available at: https://www.forbes.com/sites/benritz/2021/02/02/why-biden-has-the-right-covid-relief-strategy/?sh=385f67737a98 (accessed 26.02.2022).

36. Committee for a Responsible Federal Budget. How Much Would the American Rescue Plan Overshoot the Output Gap? Feb 3, 2021. Available at: https://www.crfb.org/blogs/how-much-would-american-rescue-plan-overshoot-output-gap (accessed 26.02.2022).

37. Zandi M., Yaros B. Macroeconomic Consequences of the Infrastructure Investment and Jobs Act & Build Back Better Framework. PP. 11, 8. // Moody’s Analytics, 04 November, 2021. 15 pp. Available at: https://www.moodysanalytics.com › media › article.pdf (accessed 26.02.2022).

38. Penn Wharton. Budget Model. The Impact of the Build Back Better Act (H.R. 5376) on Inflation. P. 12. // December 17, 2021. 13 pp. Available at: https://budgetmodel.wharton.upenn.edu/issues/2021/12/17/build-back-better-act-hr-5376-inflation.pdf (accessed 26.02.2022).

39. Board of Governors of the Federal Reserve System. Monetary Policy Report. P. 2. // February 25, 2022. Wash.: US GPO, 2022, iii + 65 pp.

Comments

No posts found

Write a review
Translate