After President Biden took office, boosting the economy was a top priority, for which he prepared a stimulus package of up to $1.9 trillion. But the plan is too costly, and questions have been raised about how this amount was arrived at, with some scholars fearing that a program of too large a scale could instead hurt those most in need.
Biden’s current package covers a wide range of issues, including direct checks to millions of Americans, increasing unemployment benefits, more than doubling the minimum wage, providing aid to state and local governments, and funding vaccines and testing for the new coronavirus (a Chinese communist virus).
Republicans oppose the case because the cost is too high, especially the $350 billion in grants to localities, which are criticized by Republicans as paying for local mismanagement.
In addition, some people worry that such a huge amount of spending, the already loopholes in the federal budget, may be added to the burden.
Excessive stimulus may cause harm in the future
The U.S. economy has been hit hard by the Epidemic, but from the overall economic point of view, it is not very bad, real estate is still in the boom, in addition to the consumer side of the bar, restaurants are restricted, people continue to spend money, the unemployment rate of 6.7%, the same situation as in March 2014, equivalent to the level after the recovery began in mid-2009.
So, why the push for more stimulus? Some believe that much of this remains a political consideration. Particularly during the epidemic, there are also areas that benefited, and they don’t need more payments.
Jim Paulsen, chief investment officer at the Leuthold Group, even argues that in the long run, it will be the poorest sectors of the population that may suffer from too much money being injected.
Paulsen is known for his positive views on the economy and financial markets. But he fears that the U.S. stimulus has gone too far and will need to pull the reins in quickly once Inflation gets out of hand, when it will be hurt even more.
This could lead to a lot of bad things, not now, but in the future,” he said.
High inflation and recession fears
Paulsen noted that as the national debt balloons to nearly $28 trillion, the result could be a loss of confidence in U.S. government finances, reflected in market turmoil that brings economic disaster.
He said these problems could soon lead to a very serious recession, but not this year, but in 2022 or 2023, so that the people who need the most support now, and eventually suffer instead.
Bank of America Global Research (Bank of America Global Research) data show that direct check issuance to individuals, resulting in a large increase in spending, in the seven-day period ending January 16, the last round of stimulus spending for low-income individuals, their financial card and credit card spending increased 22% annually.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted that U.S. households now have a lot of cash that they are ready to spend in the wake of the epidemic, which will eventually push up inflation. It will also eventually lead the Federal Reserve to revisit policy and have to start tightening monetary policy sooner than the market expects, too fast a contraction that will bring harm.
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