China News Service, September 2nd. According to the British Broadcasting Corporation (BBC) Chinese website, due to the worst recession in 74 years due to the new crown epidemic, Trump resigned with the lowest approval rate in history of 34%. The new President Biden did not come to power. In two months, the 1.9 trillion yuan bailout bill was signed, and there are many trillion-level bills waiting to be passed and implemented...
Does this scenario remind you of the United States in 1933-the depressed economy almost destroyed the country, industrial output fell by one-third, Republican President Hoover resigned, and the people greeted his convoy with eggs and rotten fruits , Democratic President Roosevelt came to power and passed more than 30,000 projects in two years to restart the economy by means of "relief for work."
American writer Mark Twain said that history will not repeat itself, but it will always have the same rhyme.
Nearly a century later, what is the national fortune of the United States?
Can "Biden Economics" be like "Roosevelt's New Deal" to make the United States more brilliant?
Or is it like all the powers in history, the end of decline is inevitable?
Liberalism to "big government"
"Biden Economics" has two major functions
In the 1980s, former U.S. President Reagan established a "small government" to reduce expenditures, lower taxes, and refrain from redistributing wealth.
Although the wealthy will become richer because of this, they will increase consumption and investment, and their wealth will leak from the top to the bottom, ultimately benefiting all classes. This is called the "leakage theory."
The unique economic policy that Reagan implemented at the time was also called "Reagan Economics", which was also the first use of economics after the leader's name.
Interestingly, the biggest feature of "Biden Economics" many years later is the total rebellion against "Reagan Economics".
For example, in the 2022 budget, Biden said that the budget reflects that the "leakage theory" has never worked.
Yuan Zhile, a senior lecturer at the Business School of the Chinese University of Hong Kong, believes that, contrary to the "small government" of Reagan Economics, "a simple summary of'Biden Economics' is a'big government'." He pointed out that the "big government" under Biden's rule "There are two main functions in economic planning: first, income redistribution; second, promoting long-term economic growth.
Mike Frank, a senior analyst at the Economist Intelligence Unit (EIU), said that "Biden Economics" can be described as two more than trillion-dollar initiatives currently being debated in the US Congress: a $1 trillion infrastructure program. And a budget resolution of $3.5 trillion.
Coupled with the $1.9 trillion that Biden has signed for the new crown bailout shortly after taking office, the total is $6.4 trillion, accounting for nearly 30% of the US gross domestic product (GDP).
If you regard it as the GDP of an economy, it will be the world's third largest economy after the United States and China.
Frank said, "Biden's economic plans don't have many new ideas, but the political space to accommodate these plans is very new."
Responding to urgent challenges
Biden, "Contemporary Roosevelt"?
The British Broadcasting Corporation (BBC) reported that Biden’s plan is roughly divided into three steps:
The first step is the US rescue plan, totaling 1.9 trillion U.S. dollars. It aims to rescue the people most affected by the new crown epidemic, while supporting medical resources such as vaccines and protective clothing.
The second step is the US Jobs Program, a total of US$2 trillion, to rebuild the nation’s infrastructure, stimulate the return of manufacturing industries, and create millions of new jobs.
The third part, the American Family Plan, with a total of 1.8 trillion U.S. dollars, reduces medical insurance expenditures, lowers basic family expenditures, and provides funds for early childhood care and universities.
Anyone familiar with American economic history can easily find the similarities behind this arrangement. The core of Roosevelt's implementation of the New Deal is the three "Rs": Relief, Recovery and Reform.
In fact, Biden not only did not shy away from the similarity between him and Roosevelt, he even encouraged this association.
As soon as he took office, he was refurbished in the Oval Office of the White House, with a portrait of Roosevelt hung in the center of the fireplace.
Frank said, "Biden himself is happy to compare him with Roosevelt." The similarities between the two are the urgency of the challenge and the need to have bold ideas to deal with.
Just as Roosevelt recognized the need to take extensive and decisive action to help the United States get out of the Great Depression, the scale of the Biden plan strongly responded to the challenge of the epidemic.
As for the difference between the two, different scholars have different opinions.
Yuan Zhile said that Roosevelt believed that the government should increase government spending and pull the economy out of the depression by stimulating demand.
Biden believes that in addition to short-term support for the economy, the country's long-term productivity and competitiveness should also be improved by investing in infrastructure and technology.
Frank believed that Roosevelt fundamentally changed the role of the US federal government and established the role of the federal government in providing national infrastructure and general welfare, which has had an impact to this day.
Biden’s bill, although emphasizing the role of the federal government in new areas, such as climate change and family policy, is not as transformative as Roosevelt’s New Deal.
Biden's plan seems to "prescribe the right medicine"
What will be the fate of the United States in the future
In March 2021, the American Society of Civil Engineers (ASCE) issued an assessment report stating that there are more than 45,000 bridges in the United States in a bad state, and more than 40% of highways are in a "bad" or "fair" state, and more than 15% All wastewater treatment systems in China have reached or exceeded their design capacity, hundreds of reservoirs are failing every day, and traffic jams caused by poor road conditions have increased commuting time by an average of 54 hours per year for office workers.
In the past winter, Texas suffered a large-scale power outage for a long time in extremely cold weather, making infrastructure problems once again raging.
The American Society of Civil Engineers blamed the problem for years of inaction by the federal government.
Biden's plan now seems to be the right medicine.
Yuan Zhile said that studies have shown that the US has underinvested in infrastructure.
Infrastructure and technological progress are the two basic elements of a country's long-term economic development.
Therefore, Biden's investment plan is necessary for the recovery of the US economy.
Frank also believes that these Biden plans will undoubtedly help make the US economy more competitive, increase productivity and promote growth. These investments are overdue.
The former British Prime Minister Churchill once said, "Don't waste a crisis."
Biden used the immediate crisis and used extraordinary means to try to remove obstacles to the development of the United States' long-term competitiveness.
However, the greater the return, the greater the risk.
If you look closely at the scale of US debt, under the impact of the epidemic, the US federal debt will soar by 4.2 trillion in 2020, reaching a total of about 21 trillion US dollars.
If all the 6.4 trillion yuan is implemented, the debt burden will far exceed the above extreme value.
"The key to the success of Biden's economic policy is how to fund a large-scale spending plan." Yuan Zhile analyzed that the ideal situation is the strong recovery and growth of the US economy, and the increase in taxation can support the plan.
However, if the situation is not satisfactory, the ever-increasing financial burden and record high national debt may plunge the U.S. and even the global economy into another economic crisis.