The world looks at America with envy. It secured vaccines for its entire adult population, it projected herd immunity in three-month time, and its economy is recovering quicker than any other in the world.
Instead of envy, everyone should cheer for the U.S. economy for several reasons. First, it shows the way out of the pandemic. It reveals the path for others to follow, acting as a true global leader.
Second, stronger economic recovery in American means faster recovery all over the world. The recent fiscal stimulus of $1.9 trillion is estimated to contribute about one percent to the global GDP.
Third, the new administration overdid it by delivering on its promises so far. Hence, protectionism measures instituted by Trump, or isolationism ones, are not in place anymore. As America opens up for business, so does the world, albeit with a lag.
Huge Infrastructure Project Underway
One would think that the U.S. administration is done supporting the economy. After all, Biden’s team followed up on Trump’s stimulus, raising the bar with another $1.9 trillion in aid. Released over the course of the first quarter, the money was used to support households via direct checks and to boost the vaccination campaign. Both efforts paid off so far if one judges by the number of jobs created in the first quarter and the high percentage of the adult population already fully vaccinated.
HoweverBiden’s administration has bigger plans for the year ahead. Last week, the President announced a new plan that mostly focuses on infrastructure. Dubbed the American Jobs Plan, it is viewed by many as a once-in-a-generation investment in the United States.
Among others, the plan will repair over ten thousand bridges that need upgrades, replace 100% of America’s pipes and services lines, and will modernize over twenty thousand miles of highways, main streets, and other roads. What does all of the above suggest? Hint – jobs, jobs, and more jobs.
With jobs, economic growth will follow. As such, it is no wonder that Jamie Damon, the CEO of J.P. Morgan, was quoted to have said that the American boom might easily continue into 2023.
But where will the money come from?
One of the first things the Trump administration did after winning the elections in 2016 was to lower the corporate tax rate. Biden plans to do the opposite – to hike the tax rate, to help to fund the new project.
Besides that, as long as the strong demand for U.S. bonds remains in place, America will have no trouble finding creditors for its long-term projects. Betting against America at this point in time is not wise.