Biden’s Sensible Stimulus
America erred in 2009-10 in curtailing the size and duration of the fiscal expansion in the aftermath of the Great Recession. Regardless of who was responsible for that mistake, President Joe Biden is right to make sure it isn’t repeated now.
CAMBRIDGE – The United States and the world entered recession a year ago. Normally, economists can’t predict the onset of a downturn. But because this recession stemmed from the COVID-19 pandemic, they could reliably discern its beginnings without waiting for the standard economic indicators.
By the end of the second quarter of 2020, US GDP had plunged by a record 11%, taking the economy from an estimated 1% above potential output at the end of 2019 to a level 10% below it. Forecasters now expect such rapid growth in 2021 that GDP will return to its pre-pandemic peak very soon. By 2022, it will probably be well above potential. The global economy is also expected to recover, though not as rapidly as that of the US.
Some now warn that the US economy could overheat. Given this possibility, is President Joe Biden providing too much stimulus with his $1.9 trillion American Rescue Plan, enacted earlier this month?