Since becoming the 46th President of the United States of America and stepping into the debacle left behind by the chaos-causing seditionist, previous Republican President Donald J. Trump, incoming Democrat, President Joe Biden, has shown an uncompromising will to act, in spite of inevitable and obstructionist agenda of the opposition of the Republican Party. Biden has to bring under control the raging Corona Virus pandemic taking a heavy toll on the health of millions of Americans, and the equally heavy toll it is continuing to exact on the US economy as quickly as possible. To be able to do that he has to find a way past the obstructing Republicans.
As with most other economies of the World, the US economy has been substantially shutdown or reduced in operating capacity in an effort to control the spread of the highly contagious COVID-19 virus, and its recent mutations.
The sudden shutting down or down-shifting of the economy, now close to a year, has resulted in tens of millions of Americans being out of work, and millions of small and large businesses struggling to survive, if they have not already succumbed to the impact of the shutdown.
Additionally, unlike a normal business cycle resulting in a recession, this pandemic induced shutdown has affected not only businesses and their employees, but has impacted everyone and everything, including, schools, colleges, universities, and of course the students of every age, the teachers, professors, janitors, ground keepers, and all other support services. So has it been with every other sphere of normal human activity. The result is the unprecedented shutdown or severe curtailment of practically all normal human activity around the World.
This sudden and swift global economic and social stop in activity has led to a worldwide crisis, and nowhere more severe than in the US where the pandemic has exacted its heaviest toll in number of infections, and in the number of deaths attributed to the Corona Virus. This ‘pole position’ that the US has held through the majority of the duration of the pandemic, has also severely strained its deeply flawed and less than adequate healthcare system.
So, Biden’s incoming administration is stepping into an unprecedented health crisis as well as an unparalleled economic crisis, and hence the need for ‘bold, big, and swift action’. Biden and his administration have the added job to circumvent the opposition, which in modern day politics is in the form of virulent partisan opposition, not for the benefit of the country as a whole, but as blind opposition to just about everything the other political party stands for and tries to advance as its governing agenda.
After the unique debacle, the gross dysfunction, and the stunning incompetence of the Trump (4) years, which resulted in America having the dubious distinction of being the worst hit country in the world, by the pandemic, Biden faces a committed obstructionist Republican Party that unanimously opposes his agenda (most even his Presidency).
Having learned the bitter lessons when he was the Vice President to President Barack Obama, of trying to fruitlessly ‘work with, and build consensus with’, the opposing Republicans, who had practically taken an oath to stop Obama from achieving anything in his two terms, Biden is not waiting for the Republicans to get onside, or ‘see the light’, but is determinedly forging ahead with his big and bold relief package of $1.9 Trillion, because all of America needs it now.
Now, expenditure of almost two Trillion dollars to rescue America from the ravages of the COVID-19 pandemic is going to bring opposition from a lot of quarters, especially the right-of-centre politicians, some economists, and others who think that such a vast expansion of the National Deficit will have negative consequences in the longer term, in the form of weaker dollar, and the scepter of rapidly rising inflation; and, in a general sense the concerns are valid.
America has been steadily growing its annual national deficits, and its total gross debt for decades. It has gone from being a net creditor nation to the world, to a deeply indebted one. Now, China has taken over the position of economic and creditor strength from the U.S. (and hence China’s ability to challenge America for economic, and perhaps in the longer-term, military supremacy). Biden is not going to be doing anything that hasn’t been done before. Stepping into the middle of a national and international health and economic crisis, he has little choice but to go bold, or risk further deterioration on all fronts.
The trend of operating with large deficits has been in the making for decades, and one can credibly argue that the Republicans have had a major, if not a dominant role in bringing America to its current position of record debts leading to an ever-weakening dollar, and recurring bouts of worrisome inflation.
In brief - it was the Democrat President Franklin Roosevelt, in the middle of the Great Depression, who ordered Americans to turn in their gold and gold certificates in denominations of over $100, to the Federal Reserve, at the price of $20.67, by May 1st, 1933, so that the country’s money supply could be expanded by 69% by the government setting a higher price of gold at $35 in 1934. But the dollar, while weakened in a controlled manner to expand the money supply to deal with the Depression, was still pegged to gold, albeit at the higher price.
It was the Republican President Richard Nixon in 1971 who took the American dollar off the gold standard altogether, thus permanently debasing the American dollar (since then nobody ever tried to re-peg the dollar to gold again, not even Ronald Reagan, the revered Republican political god). Since 1971, when Nixon de-pegged the dollar from gold, the value of the dollar has steadily dropped so that in 2021, a dollar is worth some 15.55 cents of the value of the 1971 dollar.
So, neither the weakening of the dollar nor the possible inflation that people are worrying about are going to be the sole domain of Biden and his $1.9 Trillion relief package; the path was set decades ago and almost every President since Nixon has operated with large deficits and a weakening dollar, except the Democrat President Bill Clinton, who was the one to balance the budget from an inherited deficit; and the Republicans have hated him for that with a passion.
Barack Obama of course literally stepped into the greatest financial and economic crisis inherited from the Republican President George W. Bush administration, since the Great Depression, and from day-one faced determined obstruction from Senator Mitch McConnell led Republicans in the Senate while trying to manage the crisis. Regardless, while battling the Republicans on the one hand, Obama had to increase the deficit to deal with a home-grown crisis that threatened to collapse the financial markets, which he managed to do, putting the American financial markets and the economy on an unparalleled growth and job creation trajectory that resulted in historically low unemployment.
Obama’s efforts repaired the economy and the labour market, which were inherited by Trump. On his inauguration, Trump on inheriting a stable and growing economy, the lowest unemployment numbers in recent history, and record setting stock markets, called it all ‘American carnage’ and then proceeded to make it so.
Now Biden is having to repair the real ‘American carnage’ left behind by Trump in practically every sphere of American life, and he has to do it quickly to mitigate further damage.
Biden’s ‘American Rescue Plan’ is aptly named, and the scope of it is bold. At $1.9 Trillion, this single relief package will probably rank as one of the biggest ever and will attempt to address multiple crises at the same time, and therein lies the rational for such gargantuan spending.
Spending in times of crisis is the right thing to do, while cutting back, austerity and higher taxes in the time of plenty is economic wisdom. But that is not always how it is done.
Republican Messiah, Trump, substantially lowered taxes for the wealthy, while growing deficits during the time of prosperity. This was not economically sound, nor was it a ‘Conservative’ policy. So, during the time of GDP growth and historically lowest unemployment numbers that Trump loved to take full credit for, he still grew the national debt substantially.
Biden has no such luxuries to indulge. Winning the Presidency in the middle of the greatest crisis America has known since the Great Depression, Biden’s plan, firstly, and rightly so, targets the raging pandemic and the resultant public health crisis. Without the pandemic being brought significantly under control, there is no possibility of any economic recovery.
Critically needed funds are going to be made available for increasing facilities for testing and vaccinations, and for substantially boosting medical personnel for healthcare centres, particularly in the low income and minority communities. Tackling the health crisis head-on is the right thing to do to bring America back, and Biden is going about it in the right way.
Biden is also committed and determined, to address the ‘pain across America’, by providing meaningful relief to struggling individuals and small businesses.
While the Republicans proposed a relatively modest sum, Biden is determined to push through a much more substantial relief check to individuals, families, and business that have been devastated by the ongoing economic trauma which is now entering the second year, manifesting itself as loss of jobs and income, and in some cases complete loss of business.
Biden’s plan addresses the distress that the state and local governments are in as their tax revenues disappeared, even as the demand on their services exploded with the pandemic crisis.
To keep America functioning through the crisis and to build on the progress as the pandemic crisis is reduced, Biden plans to support all services, including all the government institutions, local, State and the Federal that were devastated during Trump’s Presidency.
If Biden’s plan is implemented in its entirety, it will go a long way to address the current crisis both in the health arena, and the economic fallout from the pandemic.
Once those two key areas show improvement, Biden will face a host of other challenges as the long-term impact from the pandemic become more apparent and structural weaknesses from the past become more immediate problems. For the moment those are problems to be addressed in the (hopefully) more stable future. Bringing stability to the current ‘American carnage’ will be a great accomplishment, and Biden seems up for the challenge as he goes big and bold.
In the middle of the greatest and multifaceted crises that America now faces, Biden has little choice to boost fiscal spending substantially, even while the Federal Reserve continues the monetary stimulus programs unabated. Will these actions devalue the dollar and bring forth a rapid rise in inflation? Well, that depends on what the other countries are doing with their currencies, and the international supply and demand scenario that unfolds as the world gets past the global Corona Virus pandemic, and all its economic and social disruptions.