Biden’s Boom: US Congress passes President Biden’s Stimulus Bill
April 3, 2021
2 min read
What's going on here?
President Biden’s Stimulus Bill of a whopping $1.9 trillion has been passed by the US Congress.
What does this mean?
President Biden’s Bill which involves record levels of spending has made it through Congress and was signed into law on 11 March 2021. This entails a one-off payment, known as a stimulus check, of up to $1,400 to almost every American, as well as expanding child tax credit for lower-income families. The package also extends unemployment benefits until September 2021 and provides a further $14 billion of funding for the distribution of the COVID-19 vaccine. This will hopefully aid the already successful vaccination efforts with the US currently having one of the highest rates of vaccination around the globe.
This has led to predictions that the relief package will rejuvenate the US economy with GDP growth set to soar to levels that have not been seen since 1984. If these optimistic predictions turn out to be accurate ones, this will provide huge benefits for Americans, particularly in relation to job prospects with unemployment expected to reduce. Despite having only narrow majorities in the Senate and the House of Representatives, the final Bill was fairly unchanged with much of what President Biden had originally proposed remaining.
What's the big picture effect?
The vast spending provided by this stimulus plan will not only affect the US but the global economy, with impacts already being seen in global stocks. Since the announcement of the stimulus, global stocks have rocketed with investors hopeful that the Stimulus Bill is evidence of economic recovery being well underway. Interestingly, there has been a boost in shares in companies that have been struggling during the peak of the pandemic, whilst many of 2020’s best performers, such as Peloton and Amazon are beginning to see a reversal of fortune. With the stimulus planning to put more money into Americans’ pockets, there has also been an increase in investment in banks. This demonstrates that investors have high hopes for growth in the US, which is likely to drive global recovery. This is especially positive for advanced economies elsewhere in the world which borrow in their own currencies, who may benefit from potential increases in exports to the US. Unfortunately, poorer countries that grapple with borrowing in such a way will find it more difficult to adjust to these rising rates and the strong dollar. However, many US investors are concerned that this combination of unprecedented government spending and economic recovery will push inflation up. If inflation rises too much in a short space of time, interest rates may be bumped up by central banks which in turn could harm stocks. Only time will tell, but it will be interesting to watch how these predictions for growth unfold and the extent to which a booming US economy can affect the rest of the world.
Report written by Imogen Wilson
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