Essay on Economics
Number of words: 623
The Biden fiscal rescue package proposed a relief package of $1.9 trillion to cushion the economy from the adverse effects of the pandemic and ensure economic growth is sustained at a rate of about 8% during the period. The aim was to ensure that the country could cope with the effects of the pandemic since most people lost their employment and source of income; as such, the government had to ensure that the citizens could cater for their needs. The proposal increases the amount allocated to households, unlike the previous relief package, which was mainly centered on improving the multiplying effect of the economy to boost GDP growth. Although the rescue package is an excellent economic policy, it is not effective in ensuring that the ability of the economy to grow is given a priority; as such, it was bound to be rejected by some policymakers.
The rescue package focuses on supporting the demand side of the economy; however, it has policies that will ensure there is an increase in the supply of labor. Such policies include the provision of funds for health insurance, paid leave, and child care; all aim to ensure that the affected labor force can return to working smoothly once the government deals with the pandemic. It is based on the postulations based on the expected impact of the rescue plan on the economy. By the end of 2022, GDP will have grown to about 12% allowing the economy to effectively counter the problem caused by the pandemic (www.moodysanalytics.com). However, it is expected that there will be political interruptions; thus, the plan may be altered by policymakers. To reduce the proposed amount since it is a lot considering the country’s economic status; however, this will, in turn, result in the development of other proposals to help in the problem.
The proposed check of $ 2000 to the citizens is attractive; however, its effect on the economy in the short and long run is detrimental. Although the move is expected by many to increase the people’s consumption levels, which will increase the country’s GDP, it will not be effective in the short run. Since based on previous packages by former presidents like Obama, an increase in the relief packages aimed at increasing the income of the people were not effective in improving their consumption levels; this is despite their disposable income having an increment. Since people tend to increase their consumption only if their incomes are raised in the long run, thus an increase in income in the short run will only exact more pressure on the government due to an increase in expenditure (www.wsj.com).
An increase in expenditure will, in turn, be dealt with by increasing the tax rates; this will, in turn, exact more financial pressure on the citizens hence resulting in a vicious cycle of problems. Thus, rather than offering the $2000 to the people, the government should develop policies that will ensure the peoples’ disposable income is maintained. They should be getting a sustainable income to ensure their spending patterns are not significantly altered (Casey, 2021). People should not perceive the offer of the $2000 as a move to improve the country’s economic performance, instead as an initiative to help the people. The government could instead use the funds to support SMEs affected by the pandemic; this support will, in turn, generate income for the economy.
Casey, Anthony J. “Bankruptcy & Bailouts; Subsidies & Stimulus: The Government Toolset for Responding to Market Distress.” University of Chicago Legal Forum, Forthcoming. 2021.