American Economic Recovery
The COVID-19 pandemic shook the United States to its core. Since March 2020, the country has experienced stay-at-home orders, work and school closures, and a screeching halt to normal life. Coupled with the fear that comes with a time like this, the economy took a scary turn toward a recession or even depression. Current-dollar GDP for 2020 decreased 2.3 percent. The stock market crashed in February 2020, causing a drop of the DJI by over 2000 points three times in seven days.
The American federal government has intervened in multiple ways to assist Americans and their businesses to help ensure their survival through tough economic times. On March 27th 2020, 45th President of the United States Donald Trump signed the CARES Act which was written by the 116th U.S. Congress. This law included a swath of support for Americans and their families.
The CARES Act had a total price tag of $2.2 trillion of economic stimulus. Within that massive amount, it included one-time cash payments to most taxpaying Americans each receiving $1200, costing $300 billion cumulatively. There was also $260 billion in increased unemployment benefits, helping subsides state-funded unemployment. The creation of the Paycheck Protection Program provided forgivable loans to small businesses to keep employees on their payroll, this program costed over $669 billion after further legislation. There was also $500 billion in loans for corporations and $340 billion for state and local governments.
This law was the largest economic stimulus in the United States’ history accounting for 10% of the GDP, almost triple the size of the 2009 stimulus act passed after the Great Recession. The United States Congressional Budget Office estimated that the passage of the CARES Act will increase the deficit over the next 10 years by $1.7 trillion.
On March 11th, 2021, 46th President of The United States, Joseph Biden signed the American Rescue Plan of 2021 which was written by the 117th United States Congress into law. This was the second piece of major COVID legislation. This law is a $1.9 trillion economic stimulus.
The ARP was designed to build upon and continue the programs from the CARES Act. This law extended the federal boost in unemployment through September 6th, 2021, $1400 direct payments to individuals, emergency paid lead, expanded child tax credit, and various loans and grants to federal programs aimed at assisting business and revitalizing the economy.
There is much debate within the United States political arena if the aid was allocated in an appropriate and equitable fashion. As time passes from the COVID pandemic, hindsight will allow us to analyze what went right and what didn’t.
Looking ahead, President Biden’s new tax reforms could also have an impact on the domestic and international recovery effort. Changes in the tax code like in increase in the highest tax bracket to 39/6 percent and significantly increased capital gain rates are just some to name a few. Detailed analysis of Biden’s tax reform can be found here
To learn more about the United State economic reconvey from the COVID pandemic visit: https://home.treasury.gov/policy-issues/coronavirus
