Washington, Apr 2 (EFE) .- In less than three months in the White House, President Joe Biden has taken a radical turn in the US by positioning the federal government as the engine of economic recovery with his already approved fiscal bailout and its ambitious infrastructure investment plan, something not seen in decades.
Forty years ago, in his 1981 inauguration speech, Republican President Ronald Reagan (1981-1989) uttered a phrase that marked an era: “Government is not the solution to our problem, Government is the problem.”
With Reagan came major tax cuts and the confidence, supported overwhelmingly by Republicans and Democrats, that prosperity came from the market economy and that the private sector was more efficient than the public.
Democrat Biden, who supported that agenda as a young senator in the 1980s, now seems determined to dismantle that paradigm.
CHANGE OF MODEL
“It represents a significant change, certainly. It has to do with Franklin D. Roosevelt’s ‘New Deal’ of the 1930s or Lyndon B. Johnson’s ‘Great Society’ of the 1960s. It’s a comeback of the Democrats. to its origins, “Josh Lipsky, an expert at the Atlantic Council study center, told EFE, referring to the two great eras of public and social investment by the federal government in the recent history of the country.
The tax bailout, the third in the US since the outbreak of the crisis caused by the pandemic, has a strong social emphasis, focused on lower-income citizens and families with children.
“We are not going to apologize for this. The Government must be a powerful force for the benefit of the lives of Americans,” said the director of the National Economic Council of the White House, Brian Deese, when presenting the economic stimulus plan of 1 , $ 9 trillion recently approved by Congress.
This Thursday, in Pittsburgh (Pennsylvania), Biden presented his public investment plan in infrastructure valued at more than 2 trillion dollars, which will be disbursed over a decade and that includes more than 600,000 million to modernize the aging transportation network of the US and renew the federal fleet with electric vehicles.
The plan also includes a $ 400,000 million item, which will aim to hire workers to care for both the elderly and the disabled.
TAX RISE, ANATEM FOR REPUBLICANS
To pay for it, Biden proposes something considered anathema by the Republican opposition: a tax hike, raising the corporate tax rate from the current 21% to 28%.
The Democrats have a majority in both houses of Congress, but the margin in the Senate is so narrow that he cannot afford to lose a single vote from his bench and has the frontal opposition of the Conservatives.
“It’s like a Trojan horse. It’s called infrastructure, but inside the horse there will be more borrowed money, and huge tax increases in all productive parts of our economy,” said the Republican minority leader in the Upper House, Mitch McConnell, shortly after being informed of the proposal by the White House.
Apart from raising taxes, the other great taboo for conservatives is the excessive growth of the federal government to the detriment of private initiative.
This was expressed by Larry Kudlow, chief economic adviser to former President Donald Trump (2017-2021), who criticized “the enormous expansion” of the federal government and warned that it would end up turning the US capital “into a central planning swamp.”
THE FEDERAL RESERVE AT FULL GAS
Added to all this is the monetary arsenal deployed by the Federal Reserve (Fed), the US central bank, which has kept interest rates close to 0% since March 2020 and carries out multimillion-dollar liquidity injections every month through debt purchase programs.
Given the magnitude of the disbursement by the federal government, several renowned economists, including Democrats such as former Treasury Secretary Larry Summers, have warned of the appearance of the dreaded specter of inflation.
Others, however, point to the need to recover employment after the very serious impact of the pandemic, and it is recalled that there are still more than 9.5 million fewer jobs than before the crisis, the most serious since that of the Great Depression in 1930.
“A foreseeable temporary rise in inflation poses little risk, but leaving 10 million workers on the margins leaves lasting damage. Let’s remember that the dual mandate (of the Fed) is one of price stability and full employment,” said Mary Daly the president of the San Francisco Federal Reserve on her Twitter account.
(c) EFE Agency