America's $1.9trn supercharged economic recovery

US president Joe Biden is delivering radical change to America, says Irwin Stelzer in The Sunday Times. Once taunted as “sleepy Joe”, Biden has proved vigorous, pushing through a $1.9trn Covid-19 relief bill and preparing an even bigger infrastructure plan.

“Never has such a massive policy come at a time that is more inconsistent with economic reason”, says Robert O’Quinn in National Review’s Capital Matters. The US economy grew at an annualised rate of 4.1% in the final quarter of 2020. Even without the stimulus it was forecast to regain pre-pandemic levels by the third quarter of this year.

Why has Biden pushed ahead regardless? The bill is packed with Democratic Party spending priorities – handouts to states that largely don’t need the money, payoffs to teachers’ unions – rushed through under the cover of stimulus.

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Stimulating the stockmarket

US households will soon receive a $1,400 per person cheque as part of the plan, notes Matthew Rocco in the Financial Times. A good chunk of that cash will end up in stocks. A Deutsche Bank survey has found that holders of online brokerage accounts plan to put an average of 37% of their cheques into the markets. The S&P 500 has gained 7% this year. Things are not so happy for the tech-heavy Nasdaq composite index, which remains 3% off its mid-February high as investors “rotate” away from tech stocks.

All that cash is juicing corporate earnings, says Julia Horowitz for CNN Business. S&P 500 earnings grew by 3.9% during the final quarter of last year, meaning that Wall Street’s “earnings recession” is already over. And “analysts are projecting double-digit [annual]earnings growth for all four quarters of 2021”. Such bullish forecasts are partly driven by exuberance, but with activity set to grow 6.5% this year there is no doubt about the strength of the underlying economy.

There could be even more fiscal largesse to come, reports Nick Allen in The Daily Telegraph. Biden will soon roll out plans for another $2trn-$4trn for “repairing roads, bridges and airports” and investing in green infrastructure. The US deficit already sits at $3.1trn, while the national debt totals $28trn. To help plug the gap the first big tax rise in almost 30 years is on its way. Corporate profits, capital gains and individuals earning over $400,000 a year are likely to see their taxes rise, according to Bloomberg. But Biden is thought to have rejected a “wealth tax” favoured by left-wing Democrats.

Whatever you think about all the spending, this “heavily caffeinated US recovery” is good news for the global economy, says Daniel Moss on Bloomberg. After so much “carping about missing American leadership” in the past few years, “Uncle Sam’s foot” is now firmly back “on the gas pedal”.