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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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”.
-
VAT hike on private school fees could come earlier than previously expectedThe government could start charging VAT on private school fees as soon as January 2025, according to the latest reports. What does it mean for parents?
-
State pension errors for mothers - thousands of cases remain unreviewed with underpayments exceeding £500 millionThe DWP has made little progress reviewing state pension errors affecting mothers - with only 0.25% of the 194,000 cases looked at. Could you be owed money?
-
Donald Trump: America's political violenceThe unsettling attack on Donald Trump has meant the US election has taken another dark turn
-
Where is the US economy heading?What impact will a new president have on the US economy when it comes to growth, inflation and unemployment?
-
Revolut founder Nik Storonsky cashes in – what's next for the fintech billionaire?Nik Storonsky has shaken up the banking industry with Revolut. He is now preparing a new project that could do the same to the venture capital sector
-
Is local production making a comeback?Companies return production closer to home and shorten their supply chains due to the pandemic and geopolitical turmoil. How should investors react?
-
French election: an unexpected win for the left-wingThe snap French election delivered a stalemate. What does this mean for the country's stability?
-
Should Joe Biden withdraw his candidacy?After Joe Biden's presidential debate appearance on TV, it's left people asking if he's fit to run in the election
-
Return of Larry Ellison: the god of Silicon ValleyLarry Ellison, the founder of Oracle, was a pioneer of the US tech scene in the 1970s. The AI boom has given him a new lease of life.
-
US and Saudi deal expired – is the US in decline?As the US and Saudi deal expired, Biden and Trump are the perfect candidates for a nation in decline
