US economy expected to grow 6.5% as $1.9 trillion stimulus bill passed

A massive US government stimulus bill backed by the rollout of coronavirus vaccines has caused the Organization for Economic Co-operation and Development (OECD) to more than double its US growth forecast for 2021 from 3.2% to 6.5%.

This comes shortly after they had forecast a rise from 4.2% to 5.6% in December.This is welcome news, not just for the US but worldwide, as the package is expected to also boost other economies, particularly, Canada, China, Mexico, and the Eurozone.

What is in the stimulus package?

This is a far-reaching package that is designed to help the US turn the corner from a pandemic that has ravaged the economy and has killed over 500,000 people in the US alone.

It is a multi-pronged package that sets out with a wide-brush to infuse state and local governments with much-needed cash and to put hard cash straight into the pockets of most taxpayers.

Below are details of the main points of the package.
  • Direct Payments – Individual taxpayers earning less than $75,000 and couples earning less than $150,000 will receive payments of $1,400 per person, with a further $1,400 paid per dependent.
  • Unemployment Benefits – The existing $300 per week federal supplement plan is to be extended through to September.
  • Child Tax Credit – Under this legislation, most Americans will receive $3,600 for each child under 6 years of age and $3,000 for children aged between 6 and 17. This provision will be in place for a year.
  • State and Local Government Aid – A total of $350 Billion has been set aside to provide direct aid to cities, states, tribal governments and other US territories. This is seen as a direct stimulus to offset the 1 in 20 government jobs that have been shed since the beginning of the crisis. It is also one of the controversial points in the package as Democrats have voiced concerns that states will use the money to fund local tax cuts.
  • Pandemic Response – A sum quoted as being “tens of billions of dollars” has been earmarked to aid the pandemic response. This includes investing more in track and trace schemes and aiding in the rollout of the vaccination program.
  • School Support - $170 billion has been set aside to fund schemes to help schools and colleges return to business. The money is to go towards reducing class sizes, improved ventilation and other measures that help maintain social distancing.
Does it go far enough?

These are the main points of the package. Whilst the OECD has already ramped up their growth forecast for the US economy, and there is no doubt that this is positive news, others have claimed the package still falls short.

Unsurprisingly, one of the main dissenters is Vermont Senator Bernie Sanders. His attempt to include the raising of the minimum wage to $15 per hour did not earn enough support to be passed.

Aside from this, and concerns over how the money allocated to local government will be spent, the consensus is that this package is going to go a long way to alleviating the pain of the last year and kick-starting a faltering economy.