Biden Gets His Bazooka: U.S. Fiscal Stimulus Set To Supercharge Economic Recovery

The American Rescue Plan, valued at $1.9 trillion, was passed by the Senate over the weekend and is set to be approved by the House of Representatives tomorrow. The bill will, in every likelihood, get some ink from President Joe Biden’s pen later this week. We’ve been consistently positive on the early cycle recovery since last April. But the imminent passage of the bill capstones what has been a series of material, positive surprises for the U.S. economic outlook.

macro photo of round silver-colored coins

Image Source: Unsplash

Take yourself back to what we knew on Nov. 4, 2020:

  • A partial reopening of economies had lifted global economic growth in the third quarter
  • However, COVID-19 infections were reaccelerating again in the United States and Europe
  • The U.S. general election pointed to a gridlocked Congress, stifling hopes of further stimulus

We were still positive on the outlook late last year but thought a meager 5% real GDP (gross domestic product) growth rate seemed reasonable. Since then the Pfizer and Moderna vaccines (among others) were demonstrated to be highly effective, the lame-duck Congress passed a $900 billion stimulus package in late December (4% of 2019 GDP), Democrats won both Georgia Senate runoff races in early January—securing full control of the legislature— and the U.S. vaccine rollout has progressed at a reasonable clip. In fact, at the time of this writing, almost 20% of Americans have received their first dose, and the U.S. administration has indicated that there will be enough supply to inoculate the entire adult population in May. In addition, infections, hospitalizations and deaths from the virus are all trending lower.

In short, 2021 has already been coming together as a year of very strong economic growth. Adding an additional $1.9 trillion of fiscal stimulus (9% of 2019 GDP) WILL supercharge the recovery. We now think U.S. real GDP growth might log in close to 7% in 2021, which would be the best calendar year result since 1984.

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Disclosures

These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page.

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