No one has dared to proclaim it categorically out of respect for the suffering that the pandemic continues to generate, but ‘it’s morning again in America ‘. The famous phrase popularized by Ronald Reagan during his re-election campaign in 1984 he plans again on U.S as its economy leaves behind the worst ravages of the virus and the blazing vaccination campaign restores the confidence of its citizens. After the feeble recovery that followed 2008 financial crisis, the most anemic in history, economists predict that the world’s leading power will register its higher levels of growth ever since Reagan proclaimed that the sun has risen again in America. The risks have not disappeared and uncertainty continues to be the norm, but the North American elephant once again dreams of recovering some of its lost greatness.
Much has changed politically since Great recession, triggered by the puncture of the housing bubble more than a decade ago and the rapid contagion that the Finance system. In response to that crisis, the US opted for save the banks and the automobile giants, From rescues followed by a stimulus package conceived to refloat demand and celebrated then as one of the greatest in history. In hindsight, however, the 2.5 trillion disbursed by the governments of George Bush Y Barack Obama they turned out to be insufficient. The almost 800,000 million of the Obama stimulus were distributed in two years and in June 2009 his Administration was already taking the first austerity measures to reduce the deficit and calm the hysteria of the tax hawks in Congress.
Very different crises
“That and this crisis are very different qualitatively”, says the economist Dean Baker, co-founder of the Center for Economic and Policy Research. “Today we do not have an economic problem, but a pandemic which Joe Biden has responded very aggressively. In two months we could have most of the vaccinated population. People will go back to traveling and frequenting restaurants. I think there is a very powerful recovery”. That analysis is shared by many economists. This same week, the Federal Reserve predicted that the US will close the year with a 6.5% GDP growth, a percentage that Goldman Sachs it rises to 7.7%, unheard of figures since the eighties. A rhythm that would allow the country recover lost wealth during this fateful year in mid-2021, according to the Congressional Budget Office.
Such an upturn is not derived solely from the peculiarities of this crisis. Much of the explanation lies in the official response, starting with the central bank, that has flooded the financial system with liquidity to prevent a recurrence of the problems of 2008 and this week confirmed its plans to maintain the interest rates close to zero until 2023. But the White House has also wanted to avoid the stinginess of yesteryear, helped by the mentality change that has permeated the country on the government functions and the waning concern about budget mismatches. Among the fiscal stimuli of Donald Trump and those of Biden, USA has injected five trillion dollars in its economy, the double what was invested in 2008-2009.
Direct aid to citizens
“Today we have a new consensus in America”, Said the former congressman, Barney Franks. “For the first time in my life, people are saying that the government is not doing enough, rather than doing too much.” This time the bulk of the aid has not gone to the banks, but for the public, particularly in the rescue of Biden, which has put the money in the pockets that need it most, at the same time it lowered the cost of healthcare for millions of Americans. Some of the unemployed from the pandemic have earned more while unemployed than they earned working.
“Today people have money in the bank that they didn’t have in 2009,” says Baker. Since the health crisis began, Americans have saved $ 1.6 trillion, according to the Department of Commerce. And the unemployment has only taken six months to drop from 7%, compared to the 59 months it took to lower that number during the Great Recession. With more than two million vaccines administered each day, no one doubts that the consumption will skyrocket in the next few months.
Fears about inflation
The question that awaits on the immediate horizon is what will happen to inflation. Respected economists like Olivier Blanchard The Larry Summers They fear that as growth and jobs take off, prices will skyrocket into a dangerous spiral that could lead to a superinflation similar to the one that occurred in the seventies. But both the Fed and the White House have ironed out those fears, after noting the persistent price stability of the past two decades.
Not even Republicans deny the potentially looming horizon. “We are about to experience a boom”, said recently Mitch McConnell, their leader in the Senate. And unlike what happened in 2009, Biden is not finishing the job. He wants to invest billions more to transform the country’s infrastructure and lead the green economy, a project that could serve to extend this imminent dawn over time and allow the United States to maintain its now waning economic hegemony.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.