Feature / Biden’s economic reform in doubt / Xu Jiesheng

At the beginning of 2021, Biden officially took office as the new president of the United States, pushing for new policies of economic reform. The reform mainly includes two aspects, one is the economic stimulus / the COVID-19 relief plan, and the two is the tax reform. Although Biden is ambitious and says that he can quickly recover the U.S. economic downturn, the feasibility of the above plan has been questioned by many parties.

The economic stimulus plan announced by the Biden administration costs US $1.9 trillion, which is divided into two steps: one is to provide financial assistance to American families, enterprises and local governments to promote the economic recovery of individuals, enterprises and local governments; the other is to further promote the national economic recovery through national investment in infrastructure construction. If Congress passes this plan, the federal government will directly grant us $1400 epidemic subsidies to eligible citizens; inject US $415 billion into the medical and epidemic prevention system to fight the epidemic; invest US $440 billion in small businesses to help transition; provide us $170 billion to primary and secondary schools and other basic education institutions, and so on.

However, the U.S. economy is still struggling with the epidemic. The total GDP of the U.S. is expected to reach $21 trillion in 2020, which is 0.5 trillion less than that in 2019. Under the premise of negative economic growth and no tax increase, where does the $1.9 trillion come from? There are only two ways to solve this problem: raising debt and issuing more banknotes. Some members of Congress have expressed their opposition to the government’s further substantial expansion of the fiscal deficit and raising debt to raise money, and the issuance of additional US dollar bills is bound to cause inflation. Many economists predict that Biden’s budget should be less than $1 trillion.

The goal of Biden’s tax reform plan is to raise taxes by increasing taxes for the rich and reducing taxes for the poor, while narrowing the gap between the rich and the poor. The specific measures include sharply reducing inheritance tax and gift tax, increasing income tax for high-income people, increasing corporate tax, and encouraging home purchase tax credit, which are quite different from the trump government’s policy of slashing taxes to protect the interests of the rich. However, Biden’s new deal is bound to be opposed by the rich and enterprises in the United States, and may even lead to the outward migration of enterprise investment and the slowdown of economic recovery.

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