Amid steady progress with COVID-19 vaccinations and free spending by the Joe Biden administration, the United States economy is gathering so much steam that it is lifting other countries, where governments have not responded as aggressively to the pandemic.
Demand for goods and services is expected to spill well beyond U.S. borders in 2021, making the country the largest single contributor to global growth for the first time in 15 years.
The U.S. is expected to become the engine of global economic growth this year, according to the International Monetary Fund, where the economy will grow 6.4 percent this year.
JPMorgan Chase CEO Jamie Dimon thinks the U.S. economy is poised to come back from the COVID-19 crisis over the next two years. In his annual letter to shareholders, Dimon said hefty government spending and consumers’ pent-up savings have primed the nation for an economic explosion that will likely stretch into 2023.
Americans spent $600 USD government stimulus checks in January on furniture, laptops and clothing, and then another round of $1,400 USD checks in March, by which point the U.S. imported a record $221 billion USD worth of goods.
Accelerating progress in vaccinating people against COVID-19 plus a more generous government spending compared to other countries — coupled with the Federal Reserve’s ultra low interest rates — explains the U.S. edge. As of the end of March, the United States had vaccinated more than twice as large a share of its population as had the European Union.
Throughout the pandemic, the U.S. has done a far better job of supporting household incomes and consumer spending than governments elsewhere.
The “economic impact payments,” massive enhancements to unemployment insurance, forgivable Paycheck Protection Program loans, eviction moratoriums, mortgage and student debt forbearance, and extra money paid to healthcare providers all led to a surge in spending power for many Americans, including many at the lower end of the income scale.
U.S. disposable personal income in 2020 was seven percent higher than in 2019, while consumer spending on durable goods such as cars, electronics and furniture was six percent higher.
Governments in Europe, Japan and China — all of which could have afforded comparable levels of support for their residents — were far stingier.
The consequence of this imbalance has been a surge in the U.S. trade deficit. The difference between U.S. exports and imports of manufactured goods is now at its highest level ever relative to the size of the economy, at roughly five percent of gross domestic product, up from about four percent before the pandemic.
Biden's $1.9 trillion USD infrastructure package currently being debated in U.S. Congress is estimated to boost the world’s growth rate by more than one percentage point over the coming year.
Americans are going to be the biggest beneficiaries. But the gains will be globally distributed as U.S. households use the extra cash to buy goods and services, some of which will come from the rest of the world.
Unfortunately, the U.S. post-pandemic prosperity is also a double-edged sword, as the U.S. economy could leave behind poorer nations as it speeds toward recovery.
According to the International Monetary Fund, by next year, emerging markets are likely to have suffered a 20 percent loss in per-person income, almost twice the figure in the industrial world.
AmChamUS supports the infrastructure investments and federal government efforts to effectively vaccinate the U.S. population on the way to an economic recovery, as such a recovery creates a robust job market and economic growth.
AmChamUS cautions that U.S. economic recovery at the expense of the rest of the world, as an unchecked, overzealous approach could create long-term uncertainty in relation to the U.S., and may cause more economic harm over that time period as opposed to prosperity.
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