Why Europe should spend big like Biden

The scale of Biden’s spending plans means the US economy will recover much faster than Europe’s. Yet in many ways it is the European economy that is in greater need of stimulus.

A big macroeconomic experiment is underway in the US. The $1.9 trillion fiscal package, agreed by Congress in March, sits on top of December’s $900 billion commitment, bringing total new spending to $2.8 trillion. In addition, the Biden administration is planning to invest a further $3 trillion in infrastructure and education (although some of this will be financed by tax hikes). Not all of the $2.8 trillion is short-term stimulus – much of it consists of measures that would be considered the normal operations of a welfare state in Europe, such as income support to help households pay their bills while COVID-19 restrictions continue. But in all, this amounts to a big jump in debt-funded US government spending, which should raise growth significantly in 2021.

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Πηγή: cer.eu

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