I hope you will come to these pages to hear my thoughts.
And maybe there are days you do.
But today is not that day.
We have been a pandemic year. People are used to it.
But the kneeling policy reaction seen by the government a year ago is just the beginning.
The road from here is not that simple. And that’s why Jim wrote his latest book, The new Great Depression.
This is the first book of its kind to look at pandemics and economic implications together. Check out a recent interview with Jim Here we investigate the long-term economic impact of COVID.
Well, it ended up in the gym.
Until next time,
Editor, Daily Reckoning Australia
Joe Biden uses COVID for the cover
The Biden administration is off to a quick start, but its most important policy initiative has yet to come. These plans fall into several broad categories.
- COVID pandemic relief
- Economic stimulus
- Tax increase
- Trade agreement
- Immigration changes
- Green New Deal
We’ll cover the first three today and the remaining three in future editions. DR..
COVID pandemic relief
Biden’s bailout plan for a pandemic is similar to that of Trump, requiring 100 million vaccinations by May 1, 2021. This goal can be achieved with 1 million injections per day. That was exactly what Trump proposed, and Biden repeated the plan.
Mass injections in combination with recovered viral antibodies from more than 25 million Americans could approach US herd immunity by late 2021. It does not eradicate the virus, but it can be much less contagious and lethal (mutations in the virus do not escape the vaccine). in the meantime…
Economic damage continues
The development of a pandemic epidemic is inconsistent with the resolution of economic turmoil. Tens of millions of jobs have been lost, many of which have been lost forever. Millions of companies have closed. Whether the pandemic eases or the opportunity arises, it’s unclear whether Americans will return to restaurants, airlines, casinos, resorts, cruise ships, and large rallies. Behavioral adaptation may last for decades, as it happened after the first Great Depression (1929–40).
To alleviate this dysfunction, Biden is proposing a $ 2 trillion spending program. This $ 2 trillion comes in addition to the $ 900 billion spending package passed in December and the $ 3 trillion spending package passed by Congress from April to June 2020.
Of course, this $ 6 trillion COVID and overall implementation of financial relief will add to the $ 1 trillion baseline budget deficit already incorporated in 2020 and 2021. There is a total deficit spending tab for both pandemic and non-pandemic years to $ 8 trillion.
How they spend money
Biden requires all households to check for US $ 1,400. Increase and expansion of unemployment allowance. 14 weeks of paid leave for illness, new child, or medical condition. Increased child tax deduction of up to US $ 8,000 per family. US $ 25 billion rental assistance. US $ 130 billion to reopen school. US $ 20 billion to vaccine center. The federal minimum wage is US $ 15 per hour.
It is difficult to understand the scale and scope of this spending program. It has never happened in US history, except for the FDR’s efforts to redirect the entire US economy as part of its efforts to win World War II.
This program provides assistance to people in need and brings a storm to favorable political interests, whether they are in need or not. What this program does not do is to stimulate the economy or end the current slow-growing, slow-growing recession. The reason for this is explained in the next section.
The line between “COVID bailout” and “economic stimulus” is inevitably ambiguous. Obviously, the policy response to the pandemic has created a new recession. This means that programs designed to mitigate the economic turmoil from a pandemic are at the same time aimed at stimulating the economy. Many, but not all, of the above programs can also be considered part of an economic stimulus program.
In particular, the extension and increase in unemployment benefits, US $ 1,400 checks for all American households, the increase in the minimum wage, and the increase in childcare tax credits fall into the category of economic stimulus honestly. Most of these changes may have been pursued by Democrats, with or without a pandemic-related slowdown.
More economic stimulus awaits on the wings. After the new $ 2 trillion package has passed, the White House and Congress may pursue another $ trillion deficit spending program focused on infrastructure, education, and assistance to state and local governments. There is sex.
The Biden administration’s tax policy will take a different path from economic stimulus and COVID bailout plans. The main reason for this is that there are broadly different views on tax policy within the Democratic rally in Parliament. It will take some time to negotiate and compromise on these views before discussions with the Republicans begin.
Beyond that, Republicans can almost certainly oppose the Democratic-agreement tax increase plan and use filibuster to force opposition. This will allow Democrats to use an esoteric reconciliation process to pass the tax increase with only 50 votes (and Vice President Harris’ tiebreaker). It takes time and invites many other suggestions, but it is only directly related to tax law as a free rider in the solid settlement process. As a result, major tax bills may not be passed until August.
Despite the delays, Democratic tax law will be historic, both in its cleanup and in the scale of tax increases. The maximum personal tax rate will be raised from 35% under the Obama administration to 39.6%. Capital gains are taxed at the same 39.6% instead of the current 20%. Corporate tax will be raised from the current maximum tax rate of 21% to the new maximum tax rate of 28%.
Other possible suggestions
Other possible proposals include eliminating many business and itemized deductions. The effect of this is to raise the effective tax rate even if the statutory tax rate remains the same due to the loss of tax incentives for deductions. Large companies like Apple and Google may face a minimum tax on asset valuation, effectively a wealth tax, if they do not pay more than a certain amount of income tax due to offshore postponement and royalties paid to tax havens. There is.
Other proposals call for the elimination of capital gains treatment of private equity fund “carry-over profits.” Carry-over profit is a management fee disguised as profit sharing. The new tax law imposes the same tax rates that regular administration fees pay.
Creating the final tax package will take some time, but it may resemble this overview.
In my next edition Daily Reckoning Australia, Describes the other three policies listed above, trade agreements, immigration changes, and the Green New Deal. stay tuned…
nice to meet you,
Strategist, Daily Reckoning Australia
PS: Australia’s massive COVID recession — Learn which investments to accumulate and which to avoid in order to give you the best chance of maintaining wealth during a recession. Click here for more information.
COVID Pandemic Policy Initiative-Joe Biden Using COVID for Cover
https://www.dailyreckoning.com.au/covid-pandemic-initiatives-joe-biden-using-covid-cover/2021/02/19/ COVID Pandemic Policy Initiative-Joe Biden Using COVID for Cover