Is The Biden's Administration a Victim of a Successful Policy?

The COVID-19 pandemic undermined not only the health of people but also the economic wellbeing of workers around the world. Millions of people died and millions of workers lost their jobs. To alleviate the negative economic/financial impacts of the pandemic, major central banks and governments worldwide adopted monetary and fiscal policies designed to prevent a deep and protracted global recession. In the United States, the Biden's administration and the U.S Congress adopted the "American Rescue Plan". What is the purpose of the American Rescue Plan? And what have been its impacts?

The American Rescue Plan

The main purpose of the Plan - which is in fact a stimulus and relief spending plan - has been to "change the course of the pandemic and deliver immediate relief for American workers". The Plan has addressed both the health and economic aspects of the pandemic, but this article focuses primarily on the economic aspect.

What has the Plan envisaged to do?

• Deliver immediate economic relief to American families by devoting about $1 trillion towards building a bridge to economic recovery.
• Give working families a $1,400 per-person check, which would bring their total relief payment to $2,000.
• Extend current unemployment insurance benefits and eligibility.
• Help Americans stay in their homes by providing emergency aid to cover back rent; and help struggling homeowners catch up with their mortgage payments and utility costs.
• Increase the Child Tax Credit from $2,000 to $3,600 per child under age 6, and to $3,000 for other children under age 17.
• Increase the Earned Income Tax Credit for 17 million workers by as much as $1,000.
• Give families an additional tax credit to help cut child care costs.
• Provide emergency grants, lending, and investment to hard-hit small businesses so they can rehire and retain workers and purchase the health and sanitation equipment they need to keep workers safe.
• Distribute more than $360 billion in emergency funding for state, local, and Tribal governments to ensure that they are in position to keep front line public workers on the job.
• Help hard-hit public transit agencies avoid layoffs and service reductions.
• Provide $130 billion to help school serve all students.

The above-selected statements from the American Rescue Plan provide a limited idea of the massive amount of money at the disposable of many American consumers and businesses. They do not include billions of dollars spent "to provide the supplies, emergency response, testing, and public health workforce to stop the spread of COVID-19".

In summary, the American Rescue Plan (in conjunction with other measures) succeeded in averting a deeper and more prolonged economic downtown, and contributing to a robust economic recovery in the United States. The implementation of the Plan, however, has also contributed to a surge in inflation, which has led to a "blame game".

The Inflation Blame Game

Several factors usually contribute to inflation - a persistent general increase in the level of prices. People have been talking a lot more about this enduring inflation in part because of the presidental election in the United States. The negative effects of high prices have been directly attributed to the Biden's administration stimulus and relief spending. For instance, some critics have argued that the massive stimulus spending is the cause of higher grocery and gas prices, and refer to the inflation as "the burden of Joe Biden's inflation tax". Furthermore, most consumers and small business owners - including those who have largely benefited from the American Rescue Plan - have complained loudly about the pain inflicted on them by the inflation.

Is the Biden's administration solely responsible for the inflation?

Due to extraordinary circumstances created by the pandemic, policymakers had to act. As previously stated, the Executive Branch of the government and the U.S Congress (responsible for fiscal policy) adopted the American Rescue Plan, and the Federal Reserve System - the Fed (U.S Central Bank in charge of monetary policy) implemented several measures, such as reducing the Federal Funds rates (interest rates) to near zero, providing emergency lending, and purchasing different types of assets. All these measures (fiscal and monetary) were coordinated in a manner to mitigate the adverse impacts of the pandemic.

In retrospect, we can argue that the implemented policies were too massive, have overkilled (the economic aspect of) the virus, and contributed to high inflation because too much of a good thing does have side-effects. Nonetheless, it is important to bear in mind that both economic and political policies do sometimes carry undesired and unintended consequences.

Is the blame game justifiable?

Before addressing this question, it is worth pointing out that several factors may have contributed to the prevalent inflation, including Russia's invasion of Ukraine, shortage of supply due to interruption in global supply chains, excess demand by consumers eager to spend their extra disposable incomes, Trump's administration original spending to fight the pandemic, monetary measures implemented by the Fed, and of course the American Rescue Plan.

Regarding the blame game, it would not be accurate to say that it is justifiable. As Heads of the Executive Branch of a government rightfully and proudly take credit for the success of their policies, they are also routinely assigned responsibility for undesired and especially adverse impacts of those policies, whether it is their fault or not. But finding solutions to problems must always remain the priority.