Updated: February 24, 2021
A new report on Friday from Moody’s Analytics — an independent Wall Street firm — finds that President-elect Biden’s American Rescue Plan would “provide a large boost to the economy” by helping to create 7.5 million jobs in 2021 — doubling economic growth and returning the U.S. to full employment one year faster than without the package.
Moody’s joins a growing chorus of voices across the political spectrum — from Senators Sanders and Wyden to the U.S. Chamber of Commerce and the Business Roundtable — praising the President-elect’s plan to speed up vaccinations, contain the virus, and provide direct and immediate relief to support struggling communities and the families that have been hit hardest.
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Leading economists have echoed the urgency and scale of the President-elect’s rescue package, with Glenn Hubbard, a former economic adviser to President George W. Bush, telling the Wall Street Journal that “a big plan would be better than one that wasn’t large enough. [Saying,] ‘One lesson from the financial crisis is that you want to be careful about doing too little,’” and Reuters finding that President-elect Biden’s plan follows the approach that “many economists say is needed to avoid long-term damage from a record-breaking pandemic recession.”
Read the full report here.
|Moody’s Analytics: The Biden Fiscal Rescue Package: Light on the Horizon|
President-elect Joe Biden’s proposed $1.9 trillion fiscal rescue package, the American Rescue Plan, would provide a large boost to the economy if passed into law. With this additional economic support, real GDP growth would be robust at nearly 8% this year and almost 4% next, bringing the economy back almost to full employment by fall 2022.
Assuming that Biden’s $1.9 trillion plan is enacted in full by March, the economy would receive a quick boost. Real GDP would jump to more than 7% annualized in the first quarter of this year, despite the intensifying pandemic, and to almost 8% for all of 2021. This is almost double the growth that would be expected without any additional fiscal support. Real GDP should post an additional almost 4% gain in 2022. At this pace of growth, the economy would create 7.5 million jobs in 2021 (December to December) and 2.5 million in 2022 to fully recover the jobs lost since the pre-pandemic peak. By then, the economy will have returned to full employment—an unemployment rate of 4% to 4.5% and a labor force participation rate of more than 62.5%. This is about a year sooner than would be the case if there is no additional fiscal support (see Chart 2).
The Biden proposal is mostly about supporting the demand side of the economy, but it incorporates a handful of policies aimed at increasing the supply of labor. In particular, it would provide funds for childcare, paid leave and health insurance to facilitate the return to the workforce of several million people, mostly women, who have left the workforce during the pandemic to take care of sick family members and friends and children who are unable to go in-person to school.