Prof. Volker Wieland considers US President Biden's economic plans to be oversized (Commentary)

In his first 100 days in office, U.S. President Joe Biden has unveiled comprehensive aid packages for the economy and pushed ahead with the Corona vaccination campaign. But Biden's economic plans overshoot the mark, according to Prof. Volker Wieland. Moreover, he fears that the planned tax increases could put the brakes on private investment in the United States.

"The Biden administration wants to boost demand to the maximum. The large transfers to households increase consumption, but production doesn't keep up, and businesses reduce inventory instead. Some of the transfers are also saved and do not affect demand. So the effects on economic output are much smaller than the total volume of transfers. I consider this program to be oversized.

When comparing it with Europe, however, it should be borne in mind that the welfare state in the United States is much smaller in size. The Trump and Biden administrations' generous Corona support for many households is temporary in nature and therefore does not represent an automatic entry into a broad-based European-style welfare state.

Now more large government investment programs are to be added. They are certainly well-intentioned. But I am very skeptical that they will be as effective as hoped. Empirical analyses of previous government programs give reason for justified doubt. The adaptability of the U.S. economy and the rapid recovery from the Corona shock depend on the dynamism and performance of the private sector. That is where the vast majority of investment in new technologies must be provided. However, the tax increases the Biden administration plans to finance the investment and redistribution programs will hamper private investment."

More Information:
The White House: American Rescue Plan
The White House: The American Jobs Plan - Factsheet

New York Times: Biden's Economic Plan in one Chart