Pushing the Envelope on Government Spending

For a U.S. president who was supposed to be more of a placeholder, a little absent minded, and prone to major gaffes and stumbles, good old Uncle Joe and his team have certainly come out of the gates flying. Last week President Biden unveiled Part II of his Build Back Better initiative- the $2.3 trillion American Jobs Plan (AJP)-a proposal that follows hot on the heels of Part I, the $1.9 trillion American Rescue Plan (ARP). And sometime in the spring he intends on launching Part III, another trillion(s) dollar plan based around softer issues such as health, equality, and education.

Treasury Secretary Janet Yellen in a speech this week also made clear that the mood has certainly shifted in Washington toward big, bold, and very much global initiatives-effectively, they are flooding the zone. This is putting the United States on potentially a divergent growth path from other developed economies who will not be able to match these fiscal spending initiatives.

In this week's Economics Weekly, we share our thoughts on Biden's infrastructure proposal, the AJP, a plan designed to increase the public sector's share of investment in the United States and to tackle the somewhat loosely defined 'infrastructure' deficit-yet hopefully without also sparking debt and inflation crises.

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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.