When you hear this radio commentary, we will have a new President. Joe Biden will face a long and difficult list of challenges. Topping the list will be the Coronavirus and a $1.9 trillion stimulus to lift our economy. That huge spending bill has not passed the Congress yet. Probably will be changed some. The primary objective is to help low income people. It includes an extension of a 15% increase in food stamps we approved in December and a $600 check per adult. Biden’s plan would hand out another $1400 payment. According to the Wall Street Journal this spending would cut the poverty rate from 12.6% to 9%. The number of children in poverty would drop by half. If we get control of the virus with the vaccine as expected, our economy would be ready to take off.
Goldman Sachs forecasts our economy to grow 6.6% this year. Unemployment could drop to 4.8%. That is a very exciting forecast. But don’t assume that it will be free. We will have to borrow that $1.9 trillion. U.S. government debt has already exploded by $7 trillion in the last 4 years to $21.6 trillion. One good thing that may not always be the case is that interest rates are really low. It doesn’t cost so much to borrow money if interest is less than 2% but it might not stay that low. I remember in the early 1980s we paid 16% or 18%. That was terrible. Thousands of farms and businesses went broke. As much as we need to be concerned about our level of debt, we need to fight our way through this global pandemic recession. Here is where the U.S. stands relative to other nations. Last year our gross domestic product fell by 4.3%. Our economy should be growing by that much. But compared to other countries we didn’t do so bad. Japan, Brazil, Germany, Canada, France and U.K. – they all did worse than the U.S. – S. Korea was down only 2%. China wasn’t down at all. Their economy grew by 2.3%. There is a pretty broad agreement that we need another stimulus package, but how big should it be? How much can we afford? That’s the question.
John Block served as Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill. John hosts a weekly radio show going back more than 20 years. The commentary and opinions shared are a summary of the discussion from the broadcast and not a reflection of the opinions of the firm at large. For more from John Block Reports from Washington visit www.johnblockreports.com.