The Economist - USA (2021-02-06)

10 Leaders The EconomistFebruary 6th 2021

A

merica’seconomywillrecoverfasterfromthepandemic

thanitsrich-worldpeers,theimfpredicts.Notbecauseit

hascontrolledthespreadofdisease—ithasn’t—butmostlybe-

cause of its enormous economic stimulus, which boosted

householdincomesbymorethan6%in 2020 evenastheunem-

ploymentratepeakednear15%.BeforeJoeBidenbecamepresi-

dent,Congresshadalreadyspent$4trnfightingthecrisis.Now

heproposes$1.9trnmoreemergencyspending,whichwould

takethetotaltoover25%ofgdpin2019.Republicansthinkthat

istoomuch.A groupoftheparty’ssenatorshasmadea counter-

offerofa planworthabout$600bn(seeUnitedStatessection).

Therightsizeforthebillisnotbestjudgedfromthetopdown.

Americaisnotina normalrecessionthatisbestsolvedbya cali-

brated slug of government spending. No

amountofpump-primingwillfullyreopenres-

taurants,nightclubsandofficeswhilethevirus

remainsprevalent—norwould that be desir-

able.Thegovernmentmustinsteadfightthecri-

sisfromthebottomup.

Congressshouldspendwhateverisneeded

onvaccinations and onreplenishing the in-

comesofworkersbearingthebruntofthecrisis.

Theyhavelosttheirjobsthroughnofaultoftheirown,andif

their incomes collapsed, they would slash their spending,

spreadingthepaintotherestoftheeconomy.Extendinga gener-

oustop-uptounemployment-insurancebenefitsbeyonditsex-

piryinMarchshouldbea priority.

Nobodyshouldfretaboutthecostofprovidingwhatisinef-

fectdisasterrelief.Prolongingvastdeficits,however,doescarry

a risk.AccordingtoofficialprojectionsreleasedonFebruary1st,

withoutmorestimulusAmerica’sgdpwouldlagbehinditspo-

tentialbyonly1.3%attheendof2021.MrBiden’sproposed

spendingissixtimesbiggerthantheshortfall.The“multiplier”

effectofgovernmentspendingonoutputishardtoestimate,but

issmalltodaybecausemanyhouseholdsaresavingstimulus

money.Yetshouldvaccinationslettheeconomyreopenfullyin

thesecondhalfof2021,thepent-upeffectsofstimulusmay

causetheeconomytooverheat,leadingtoa burstofinflation.

Higherinflationwouldbetolerable—welcome,even,uptoa

point.Butit wouldmeananyfurtherdeficitspending,forexam-

pleonMrBiden’sinfrastructureplan,wouldfurtherstokethe

fire.Bettertopreservefiscalfuelbyavoidingunnecessarylar-

gesse.Democratswanttosendchequesworth$1,400tomostin-

dividuals,addingtothe$600theyrecentlyreceived.Universal

handoutsstoppeoplefallingthroughthecracksofbureaucratic

means-testedprogrammes,but$2,000isanarbitrarytotalpop-

ularisedbyDonaldTrump.MrBiden’splanalsoincludes$350bn

forstateandlocalgovernments.Earlyinthecrisisit lookedasif

theywouldsuffera collapseintaxrevenues.In

fact,theirbudgetshaveheldupasthefederal

government’s generousunemploymentbene-

fitsanda burstofspendingongoodshaveboost-

edtheirtaxreceipts.Neitheroftheseitemsin

MrBiden’sbillisa priority.

Therightfiscalpolicywouldbeflexible,pro-

vidingemergencyspendingforaslongasthe

pandemicpersistsandsavinga broaderfiscal

boostforlaterifnecessary.Republicans—andsomemoderate

Democrats—arerighttoarguethat$1.9trnisexcessivetoday.Mr

Bidenmaybewillingtotrimhisproposal.Afigureofaround

$950bnwouldallowforunemploymentinsurance,asmaller

amountofcatch-alluniversalcheques,MrBiden’sassaulton

childpovertyandextraspendingonvaccines.

Equally,DemocratsarerighttofearthathawksinCongress

could derail the recovery ifthe crisisworsens.Republicans

shouldpledgetosupportfurtherspendingwerethattohappen.

TheDemocratsshouldhusbandtheirlimitedopportunitiesto

circumventRepublicanoppositionintheSenate.Abipartisan

agreementnowwillraisetheoddsthattheeconomywillgetthe

rightamountofsupportattherighttime. 7

How much is too much?

Cumulativestimuluspackages

UnitedStates,2020-21,$trn

6543210

Biden

proposal

December

deal

Pre-December

2020

Targeted relief would be better than indiscriminate spending

Fiscal stimulus in America

M

ost politiciansfind winning over a majorityoftheelec-

torate challenging enough. Imagine, then, thedifficulties

of candidates in Myanmar, who must secure the approvalnot

only of voters, but also of the army’s top brass. TheNational

League for Democracy, the party led by Aung San SuuKyi,a veter-

an dissident, excels at the first task. It has won the pasttwona-

tional elections with landslide votes. But it is not sogoodatthe

second. On February 1st, as mps elected at the mostrecentpoll

were about to take their seats, the army arrested themandsaid

that it would run the country instead (see Briefing).

Few outsiders had predicted the coup, despite thesnarling

statementsemanatingfromthehighcommandinthedaysbe-

forehand,forthesimplereasonthatthearmywasalreadyincon-

trolofalmosteverythingthatmatteredtoit.Undertheconstitu-

tion,whichthetopbrassitselffoistedonthecountry,thearmy

chiefcommandsallthesecurityservices.Heappointshisown

boss(theministerofdefence),aswellasseveralotherministers

anda quarterofmps.That,inturn,giveshima vetooveranyat-

temptstochangeallthisbyamendingtheconstitution.Thesys-

temisdesignedtopreservethearmy’sinterests,nomatterwhat

voterssaytheywant.Sowhywouldthegeneralsupendit?

Putschistsanddespotstendtocraveatleasta veneeroflegiti-

The meaning of Myanmar’s coup

Attempts to dress up authoritarianregimesasdemocraciesareunlikelytosucceed

Despots v democrats

1