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U.S. President Joe Biden has announced an eight-year economic stimulus package worth $2 trillion (¥220 trillion). The pillars of the plan are to rebuild aging infrastructure and strengthen key industries such as semiconductor production.
By stimulating the construction and manufacturing sectors and raising the income level of the lower and middle classes, the plan aims to redress the disparities that have widened further amid the novel coronavirus pandemic.
Setting aside wartime measures, the proposed package would be the largest since the New Deal policies implemented in the 1930s to overcome the Great Depression. This is fiscal spending on an unusually large scale, even for a Democratic administration that tends to lean toward big government.
In his speech announcing the stimulus, Biden stressed that the plan will create millions of jobs. It is reasonable to try to mend the divisions in society that are becoming increasingly serious in the United States.
The package will allocate $621 billion for transportation infrastructure to improve the road and rail networks. It plans to invest $300 billion in manufacturing, of which $50 billion will be used to support research and domestic production of semiconductors.
The spending will mostly be financed by raising the corporate tax rate. The Republican Party is opposed to the tax hike, and adjustments will have to be made in Congress. But if the massive investment is realized, it will also be an opportunity for Japanese companies.
The proposed package is also believed to be aimed at countering China’s growing economic power. It aims to reduce dependence on China and other countries by rebuilding supply chains, so there is much room for cooperation between Japan and the United States.
In particular, securing semiconductors, which are in short supply worldwide, is a common concern. Japanese companies have strengths in semiconductor manufacturing equipment and materials, so the two countries can cooperate in research and development. The Japanese and U.S. governments should explore concrete measures for cooperation at the Suga-Biden summit planned for Friday, among other occasions.
Decarbonization with no emission of greenhouse gases is also an urgent issue. Japan and the United States are urged to expand cooperation on measures such as promoting electric vehicles and renewable energy.
On the other hand, there are people who have concerns that the stimulus package will overheat the economy.
A $1.9 trillion economic stimulus package that includes benefits for households has just come into effect in the United States. The International Monetary Fund predicts that the U.S. economy will grow by 6.4% this year, the highest among major industrialized nations.
Further economic recovery might result in accelerating inflation, forcing the Federal Reserve to reduce monetary easing earlier than expected. If this happens, financial markets could be shaken by a sharp drop in stock prices, which are at historically high levels.
The U.S. government and the Fed need to keep an eye on these risks.
— The original Japanese article appeared in The Yomiuri Shimbun on April 11, 2021.
