Press Release - President Biden's Economic Plan is Working as New IMF Report Shows Strong Boost Expected from His Economic Proposals

A new report today highlights that President Biden's economic plans are working. Thanks to President Biden's American Rescue Plan and a successful national vaccination strategy, the economy is getting back on track, and Americans are getting back to work. The first line of the report puts it best, "The new administration's policies have put the U.S. economy on a strong footing. An effective vaccine rollout has put the number of new COVID-19 cases on a firmly downward path. At the same time, unprecedented fiscal support is quickly restoring the economy back to full employment and generating positive outward spillovers to the world economy."

The IMF report praised the President's forward-looking economic plan as an "ambitious agenda to address long-standing structural challenges":

• "The new Administration has proposed an ambitious agenda to address long-standing structural challenges in the US economy. The American Jobs Plan and American Families Plan contain proposals to redistribute resources toward vulnerable households, invest in infrastructure, incentivize human capital accumulation and labor force participation, and improve productivity."
• "The combination of the Rescue, Jobs and Families Plans, in the context of a Flexible Average Inflation Targeting framework, is estimated to add a cumulative 10¼ percent to the level of GDP during 2021–23. The baseline forecast incorporates the effects of both the Jobs and Families Plan based on an assumption that they are passed into law in line with the composition and size described above. Forecasts rely on the empirical and economic modeling literature to define the size of the multipliers for the various policy measures being proposed. The proposed fiscal plans, combined with the more accommodative monetary framework, are expected to reduce unemployment to close to 3 percent and bring labor force participation to pre-pandemic levels by end-2022. Supply-side policies—including infrastructure spending, childcare support, paid family leave, expanded healthcare, and a more generous EITC—are expected to help support labor force participation and productivity over the medium-term, helping to offset an expected demographic downtrend in participation. As a result, potential growth is expected to move up (to around 2 percent) and the level of real GDP would be higher by around 1 percent in 2030."

More key quotes from the new IMF report are below, and the full report is available here.

• "The US economy is expected to grow by around 7 percent in 2021, as savings are drawn down, demand shifts back to in-person services, and depleted inventories are rebuilt. Disruptive supply and demand mismatches are possible as the economy normalizes, including in the labor market, but these are expected to be transitory, while the significant employment gap should help contain wage and price pressures."
• "The recovery is being underpinned by strong fiscal and monetary support. The American Rescue Plan was adopted in March 2021 and contained 8.2 percent of GDP in federal spending, in addition to the December fiscal package. Fiscal support to small businesses was extended, as was expanded unemployment insurance, while households received transfers via stimulus checks. These packages have supported demand, helped avoid corporate bankruptcies, and relieved financial stress on households and state and local governments."

And, as you can see in the below charts, President Biden's economic proposals will have a profound positive effect on both GDP and the employment rate.

This report, combined with the Moody's release earlier in this week, makes clear: President Biden's economic plan is working.