President Biden announced in his first ‘non-State of the Union’ address that “America is on the move again,” saying in effect that government isn’t the problem but the solution to today’s problems, including the horrific events of the past year.
We are seeing the effects of those solutions in today’s first estimate of Q1 Gross Domestic Product growth: Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021, said the BEA, reflecting the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic.
All sectors expanded, with consumer spending surging 10.7 percent, the economy adding`1.5 million new jobs. business investment jumped up 10 percent and housing investments up 11 percent in the ongoing housing boom.
Much of this is possible because of the still record low interest rates that the Fed has promised to maintain al least through next year. But consumers have benefited the most with the assistance payments, of course, so much so that disposable personal income increased $2.36 trillion, or 67.0 percent, in the first quarter, compared with a decrease of $402.1 billion, or 8.8 percent, in the fourth quarter.
And personal saving was $4.12 trillion in the first quarter, compared with $2.25 trillion in the fourth quarter, which has boosted the personal saving rate—personal saving as a percentage of disposable personal income—to a huge 21.0 percent in the first quarter, compared with 13.0 percent in the fourth quarter, and 3-5 percent historically.
Consumers with more money in their pockets means the economic recovery has just begun and businesses will be playing catchup to the increased demand for the rest of this year, further boosting economic growth.
The American public seems to like governmental solutions to our problems, says Gallup’s Frank Newport:
“The latest update (of polling data) shows that 54% of Americans say the government should do more to solve our country's problems, while 41% say the government is trying to do too many things that should be left to individuals and businesses. This is the highest percentage choosing the "government should do more" option since Gallup began asking the question in 1992.”
But will the rising sentiment for big government continue as President Biden asks for more spending?
President Biden outlined his American Families Plan at last night’s address that is summarized by the White House:
“The American Families Plan is an investment in our children and our families—helping families cover the basic expenses that so many struggle with now, lowering health insurance premiums, and continuing the American Rescue Plan’s historic reductions in child poverty. Together, these plans reinvest in the future of the American economy and American workers and will help us out-compete China and other countries around the world.”
It is a ‘new’ New Deal that brings us out of this pandemic and the deterioration of American education, infrastructure, research & development, and environmental protection that is despoiling the planet and our ability to survive as a democracy.
“History shows that Americans tend to adopt big government initiatives when there are big problems facing the nation,” Gallup’s Newport continued. “including COVID-19, the Great Recession, 9/11, World War II and the Great Depression.”
But there has been too little agreement on how we should be paying for future generations since World War II, I said in my last column.
Let us hope we are willing to pay enough forward to win this world war against COVID-19 that is also a battle to save the liberal democracy our constitution has envisioned.
Harlan Green © 2021
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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