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At a time when the government of India is obsessed with fiscal conservatism and shying away from any meaningful budgetary expansion, US President Biden proposes a $6 trillion budget for the United States in the financial year 2021-22. This entails a significant jump of 36.6 percent as compared to the 2019 fiscal. Biden wanted to spend $2.3 trillion on infrastructure. But, he has scaled it down to $1.7 trillion in a bid to placate Congress, where Democrats enjoy only a slight margin over Republicans known for opposing higher public spending. Besides, the Biden administration intends to spend another $1.8 trillion on education and social services to create 21st-century manpower.
President Biden’s higher public spending will not be confined to this fiscal alone. The vision is to spend $8.2 trillion by 2031. The huge public spending will be financed partly by higher taxes on rich, corporate America and partly by rising debt. The debt to GDP ratio will surpass the level seen at the end of World War II.
The progressives call it a bold attempt to create jobs and reduce poverty, while the Republicans dismiss it as an attempt to drive the US into debt, deficit, and inflation. Thus, Republicans will oppose Biden’s fiscal push.
President Biden has twin objectives for this budget- to grow the American middle class and make the US compete with its rivals.
In the age of pandemics, economists of all ideological hues have been recommending higher public spending to stimulate growth. The US too has been resorting to quantitative easing to finance stimulus packages. Higher public expenditure is essential as private investment will not be forthcoming in a pandemic-induced economic downturn.
On the contrary, the government of India is not ready for a fiscal expansionary strategy. In 2019, the corporate income tax in India has been slashed by 10%, which meant a revenue loss of Rs 1.45 lakh crores. Even the allocation for health in the first budget after the pandemic (2021-22) has come down by Rs 7,597 crores as compared to the previous year. India has to learn from Biden-led America’s new tryst with reformed free-market economic post-pandemic.
By Prof K Nageshwar
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Tags Joe Biden US Economy
