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US Fiscal Stimulus “Mother of all Bazooka’s”

The Congress and the White House approved $2 trillion fiscal packages, the most considerable fiscal stimulus ever done in the US. To share a quick perspective, it’s about 10 percent of the US GDP; US GDP is ~ $21.9 trillion. Collective both of them are Mother of all Bazooka’s known to humans. The budget is well-rounded and has policies that address the risks posed by price rises due to the supply shock and the demand shock, especially in the airline industry. The stimulus bill will pay a direct payment of $1200 to individuals/ $2400 to couples to millions of Americans earning up to $75,000 individually or 1,50,000 as a couple with an additional $500 per child—an excellent step to mitigate any cash shortfall for basic amenities due to lock-down.

The first most important and key policy initiative which is considered a win by The middle Road is $130 billion to hospitals and health care providers.  This step will enable healthcare providers should be used for innovating testing procedures for the COVID-19, scaling up the invention along with an increased amount on buying PPE to fight COVID-19. Bill Gates and WHO pointed out that scaling the vaccines for global population will be a herculean task and rely on a multi-collaborative global effort in a public-private-civic societies’ partnership model. WHO emphasized shortage of PPE (face mask, gloves, ventilators etc.) as a significant hurdle for front line caregivers in administering medical care. Although the US has more hospital beds than any other country in the world but a shortage of ventilators is creating a hurdle. Design thinking can work out here in reworking operational flows in makeshift hospitals to handle patients suffering from COVID-19.  Article  published in  Stanford Social Innovation Review discusses how design thinking is making inroads in social innovations through improvements through refining the flow process.

  • $350 billion loans to distressed small businesses with good credit history is a decisive move since more than 90 percent of companies are in the Micro and Small Medium Enterprises.
  • $150 billion allocations to fund state and local governments are insufficient and need to increase. New York is the epicenter of the pandemic in the US and a cultural and financial global hub. Cities example, Chicago and San Francisco are critical financial and tech hubs and will have a bigger economic hit than smaller towns. Many states and cities don’t have a stable credit history. Still, they are the pillars of American values and ethos, so a more significant chunk of the stimulus must be allocated to fund states and cities. The US has the most vibrant municipal bond market globally, and FED buying in the municipal bond market to prop up the liquidity will boost coffers for the state. A further $100 billion allocation of funds here is strongly needed.   
  • A $500 billionto distressed businesses is the tricky part of the bill. An independent committee overlooking the funds and strict rules governing executive pay packages and share buybacks is a win-win, bringing accountability to cut out nepotism. 

The stimulus package backed by the monetary package will help the US back on its feet but remember now we will live in an era of asset prices on steroids. The debt to GDP ratio in the US is already more than 100 percent but still less than in Japan which is more than 200 percent. The dip in productivity in America is only temporary and will jump back to the mean once the risks are mitigated. Americans are known for their patriotism, and it’s their collective effort that landed the first human on the moon.

Featured Image by DWilliam from Pixabay

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