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The US plans to allocate almost 2 trillion dollars for the economic turnaround

V.R.
English Section / 02 martie

The US plans to allocate almost 2 trillion dollars for the economic turnaround

Republicans: "The stimulus plan passed by the American congressmen, too expensive and too badly targeted"

Democrats want the passing of the plan by March 14

The House of Representatives in the US passed at the end of last week, with the Democrats' vote alone, the 1.9 trillion turnaround plan, proposed by president Joe Biden, an important step before the text reaches the Senate.

Biden wanted the American Rescue Plan to be passed in the beginning of February, but the vote was late, meaning that the leader in the White House urged Congress to speed up the procedure for the passing of the Act.

The bill received the approval of the House of Representatives after several hours of debates, on Saturday night to Sunday, with 219 votes "in favor", all Democrats.

"The text has been approved," Nancy Pelosi, the Democratic leader of the House of Representatives, said.

There were 212 votes "against", including two from Democrats, and opponents of the plan say the measures are "too expensive and poorly targeted."

According to Democrats, adopting the plan is essential to mitigate the effects of the Covid pandemic.

The text is due to be sent to the Senate this week, where the measure that provides for an increase in the minimum wage - from $ 7.25 per hour currently to $ 15 per hour by 2025 - is expected to be eliminated. Republican Senators Mitt Romney and Tom Cotton have suggested a federal minimum wage of $ 10 an hour, but Democrats say it's too low.

Democrats are counting on their majority (which is a small one) in Congress, and they think the bill will be passed.

After passing through Congress, the final version of the text will return to the House of Representatives, where Democrats believe the plan will be finally adopted.

"We must adopt this project by March 14, when the payment of extended unemployment benefits through the previous aid plan will cease," warned the leader of the Democratic majority, Steny Hoyer.

According to Nancy Pelosi, if the US does not implement this aid plan, the results could be "catastrophic".

Republicans, on the other hand, denounced a huge plan that "just throws money out the window."

After adopting the previous rescue plans of the administration led by Donald Trump, in the context of the pandemic, the Republicans think that the Democrat project is useless and that only 9% of the expenses actually serve in the fight against the coronavirus. According to CNN, Republicans want a smaller aid package and that's why they think lawmakers in Congress should wait to see how the Covid pandemic evolves before passing additional aid. In addition, there has been criticism from Republicans of the funding for public transportation affected by the pandemic.

"Will this plan help people find a job? No!", said the leader of the Republican minority in the House of Representatives, Kevin McCarthy.

The Biden plan provides tens of billions of dollars to speed up coronavirus vaccination and testing, and $ 130 billion to reopen schools and high schools. At the same time, stimulus checks - worth up to $ 1,400 - are to be sent to Americans, depending on their income level, and the duration of unemployment benefits is extended until September 30, 2021. According to the plan, other benefits will be granted. aid for those who have problems making rent and their home repayments.

The plan also provides for measures to support small businesses and local authorities.

The package comes after the stimulus packages of about 4 trillion dollars passed by former US President Donald Trump during the pandemic.

In order for the new package to be passed, Joe Biden called for unity, given that there will be different versions between the House, Senate and the White House. So far, the Republican majority has shown it is unwilling to cooperate with Democrats who are now in power, but also that Democrats are not fully united.

Democrats say the plan will go through by the end of the month

According to Senate Minority Leader Mitch McConnell, Republicans went to the White House to demand a smaller, more targeted project. But Democrats were not interested in the request, CNN notes.

Thus, things could become difficult in the Senate. Democrats intend to use a process known as "budget reconciliation," which was developed to keep the federal budget under control. It also gives Democrats the only way to get bills passed by a simple majority.

Democrats believe the bill could go through by mid-March. "We are on track to pass the bill and put it on the president's desk before the increased unemployment aids expire on March 14", Senate Majority Leader Chuck Schumer was quoted as saying by CNN last week.

According to Senate Minority Leader Mitch McConnell, Republicans went to the White House to demand a smaller, more targeted project. But Democrats were not interested in the request, CNN notes.

Thus, things could become difficult in the Senate. Democrats intend to use a process known as "budget reconciliation," which was developed to keep the federal budget under control. It also gives Democrats the only way to get projects passed by a simple majority.

INSERT

The new plans, huge compared to the one 2008

Biden's project involves huge amounts compared to 2008, when the US Administration approved the Emergency Stabilization Plan, known as the bank bailout plan, proposed by Treasury Secretary at the time, Henry Paulson, and ratified by president George W. Bush. The act became a law on October 3, 2008, in full financial crisis (2007-2008). The funds at the time were directed towards capital injections in banks and other financial institutions. Thus a 700 billion dollar plan was created for the acquisition of toxic assets owned by banks (Troubled Asset Relief Program - TARP).

Paulson's proposal was initially rejected by Congress, but the financial crisis which was ongoing at the time, and the lobbying performed by president Bush convinced Congress to pass it.

Back then, the Treasury Department was authorized to buy bank shares of up to $ 250 billion to provide the necessary capital to financial institutions. The Treasury thus bought $ 20 billion worth of securities from Bank of America and Citigroup. Subsequently, the Treasury sold the shares.

In total, the American government gave banks TARP assistance to the tune of 245.1 billion dollars and got back 275.6 billion dollars, with an investment gain of 30.5 billion dollars.

INSERT 1

Four tranches of quantitative easing in the US, totaling over $ 7 trillion

Since the beginning of the 2007-2008 financial crisis to the present, the US has enacted four rounds of Quantitative Easing (QE) measures to support the economy. Quantitative relaxation is a monetary policy whereby a central bank buys government bonds or other financial assets on a large scale to inject money into the economy.

In late November 2008, the US central bank (Fed - Federal Reserve) began buying $ 600 billion in mortgage-backed securities. As a result, in March 2009, the Fed held $ 1.75 trillion in bank debt, mortgage-backed securities and treasury securities. The balance sheet rose to a peak of $ 2.1 trillion in June 2010. Additional purchases were halted that month as the economy began to improve, but resumed in August 2010, when the Fed decided that GDP did not have a solid growth.

In November 2010, the Fed announced a second round of quantitative easing, buying $ 600 billion in government bonds at the end of the second quarter of 2011. The third round of QE was announced on September 13, 2012. Then , The Fed decided to launch a new monthly bond purchase program of $ 40 billion per month.

On June 19, 2013, the Fed announced a reduction in some of the bank's QE policies, depending on the evolution of economic data. In December 2013, the Fed announced that it would begin reducing its purchases in January 2014. Purchases were halted on October 29, 2014, after the Fed accumulated $ 4.5 trillion in assets.

The United States announced its fourth quantitative easing in March 2020, amounting to approximately $ 700 billion. In mid-summer 2020, that brought 2 trillion dollars in assets on the Fed's balance sheet, compared to a total of less than $ 1 trillion in 2008.

According to American think tank Atlantic Council, the four major central banks in the world have implemented quantitative easing programs to the tune of 7.8 trillion dollars to support the economy, in the context of the Covid pandemic. The total holdings reached in the balance sheets of major central banks through the QE programs carried out by them after the 2008 financial crisis reached 23.3 trillion dollars in 2020, according to the source, compared to 10.4 trillion dollars in 2014.

QE operations have also been carried out by Japan, the United Kingdom, the Eurozone, Switzerland, Sweden.

We note that, according to the American think tank Atlantic Council, the four major central banks in the world have implemented quantitative easing programs in the amount of 7.8 trillion dollars to support the economy, in the context of the Covid pandemic. The total holdings reached in the balance sheets of major central banks through the QE programs carried out by them after the 2008 financial crisis reached 23.3 trillion dollars in 2020, according to the source, compared to 10.4 trillion dollars in 2014.

In the case of the Fed, holdings have reached 7.3 trillion dollars, from 4.6 trillion in 2014, and in the case of the Bank of Japan - 6.6 trillion dollars, up from 2.5 trillion. European Central Bank holdings rose to $ 8.1 trillion, up from $ 2.7 trillion in 2014, while in the case of the Bank of England - they went from $ 1.1 trillion, to $ 0.6 trillion.

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