[Global Focus] Will Biden's Sincere Efforts Toward a 'Better US Reconstruction' Succeed?

Major Fiscal Spending Policy Sparks Ruling and Opposition Clash... Republicans Attack "Government Spending Plan Raises Inflation"
Biden Pushes Climate Change Response and Wealth Inequality Resolution Despite Approval Rating Falling to 40%

[Asia Economy Reporter Park Byung-hee] Although the new fiscal year for the U.S. federal government (October 2021 to September 2022) already began last month, the federal government budget for the new fiscal year has not yet been finalized. This is because the Democratic and Republican parties are sharply divided over President Joe Biden's successive large-scale fiscal spending policies.

Shortly after taking office, Biden unveiled a series of large-scale fiscal spending plans under the 'Build Back Better' initiative he announced during his presidential campaign. The Republican Party has been obstructing every step, warning of the federal government's massive fiscal deficit and inflation risks.

Biden's 'Build Back Better'

The first spending bill Biden introduced aiming for Build Back Better was the $1.9 trillion 'American Rescue Plan,' legislated in March. It was a one-time spending bill centered on a $1,400 cash payment per adult.

Following that, President Biden proposed the 'American Jobs Plan' and the 'American Families Plan' bills, aiming for long-term expansion of physical and human infrastructure. The American Jobs Plan was legislated on the 15th under the name 'Infrastructure Investment and Jobs Act.' The originally proposed budget was $2.3 trillion, but it was reduced to $1.2 trillion during congressional discussions.

The American Families Plan is a $1.75 trillion social welfare budget bill that passed the House on the 20th. Since only the Senate approval process remains for the social welfare budget bill, Biden's Build Back Better initiative is legally nearing completion.

Biden's Build Back Better aims for a big government. The core goal is for the government to actively intervene to resolve wealth inequality and establish eco-friendly social infrastructure to achieve carbon neutrality by 2050.

Biden's Firm Belief Despite Falling Approval Ratings

Even though the budget was reduced from the original plan, the 2022 fiscal year budget proposed by the Biden administration is already a super-budget. The budgets submitted in the three large spending bills approach $5 trillion. The World Bank announced last year that the U.S. Gross Domestic Product (GDP) was about $21 trillion. Of course, the two bills Biden proposed second and third will be implemented over the next ten years, so the impact on federal finances will be spread out.

Earlier in May, the White House proposed a $6.01 trillion 2022 fiscal year budget to Congress, reflecting Biden's large-scale infrastructure investment, job creation, and education and welfare spending plans.

The fact that the U.S. consumer price index rose 6.2% in October, entering the 6% range for the first time in 30 years, is a major setback for the Biden administration. The Republican Party is attacking, claiming that prices are rising because the Biden administration is planning successive large-scale fiscal spending. Thanks to the Republican strategy, Biden's approval rating recently fell to the 40% range, putting him at risk. Dissatisfaction within the Democratic Party, worried about next year's midterm elections, is also increasing.

However, President Biden does not seem willing to back down. After losing the Virginia gubernatorial election, a Democratic stronghold, on the 3rd, Biden said, "I think we should have passed (the budget) before the election day." This is interpreted to mean that if the spending bill had passed, they might have won the election.

Despite various controversies, President Biden believes that establishing an eco-friendly social foundation and resolving wealth inequality are for a better America. After the Infrastructure Investment and Jobs Act was finally passed in Congress, he emphasized in a statement, "Future generations will look back and know that this was the time America won the 21st-century economic competition."

The Growing Role of Fed Vice Chair Brainard

On the 22nd, Biden decided to retain Jerome Powell as chairman of the U.S. central bank, the Federal Reserve (Fed). Biden had long deliberated with Powell and also considered Lael Brainard, a Fed governor, as a candidate for chairman. Although Brainard did not become chair, she was nominated as vice chair, and her role has grown.

Brainard was also mentioned as a candidate for Treasury Secretary during Biden's cabinet appointments. This indicates that she aligns well with Biden's governance philosophy.

Brainard has led discussions within the Fed on responding to climate change. In a draft report for the Fed meeting on the 7th of last month, she stated that "the Fed should seriously begin considering ways to assess climate-related financial risks of large banks." It is highly likely that climate-related financial risks will be included in the annual stress tests assessing the asset soundness of large banks conducted by the Fed in the future.

Powell has been criticized for easing Wall Street regulations and not actively responding to climate change. Brainard is expected to compensate for these weaknesses of Chairman Powell. She is also evaluated to share Biden's belief in resolving income inequality.

On the other hand, as an inflation fighter, Brainard is considered less hawkish than Powell. However, the U.S. economic media Quartz recently reported that Brainard is more concerned about climate change than inflation. President Biden appears to share the same stance.

This content was produced with the assistance of AI translation services.