Economic and financial hotspots 199th issue of 2021 (total 635th issue): The US “Rebuild a Better Future” bill passed by the House of Representatives may increase the risk of government debt |

On November 20, 2021, Beijing time, US President Biden’s $1.75 trillion “ReconstructionGood future(BuildBack Better)” bill passed by the House of Representatives voted, ushering in key progress. The bill aims to expand the social safety net, address climate challenges, and reform part of the tax system. It is another fiscal stimulus plan of the US government after the “largest infrastructure bill in history” and will have an important impact on economic recovery. Mainly focus on the following three points.

First, “ReconstructionGood future“The bill strongly supports the field of new energy, helps combat climate change, and stimulates economic recovery.According to the bill, 555 billion US dollars will be used for the new energy industry, with a focus on supportingSolar energy, Wind energy and other key industries to promote the development of the domestic supply chain in the United States, and will promote capital investment in the decarbonization and revitalization of the US manufacturing industry through grants, loans, tax credits, and procurement (Table 1). For photovoltaic wind power, increase the tax reduction ratio and extend the time limit for investment tax credits. The tax reduction rate for the US photovoltaic industry will be increased from 26% to 30%, and the reduction period will be extended from 2022 to 2026. For energy storage, it was the first time to receive a separate tax deduction. By 2026, achieve a tax refund of up to 30% for energy storage systems above 5KWh. In terms of new energy vehicles, the tax credit has been increased from US$7,500 to a maximum of US$12,500. Investment in the new energy sector will help the U.S. economy transition from fossil fuels to clean energy, increase the productivity of enterprises and workers, enable the entire economy to have the ability to produce more goods and services, and strengthen the resilience of the supply chain.

Second, “ReconstructionGood future“The bill will not make ends meet, and it is highly uncertain that it will be passed by the Senate. From a short-term perspective, the narrowing of the “broad fiscal” space makes the follow-up of the bill more difficult. With the recovery of the economy, the problem of labor supply and demand mismatch caused by the shortage of the labor market in the United States has gradually eased, and the inflation rate has continued to operate at a high level. This has led to the narrowing of the scope and intensity of expansionary fiscal policy. It is difficult for the bill to pass in the Senate. Will also increase.

In the long run, the “Rebuild a Better Future” bill will further aggravate the federal government’s debt risk. Since the outbreak of the new crown epidemic in March 2020, the US federal government has implemented a total of nearly 6 trillion US dollars in epidemic relief and financial stimulus programs, which has led to a high level of federal government debt. As of August 2021, the US federal debt has exceeded the US$28.4 trillion debt ceiling. According to the cost estimates of the US Congressional Budget Office (CBO), the revenue generated by the “Rebuilding a Better Future” bill is not enough to cover the cost. The bill will generate $1.636 trillion in expenditure and $1.269 trillion in revenue in the next 10 years , Excluding any additional revenue that may be brought about by the tax clauses, caused the federal budget deficit to increase by $367 billion, or pushed the US federal government to the brink of a debt crisis.

(Article Source:Bank of China）

Article source: Bank of China

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Original title: Economic and Financial Hotspot Issue 199, 2021 (Total Issue 635): The US “Rebuild a Better Future” bill passed by the House of Representatives may increase the risk of government debt