Kukgeum Center "Biden Stimulus Package Larger Than Expected... Congressional Approval Also Expected to Face Difficulties"

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] The International Financial Center evaluated the $1.9 trillion (approximately 2,050 trillion KRW) economic stimulus package announced by President-elect Joe Biden on the 14th (local time) as a "larger-than-expected scale," adding that "without scaling down the size, it will face difficulties passing through Congress."

The Center, citing analyses from JP Morgan, Citi, and Goldman Sachs, stated, "The Biden administration intends to prioritize bipartisan agreement over the reconciliation process, but reaching an agreement without scaling down the size seems unlikely," and added, "In unavoidable cases, some issues such as direct cash payments and employment support may be pursued through the reconciliation process."

The $1.9 trillion scale is the starting point for discussions, and since the amount is large and there may be significant differences between the two parties, some adjustments might be necessary.

Goldman Sachs said, "It will be difficult to secure support from more than 10 Republican lawmakers, so a deal around $1.1 trillion is expected between mid-February and mid-March," adding, "The reduction may focus on employment support and expanded direct cash payments."

They also saw the possibility of utilizing the reconciliation process. While it is more likely to be used for a second economic recovery plan including future tax increases (corporate tax from 21% to 25%) rather than this stimulus package, it could be applied to this plan if bipartisan agreement fails. In this case, only direct cash payments, expanded employment support, and minimum wage increases can be applied, while support for state and local governments and discretionary spending such as healthcare expenditures cannot be pursued through the reconciliation process.

The stimulus package announced by President-elect Biden includes direct cash payments to Americans, expanded unemployment benefits, and extended durations. The Biden team also announced plans to unveil another fiscal stimulus package focused on infrastructure investment and climate change response in February.