Moody’s Analytics estimate that accumulated fiscal relief – actual debt-funded spending – amounts to $5.2 trillion. “This is equal to an astounding 25pc of GDP, substantially more than provided by any other country in the world,” it said.
The fresh money will flow through just as vaccination reaches critical scale and the US economy opens up, unleashing a surge of pent-up spending. Moody’s has raised its US growth forecast to 7pc annualised for this quarter, and a blistering 8pc this year (up from 4pc last month). Unemployment could drop to 4pc by next year.
Analysts are scrambling to upgrade their numbers. Goldman Sachs now expects 6.5pc growth this year, JP Morgan expects 5.5pc. A month is a long time in political economy.
Mr Biden will not secure all of his demands. Conservative “Blue Dog” Democrats in the Senate will refuse to write a blank cheque. Overzealous Democrats in Congress have made it more difficult for the incoming White House to reach out across the aisle for compromises.
They missed a trick in not agreeing to a deal with House Republicans for a motion of censure against Donald Trump rather than impeachment. That would have been a healing ritual. There is no need to ban Trump from future office. His brand is spoiled beyond repair.
The consensus is that Mr Biden will secure an extra $1 trillion. This still brings largesse to 8.5pc of GDP this winter. It will be followed by the first tranche of infrastructure spending and investment in green energy – dressed up as technological rivalry with China – to kick in later this year.
My conclusion: the Federal Reserve will be on the warpath much earlier than widely assumed; dollar bears will be disappointed again; and Wall Street faces a cold douche, a sharp correction before the long bull market of the Roaring Twenties gets going.