Bidenomics and the repercussions for Europe

What does the Biden administration's relaunch agenda include? What impact will it have on the US economy and what implications will there be for the Eurozone? After summarising the main features of the Build Back Better agenda, this brief discusses the extent to which the expansion programme, promoted by the Biden administration, may not only influence the dynamics of macroeconomic variables in the United States and Europe, but also inspire a reorientation of the European fiscal stance.

Read the key message from the report and download the document for further information.

• US fiscal policy is set for an unprecedented expansion with Build Back Better, the three-pronged recovery agenda:
• The American Rescue Plan, to date the only approved programme to boost the economy in the short term;
• The American Jobs Plan, a programme with a longer-term perspective that aims to close the infrastructure gaps in the United States and boost the country's potential growth;
• The American Families Plan, aimed at reducing inequality and growing the workforce inclusively.
• The first package was approved by the reconciliation procedure - a legislative procedure that allows certain measures to be passed in the Senate by a simple majority - will have a massive but temporary impact on the US economy.
• The approval process for the other two, more structural, plans will not be easily given the lack of broad political agreement on financing methods (e.g. increasing personal and corporate taxes).
• As far as the European economy is concerned, the expansionary stance of US fiscal policy could have both direct effects, through higher trade volumes and an increase in the inflation rate, and indirect effects, for example, by influencing the debate on the reform of the Stability and Growth Pact, the rules of which have been suspended until the end of 2022.
• The revision of the EU fiscal stance could include exceptions to debt limitations for both public and private investment incentives.