President Joe Biden’s $1.9 trillion coronavirus relief package, which the House passed Wednesday and Biden is expected to sign this week, is mammoth in scope – a number so large it can be hard to conceptualize. But amid a pandemic that has wrought severe economic damage around the world, many governments have made dramatic spending pledges.
Here’s how U.S. measures stack up.
How much is $1.9 trillion on a global scale?
It’s big. Biden’s American Rescue Plan is larger than most countries’ annual economic output, running slightly behind Italy and ahead of Brazil according to 2019 data from the World Bank.
And it is only the latest U.S. measure. In December, Congress passed a $900 billion relief bill, on top of more than $2.5 trillion of aid authorized during President Donald Trump’s final 12 months in office.
The United States appears to have spent more than anywhere else on coronavirus relief. The U.S. economy is the largest in the world, so the country has more to spend.
Japan, which approved a $707 billion stimulus in December on top of two previous packages that amounted to $2.2 trillion, probably comes in second. However, some analysts take issue with Japan’s figures, saying they include more than just government coronavirus spending.
Comparisons can be tricky: In some countries, social safety nets that were already in place have kicked into gear during the pandemic, easing the need for massive spending pushes.
How does U.S. spending compare?
Ceyhun Elgin, a macroeconomist at Bogaziçi University in Turkey, who has been leading a team tracking countries’ fiscal responses to the pandemic as share of gross domestic product, said that before Biden’s relief package the United States had committed to about 18.22% of its GDP – the 13th largest share among 168 countries being tracked.
The new $1.9 trillion package adds to that, pushing America’s fiscal response above 27% of GDP, according to Elgin’s calculations. That’s nearly four times the share implemented in response to the 2008 financial crisis – and second only to Japan in terms of coronavirus response.
“The U.S. fiscal response in 2020 was among the largest in the world. It was comparable to, or slightly smaller than, the responses in a few other countries like Germany and Canada, but roughly the same,” said Jason Furman, a senior Obama administration official. “The fiscal response in 2021 so far in the United States is massively larger than what any other country has done to date or is currently discussing.”
What are other countries doing differently?
Approaches differ so drastically that comparisons can be challenging.
For instance, the stimulus figures announced by Japan’s government include pledges that are not directly related to the coronavirus, such as a fund that promotes carbon neutrality by 2050, and includes money expected to come from private rather than government sources.
Adam Posen, president of the Peterson Institute for International Economics, said that Japan’s apparent coronavirus spending as percentage of GDP is a “vast overstatement” and that if like-for-like fiscal outlays were held up against U.S. spending, they would be roughly on par.
An analysis by Peterson’s Madi Sarsenbayev and Takeshi Tashiro put the total Japanese fiscal outlay at less than 30% of GDP.
In a number of European countries, governments have resorted to extensive loan guarantees to help prop up businesses. Elgin and his colleagues have not included these in fiscal outlay, instead counting them as macro-financial policy.
Other researchers, such as Ned Davis Research, have included these loan guarantees in their estimates. “Ultimately, that’s money that will have to be paid back,” said Alejandra Grindal, senior international economist with Ned Davis Research Group. “Whereas if you look at all the details of the U.S. stimulus and particularly this one that’s coming right now, this is outright cash payments.”
What about those $1,400 checks?
The United States is one of the few major economic powers to offer new cash payments as a response to the pandemic. Japan gave out more than $900 to all citizens last year but has not yet committed to repeating that approach.
Last year, Brazilian President Jair Bolsonaro pumped $110 per month into the hands of some of the country’s poorest. The program, estimated to cost almost $10 billion a month, has since ceased.
However, most other large economies have not relied on cash payments, instead falling back on preexisting social safety nets. In Europe, Grindal said, “a lot of that money is going to, you could say, the people most in need of it, whereas in the case of the U.S., a lot of these stimulus checks went to a pretty broad population.” Many European countries already have robust universal social programs in place.
Another key difference is that many European countries paid companies to keep workers on, as opposed to the U.S. approach, under which the laid off could seek bolstered benefits. “The theory of the European one was that it would enable you to keep the employment relationship,” Furman said.
This has led to the United States taking one of the worst hits among major economies on labor force participation.
Some people have to access unemployment benefits. But the flexibility of the U.S. system had enabled more money to be sent out, Furman said, without a clear ill-effect on rehiring. “I think the U.S. system has the slight edge,” he said.
What works best?
It is too early to assess. A number of factors affected countries’ economic activity over the past year, including the scale of their coronavirus outbreaks and the severity of their measures in response.
The full scale of relief spending, with various plans yet to be implemented around the world, remains unknown. And then there’s the separate issue of monetary policy by the Federal Reserve and other central banks, which are not part of fiscal stimulus packages.
Some signs point to reason for optimism over U.S. fiscal initiatives. “Last year, the U.S. economy contracted significantly less than any of the other [Group of Seven] countries, with the exception of Japan,” Furman said, suggesting that the size of last year’s measures may have played a role.