Stimulus Spending Fuels Big Economic Rebound

Written by SK Ashby

The economy was always going to recover over a period of time even without action from Congress and the White House, but it should come as no surprise that passing a $2 trillion stimulus bill has hastened and increased the size of our recovery.

According to the latest numbers from the Commerce Department, consumer spending has increased by the most since long before I was even born.

Gross domestic product expanded at a 6.4% annualized rate following a softer 4.3% pace in the fourth quarter, the Commerce Department’s preliminary estimate showed Thursday. Personal consumption, the biggest part of the economy, surged an annualized 10.7%, the second-fastest since the 1960s.

The inflation-adjusted value of domestically produced goods and services climbed to an annualized $19.1 trillion, indicating GDP will soon eclipse the pre-pandemic peak of nearly $19.3 trillion.

U.S. equities climbed to all-time highs after the GDP report and a batch of corporate earnings.

Zero Republicans in Congress voted for this.

Moreover, policies they opposed with the most vigor are largely responsible for this surge in consumer spending and economic activity.

Republican senators warned us that Americans were going to take their stimulus checks and go shopping at Wal-Mart and that's more or less what we've all done. But that's a good thing. At the end of the day and macroeconomically speaking, it doesn't matter what people spent it on as long as they did spend it. All consumer spending contributes to the economy in some way.

It's hard not to be optimistic about everyone's economic prospects in the coming years and in the post-pandemic world. Even if President Biden's infrastructure spending proposals are scaled down to get them through Congress, it could lead to higher but sustainable growth rather than another bubble.