The doctrine has been disrupted by the COVID-19 pandemic and is now buried in a stimulus package valued at $1.9 trillion (£1.4 trillion) launched by President Joe Biden. The fact is that “we are all Keynesians now” because it is widely accepted that governments worldwide should spend more money than their income to stimulate their economies, which have been damaged by the epidemic and the restrictions imposed by it.

The Biden stimulus plan, the US aid plan, includes a one-time payment of $1,400 to most Americans; and expanding unemployment support; increasing the benefits of food stamps; increasing tax exemptions; company subsidies; and increasing education funding. This is a major capital injection into the US economy, but it has not similarly withdrawn from tax increases (although Biden is raising some tax rates and thinking more about it, especially for the rich).

The effect of the US economy’s fiscal stimulus will depend on consumers’ and producers’ reactions. In short, will consumers spend more money without saving additional income, and will producers invest more instead of scrapping capacity?

The behavior of consumers and producers will be affected by the beginning of vaccination and economic opening. In 2020, the United States was in a desolate area, and the combination of inefficiency and bad luck will lead to an increase in the death rate of the coronavirus and loss of GDP.

The United States situation is much better now, with vaccines being launched relatively quickly, and most of the economy is open. This shows that consumers and producers will spend, and the economy will recover quickly. The Organization for Economic Cooperation and Development (OECD) estimates that Biden’s stimulus measures will increase US GDP by 3.8%, which will increase employment, wages and profits.

Given the US economy’s size and its global connections, other countries will also benefit from Biden’s incentive policies. This will be affected by how Americans use the incentives and the strength of the US’s trade relations with other countries.

Suppose Americans respond to the US economy’s opening by spending their repressed income and savings on consumer services (dining out, going to the gym, watching movies, watching movies, etc.). In that case, the impact on other countries will be greatly reduced because these services are large. Some are produced locally.

However, if American consumers buy more imported goods due to stimulus measures, it will stimulate other countries economies.

However, although the OECD forecast is accurate, each country’s overall score will depend on its ability to deal with the epidemic. If the increase in national income due to increased exports to the United States turns into more expenditures for the country, it will further promote economic growth.

However, if most of the income is saved due to epidemic restrictions or because consumers are pessimistic about their economic prospects, then the economy’s overall impact will be weakened. Given the slow and irregular progress of vaccination in many countries, it is likely to be carried out soon.

Therefore, although Biden’s efforts are an urgently needed boost to the global economy, it is not enough to restore it to the pre-pandemic level for many countries. They need to speed up their vaccination plan and implement fiscal stimulus measures on a scale comparable to that of the United States.

Although the public recognizes that deficit spending is the best way to reignite global growth, some orthodox economists still worry that they have a pathological hatred of big government and that deficits continue to increase. “The Economist” announced that the deal with Biden was a “big bet.” He believed that the US budget deficit might get out of control and the inflation rate might rise.

Indeed, because of the high demand for US government debt, the deficit can be easily covered. As Treasury Secretary Janet Yellen pointed out, the risk of inflation in the United States is small and “controllable.”

The biggest threat is that the booming US economy may lead to a stronger US dollar and higher global interest rates. This may prevent recovery elsewhere and put a heavy burden on emerging economies with dollar-denominated debt.

However, the global economy will benefit from stimulus policies, especially if other high-income countries spend on the same scale. There is no reason not to do this. However, the immediate priority is to accelerate the vaccination rate worldwide: the World Health Organization warns that because developing countries are lagging in vaccinating their citizens, there is a “catastrophic moral failure.”