The U.S. Budget Response to COVID19 Among Major Industrialized Countries
As the Omicron variant continues to surge around the world, there may be further discussions about budget support if economic growth declines. For this reason, it is worth considering how various countries have responded to the pandemic over the past two years. One thing stands out: the US budget response was among the greatest from any industrialized country.
A team of researchers examined 166 countries and ranked their fiscal responses to the pandemic as a percentage of GDP. International comparisons can be difficult because in 2020 and 2021, not all countries measured spending in the same way. As an example, their analysis actually places Japan at the top of fiscal responses to the pandemic, with around 55% of its GDP spent on stimulus. However, this estimate includes spending not directly related to the pandemic, such as government efforts to reduce carbon emissions and some loan guarantees that do not affect current spending.
By removing this spending from the total, Japan’s fiscal stimulus falls to 16% of GDP, and the country is not in the top 10 fiscal responses to the pandemic. Singapore leads the pack of industrialized countries with 29% of its GDP devoted to fiscal stimulus, the United States not far behind with 27% of its GDP for this purpose. Only eight other countries spent more than 20% of their GDP on fiscal stimulus.
Compared with Europe, the United States was more likely to offer direct cash assistance to households, while European governments were more likely to rely on loan guarantees and business support. Germany, for example, relied heavily on business grants maintain their payroll and not lay off workers. While the United States experimented with a similar program under the Paycheck Protection Program, it also significantly expanded unemployment benefits for individuals, which continued until September 2021.
Additionally, payments to US households have targeted much larger populations than the stimulus in Europe. European economies have mainly administered targeted relief through existing social assistance programs, while the United States sent payments to the vast majority of households. In total, 163 million payments were sent to American individuals, about 85 percent of which went to households earning less than $ 100,000 per year. Japan in the same way sent checks for about $ 950 to households in 2020, but the United States was left alone in 2021 when it issued a third round of cash payments of up to $ 1,400 to individuals as part of the US bailout.
At a budgetary cost of $ 1.9 trillion, the US bailout was adopted in March of last year despite many economists including Larry summers, warning that the legislation could contribute to higher inflation. Furthermore, the stimulus came at a time when the US national debt was already higher (as a percentage of GDP) than at any time since World War II, and is expected to increase. dramatically over the next 30 years.
As the United States grapples with rising prices, large and growing national debt, as well as a possible economic slowdown from Omicron, the decision to provide additional budget support will prove difficult. Policymakers can debate the appropriate degree of stimulus, but what is clear is that US budget support so far during the pandemic has outstripped nearly all industrialized countries.
Was this page useful for you?
The Tax Foundation works hard to provide insightful analysis of tax policy. Our work depends on the support of members of the public like you. Would you consider contributing to our work?
Contribute to the Tax Foundation
Let us know how we can better serve you!
We are working hard to make our analysis as useful as possible. Would you consider telling us more about how we can do better?