President Joe Biden proposed a $1.9 trillion relief package against the pandemic caused by the CCP Virus, the measure received criticism from different sectors and for different reasons. Now a study by the University of Pennsylvania published on Wednesday, Feb. 3, assures that if applied it will cause a drop in GDP of at least 0.3%.

Despite the criticism received, Democratic legislators are prepared to go ahead with the approval of the relief package presented by Biden. 

By logical estimates, the measure will provide an immediate burst to the economy but according to expert opinion it could drag down growth for years to come, Fox News reported.

A new economic study by a nonpartisan group at the Wharton School of the University of Pennsylvania was released Wednesday, which warned that Biden’s proposal could “artificially” increase U.S. GDP by 0.6% during 2021 by injecting an exorbitant sum of money. However, the public debt generated will inevitably cause a subsequent retraction of the economy, which could drag on for years to come.

Biden relief plan could drag on for years to come

“The Biden relief plan leads to an increase in output in 2021 as the plan’s expenditures stimulate the economy, but GDP declines in subsequent years as the additional public debt crowds out investment in productive capital,” the report said. “The increase in output 2021 is due to the immediate stimulative effect of the economic recovery plan.”

When the $2.2 trillion CARES Act was implemented in March 2020, the reality was completely different than it is today. The economy is now much closer to its average production level than it was then, so a surplus injection of capital would only generate unnecessary spending by the federal government that would not translate into consumption and production but into savings and financial speculation. 

What the relief package really does

For example, in Biden’s relief package, a third stimulus check, worth $1,400, is proposed as an integral part of the emergency relief package. But the study released by the University of Pennsylvania estimated that 73% of check recipients would keep the money in household savings rather than spend it. Only 27% would spend it on higher consumption, analysts projected.

In line with the recent release, in late January a bipartisan group of senators came out with blunt criticism of the Biden administration’s proposal regarding the stimulus plan aimed at addressing the pandemic, suggesting the White House is providing too much money “to high-income Americans.”

The bipartisan group of senators, led by Sen. Joe Manchin (D-W.Va.) criticized the measures not only for the exaggerated amounts, but rather for the misallocation of that money, since it involves enormous federal spending that may be totally wasted if the funds do not reach the hands that truly need them.