(The Center Square) – Newly released economic data show the economy is experiencing accelerated growth, potentially signaling a rebound from the economic downturn caused by the pandemic, but critics warn proposed tax hikes could stifle that growth.
The U.S. Commerce Department said Thursday that the nation’s Gross Domestic Product grew 6.4% in the first quarter of 2021, exceeding expectations. Economists hailed the numbers as signs of a healthy economic upturn.
“Personal consumption expenditures increased by a robust 10.7-percent annual rate, while business investment in equipment and intellectual property products continued to grow steadily,” the Commerce Department said in a statement.
The GDP grew 4.3% in the previous quarter.
“Today’s GDP report is encouraging,” U.S. Secretary of Commerce Gina M. Raimondo said. “President Biden took swift, decisive action in his first 100 days to vaccinate Americans, deliver relief to families and businesses, and set the stage for a sustainable economic expansion for all Americans.”
Biden touted the economic recovery in his address to the nation Wednesday evening.
“The International Monetary Fund is now estimating our economy will grow at a rate of more than 6% this year,” Biden said. “That will be the fastest pace of economic growth in this country in nearly four decades.
“America is moving, moving forward, but we can’t stop now,” he added. “We’re in competition with China and other countries to win the 21st Century. We’re at a great inflection point in history. We have to build back better. We have to compete more strenuously than we have.”
Democrats quickly claimed victory for the recovering economy while Republicans argued that Biden inherited the growth trajectory of former President Donald Trump’s economy and the benefits of a vaccine developed under the Trump administration.
“This Administration inherited a tide that had already turned,” Sen. Tim Scott, R-S.C., said in the Republican rebuttal to Biden’s address. “The coronavirus is on the run. Thanks to Operation Warp Speed and the Trump administration, our country is flooded with safe and effective vaccines. Thanks to our bipartisan work last year, job openings are rebounding.”
The GDP numbers came the same day the Department of Labor released its weekly jobless numbers, which showed that the number of Americans filing for unemployment fell by 13,000 to 553,000. That number is the lowest since the pandemic began last year.
The states with the biggest decreases were Texas, New York, Georgia, Florida and Washington. The states that saw the most significant uptick in insured unemployment rates were in Virginia, Michigan, Indiana, Utah and California.
The drop in overall unemployment numbers, though, has given fresh hope after a year of shutdowns and COVID scares left the economy limping.
“The economy created more than 1.3 million new jobs in 100 days,” Biden said in his address. “More jobs in the first 100 days than any president on record.”
Despite the recent economic gains, some experts say the slew of higher taxes proposed by Biden could slow and even halt the nation’s economic growth.
“Biden says GDP will grow at 6% this year,” Rep. Thomas Massie, R-Ky, wrote on Twitter. “The only problem with that is he’s already spent 10% of GDP in his first 100 days!”
To pay for that spending, Biden has proposed a series of tax hikes, including raising the corporate tax rate from 21% to 28%, increasing the highest marginal tax rate from 37% to 39.5% as well as a series of tax law changes that would force corporations to pay more. He has also proposed beefing up the IRS’ budget so the agency can more aggressively audit Americans and increase revenue as a result.
Critics of the plan say those corporate tax increases will be passed on to consumers.
“While the White House is claiming the tax hikes would affect just a small sliver of taxpayers, significant tax increases on investment and small business income would unfortunately have a far larger impact,” the National Taxpayers Union said in a statement.
Club for Growth voiced their opposition Thursday, saying Biden’s “bet that government can drive economic growth is wrong. And unfortunately, it is American taxpayers who will have to foot the bill for his big government takeover.”