I recently found myself discussing with my partner the last time we had a family outing to the movies. In our quaint Oregon town, there’s a charming single-screen cinema where we used to go once or twice a month with our three kids. However, since March, we haven’t been able to enjoy a film together.
Dining out as a family has also come to a halt. We skipped trips to the community pool this past summer and went for months without haircuts. I even decided to cancel my gym membership, and my partner hasn’t pampered herself with a spa day in ages. We saved for a long-awaited family vacation to Disney World planned for October, only to cancel it and put the money aside. If you’re reading this, it’s likely you’ve been living a similar COVID-19 existence, staying indoors and avoiding social gatherings.
That said, I recognize that these inconveniences are minor compared to the struggles faced by many Americans. Countless individuals have lost their jobs, and tragically, over a quarter of a million lives have been claimed by this pandemic. The reality is, not everyone has weathered this storm well.
On the flip side, however, there’s a significant segment of the American population that has been working from home, doing their part to curb the virus’s spread, and consequently saving the discretionary income they once spent on dining out and entertainment. They’ve also cut costs on commuting, which means fewer snacks and coffee runs. All that saved money has accumulated in bank accounts, and it’s not an insignificant sum. In fact, estimates suggest that this stash could be around $2 trillion—roughly 10% of America’s economy. Ian Parker, chief economist at Pantheon Macroeconomics, even coined it the “Biden Boom,” a term that certainly has a catchy appeal. “With President-elect Biden stepping into office at a pivotal moment,” he remarked, “the COVID-19 situation will be dire at first, but it won’t stay that way for long.”
The pressing question is: how much longer will this take? The unlocking of that vast sum relies heavily on the successful rollout of a vaccine. While we are closer than ever, the grim milestone of 250,000 COVID-19 related deaths in the U.S. makes even a few months feel daunting.
Promising developments have emerged from companies like Pfizer and Moderna regarding their vaccines, but they face substantial logistical hurdles in terms of FDA approval, production, and distribution. Moreover, there are many Americans who may hesitate to get vaccinated. Essentially, it won’t be an immediate switch that allows us to return to our previous spending habits. However, when the time comes, it could lead to a significant economic boost.
What individuals will ultimately spend their saved funds on remains uncertain. Joel Pratt, chief U.S. economist at IHS Markit, pointed out to NPR that, “Just because I missed my haircuts doesn’t mean I’ll have three in quick succession to make up for it.” So, it’s likely that this discretionary spending will not flow back to its original destinations. Pratt believes it may take up to two years before Americans return to pre-pandemic levels of spending on travel, entertainment, and other services. Even with a widely available vaccine, it might take additional time for people to feel secure enough to venture out and spend freely again.
I can relate to this sentiment, having navigated two rounds of layoffs at my primary job (writing here is my side endeavor). The anxiety surrounding my main source of income has made me cautious, and it may take a while before I feel comfortable spending money like I used to.
However, after nearly a year of grappling with this virus (yes, it’s a sobering reality), there appears to be more hope on the horizon than I have seen in quite some time. After enduring months of bad news, even a glimmer of hope feels refreshing.
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Summary:
The anticipated “Biden Boom” refers to a potential economic surge fueled by a significant amount of savings accumulated during the pandemic. With estimates suggesting around $2 trillion saved, the timing of spending will heavily depend on the successful distribution of COVID-19 vaccines. Despite logistical challenges and public hesitance, there is hope for economic recovery on the horizon, although it may take time for spending habits to return to pre-pandemic levels.
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