The economic recovery, which has been slowing down for months, threatens to be reversed. Because of this, a growing roster of economists, business lobbyists, and other stakeholders are calling on lawmakers to rally around the $ 908 billion aid package currently supported by both parties in Congress.
A plan this size would not do everything economists want Congress to do to help workers and businesses during the coronavirus pandemic. But they said if lawmakers could get the details right, Congress should do it anyway.
“It’s in the area where you could argue that it does enough good that it’s worth taking,” said William E. Spriggs, a Howard University economist who served in the Department of Labor under President Barack Obama . “But it leaves a ton on the table and still leaves us with a big problem for the future.”
The $ 908 billion compromise is not even a legislative proposal. It is a bipartisan framework put together by a group of Senators led by Susan Collins, Republican of Maine, and Joe Manchin III, Democrat of West Virginia. Many of its details are still under negotiation, including how the government should distribute more aid to small businesses.
Once the bill is complete, its success is no longer assured: Senator Mitch McConnell of Kentucky, the majority leader, has stopped approving it, as has President Trump, who would have to sign any lame duck laws approved in the Congressional session. California spokeswoman Nancy Pelosi has endorsed this as a starting point for renegotiations, and President-elect Joseph R. Biden Jr. said Friday that he was “encouraged” by the effort.
Experts say the plan would relieve several ailing corners of the economy. It includes nearly $ 300 billion for small business aid, $ 180 billion for the unemployed, and $ 160 billion for state, local, and tribal governments.
The plan wouldn’t help anyone in need, and the support might not last long enough to tie the economy to the boom expected when coronavirus vaccines become widespread. And a lot depends on the details, especially when it comes to Americans who have been unemployed for months and small businesses that struggled to take advantage of government programs at the start of the pandemic.
But if the plan were passed soon, it would send money out quickly. And as virus cases rise and economic gains stall, more and more politicians are ready to accept such a compromise.
“You get there most of the way, you don’t end up turning around,” said Ohio Governor Mike DeWine, one of several Republican governors who has called for more federal aid. “We can’t stop now, and I think I would tell my friends in Congress: we need your help here again. Help us get through a very harsh winter. “
November employment data released by the Labor Department on Friday underscored his position. Employment growth slowed to 245,000, the weakest monthly rate of the recovery to date. The number of people suffering from long-term unemployment rose to nearly four million. Restaurants and retailers, whose hiring of vacation workers has helped the recovery in recent months, cut jobs in November. The number of people who have permanently lost their jobs has increased. This is the latest sign that the crisis will leave permanent economic scars.
“I feel more urgent now, especially after seeing the job report,” said Karen Dynan, a Harvard economist and former Treasury officer in the Obama administration. “We’re really starting to see the cracks now.”
Perhaps the main goal of the aid package is to prevent millions of families from losing their sole source of income in the week after Christmas.
Up to 13 million Americans receive benefits under two programs that have expanded and expanded the existing unemployment insurance program. These programs, which were launched by Congress in the spring, will expire at the end of the year – a result that members of both political parties want to avoid.
The aid package discussed in Congress would extend both programs while reviving the extra unemployment benefits that expired in the summer, most likely to half of the original level of $ 600 per week. Depending on how the negotiations go, the eligibility may not be renewed for people who are already close to the end of their services.
Putting money in the pockets of the unemployed could be good for the economy as a whole: Research has shown that unemployment benefits are one of the most effective forms of economic incentive, as recipients are likely to spend the money rather than save. By helping families avoid foreclosures, evictions, and debt defaults, unemployment benefits can prevent the financial damage from spreading.
The most compelling argument, however, may not be economic, but humanitarian: without the money, many families could starve, become homeless and face other hardships.
“When households find themselves in financial disaster, we as a country have a moral obligation to help households, regardless of what their spending may or may not mean to the overall economy,” said Wendy Edelberg, director of the Hamilton Project, an economic policy division of the Brookings Institution.
The money in the proposal would similarly provide a lifeline to some small businesses who, given the weak demand pending availability of vaccines, could run the risk of permanent closure. Even large companies could be hurt if many smaller companies go under. This is one of the reasons large business groups have asked for immediate help for small businesses.
“Jobs created by small businesses affect the ability of large companies to sell to these people,” said Suzanne Clark, president of the US Chamber of Commerce. “So we are very concerned about the entirety of the ecosystem and the number of small businesses that are hanging by a thread.”
However, many business groups are warning that there is not enough money in the compromise plan, which may result in some businesses not receiving any help, and are re-running the first round of government paycheck protection loans in the spring. Legislators could face pressure almost immediately again to spend more money on the program.
The aid structure is unlikely to provide a long-term bridge for certain types of businesses, including many in the hospitality industry, that may not resume operations for months or years before the pandemic.
The deal would make money available to state and local governments, though the $ 160 billion discussed is just a tiny fraction of the $ 1 trillion the Democrats originally proposed last spring.
State and local aid were a major sticking point in the negotiations, and McConnell dismissed it as a “blue state bailout”. The Republican-led states, however, face some of the largest revenue gaps.
States and local governments hit by pandemic-related costs and collapsing tax revenues have already shed more than 1.3 million jobs, and deeper cuts are looming. These cuts could have both short and long term consequences. A new round of layoffs and vacations in the public sector, coupled with a slowdown in private sector hiring, could ruin the precarious recovery. Cuts to schools, public transport and other services could make it harder for the economy to regain momentum after the pandemic.
Even if Congress were to reach an agreement before the end of the year, Mr Biden warned on Friday that lawmakers would have to spend more after taking office. “The country will be in dire straits if they don’t,” he said.