The economic recovery, which has been slowing for months, is in danger of being reversed. That’s why a growing list of economists, business lobbyists and other advocacy groups is urging lawmakers to rally around the $ 908 billion aid package that is currently gaining bipartisan support in Congress.
A plan of this size wouldn’t do everything economists say Congress should do to help workers and businesses during the coronavirus pandemic. But they said if lawmakers could get the details correct, Congress would have to do it anyway.
“It’s in the range where you could say it’s doing enough good to be worth it,” said William E. Spriggs, a Howard University economist who served in the department. of Labor under President Barack Obama. “But that leaves a ton on the table, and still leaves us with a big problem going forward.”
The $ 908 billion compromise is not even a legislative proposal yet. It is a bipartisan cadre, assembled 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 being negotiated, including how the government should distribute more aid to small businesses.
Once the bill is finished, its success is not guaranteed: Sen. Mitch McConnell of Kentucky, the majority leader, has stopped approving it, as has President Trump, who is expected to sign any legislation approved during the lame congressional session. . But President Nancy Pelosi of California backed it as a starting point for new negotiations, and President-elect Joseph R. Biden Jr. said on Friday he was “encouraged” by the effort.
Experts say the plan would relieve several segments of the struggling economy. It includes nearly $ 300 billion for small business assistance, $ 180 billion for the unemployed, and $ 160 billion for state, local and tribal governments.
The plan would not help everyone who needs help, and the support may not last long enough to link the economy to the rebound that is expected to occur when the coronavirus vaccines are widely distributed. 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 tap into government programs at the start of the pandemic.
But if the plan was passed quickly, it would send money quickly. And with the increase in virus cases and the stalling of economic gains, a growing number of politicians are ready to accept such a compromise.
“You get most of the way, you don’t look back at the end,” said Governor Mike DeWine of Ohio, one of the many Republican governors who called for more federal aid. “We can’t stop now, and I guess I would say this to my friends in Congress: we need your help once again here. Help us through what is going to be a very difficult winter.
November employment data released by the Labor Ministry on Friday underscored his point of view. Job growth slowed to 245,000, the weakest monthly gain in the recovery to date. The number of people trapped in long-term unemployment has risen to almost four million. Restaurants and retailers, whose rehiring of workers on leave helped to recover in previous months, cut jobs in November. The number of people who have lost their jobs permanently has increased, the latest sign that the crisis will leave lasting economic consequences.
“I have a greater sense of urgency now, especially after seeing the jobs report,” said Karen Dynan, Harvard economist and former Treasury Department official in the Obama administration. “We’re really starting to see the cracks now.”
Perhaps the main goal of the aid program is to prevent millions of families from losing their only source of income the week after Christmas.
As many as 13 million Americans receive benefits under two programs that broadened and extended the existing unemployment insurance program. These programs, created by Congress in the spring, are expected to expire at the end of the year – an outcome members of both political parties have said they want to avoid.
The aid package discussed in Congress would expand both programs, while restoring additional unemployment benefits that expired over the summer, likely to half of the original level of $ 600 per week. But depending on how negotiations unfold, this may not further extend eligibility for people who are already close to the end of their benefits.
Putting money in the pockets of the unemployed could be good for the economy at large: Research has shown that unemployment benefits are among the most effective forms of economic stimulation because recipients are likely to spend rather than to save money. And by helping families avoid foreclosures, evictions and defaults, unemployment benefits can prevent financial damage from spreading.
But the most convincing argument is perhaps not economic but humanitarian: without the money, many families could go hungry, become homeless and face other hardships.
“If households are in financial disaster, then we have a moral obligation as a country to help households regardless of what their spending or not doing to the overall economy,” said Wendy Edelberg, director of Hamilton Project, an economic policy arm of the Brookings Institution.
The money in the proposal would similarly provide a lifeline for some small businesses that risk shutting down permanently amid low demand between now and when vaccines become available. Even large businesses could be affected if many small businesses go bankrupt, which is one of the reasons large trading groups have called for immediate help for small businesses.
“The jobs created by small businesses impact the ability of large businesses to sell to these people,” said Suzanne Clark, president of the US Chamber of Commerce. “So we’re really concerned about the whole ecosystem and the number of small businesses hanging by a thread.”
But many business groups warn the compromise plan does not include enough money, potentially leaving some businesses without help, in a repeat of the government’s first round of loans from the government’s paycheck protection program in the spring. . Lawmakers could again almost immediately face pressure to allocate more money to the program.
The aid structure is unlikely to provide a long-term bridge for certain types of businesses, many in the hospitality sector, which may not return to pre-pandemic activity levels during months or years.
The deal would provide money for states and local governments, although the $ 160 billion under discussion is only a small fraction of the $ trillion originally proposed by Democrats last spring.
State and local aid has been a major sticking point in the negotiations, with Mr McConnell calling it a ‘rescue of the blue state’. But Republican-led states face some of the biggest income gaps.
States and local governments, which have been hit by the costs of the pandemic and collapsing tax revenues, have already cut more than 1.3 million jobs, and much deeper cuts are looming. These cuts could have short and long term consequences. A new round of layoffs and leaves in the public sector, combined with the slowdown in private sector hiring, could derail the fragile recovery. And cuts to schools, public transport and other services could make it more difficult to regain economic momentum after the pandemic has passed.
Even if Congress reaches a deal before the end of the year, Mr Biden warned on Friday that lawmakers would have to spend more once he takes office. “The country will be in a desperate, disastrous situation if it does not,” he said.