Sunday’s congressional agreement on another dose of aid to fuel the slowing economic recovery likely saved millions of Americans from a winter of poverty and kept the country from falling back into recession.
For much of the economy – especially people and industries isolated from the worst effects of the pandemic – this could bridge the gap to a vaccine-driven boom. This is especially likely if the vaccine is fast and widespread, and the growing number of coronavirus cases doesn’t force another round of widespread shutdowns.
However, for tens of thousands of failed businesses, the money comes in months late, and it may not be enough to feed the unemployed until the labor market recovers. In addition, it could be the last aid from Washington that the economy is getting soon.
The package requires a vote in both Houses and its text was finalized on Sunday. However, it is expected to include most of the elements that economists have long said are critical to avoiding further disasters and helping a recovery. It expands unemployment benefits for millions at risk of losing it and adds money to their checks to pay their bills. It revitalizes the Paycheck Protection Program that kept many small businesses alive last spring.
It continues the eviction moratorium and expanded nutritional benefits that have fed and housed many of the most vulnerable families during the crisis, according to a statement by the Democratic leaders of the House and Senate on Sunday evening.
It also offers a new round of direct payments for most Americans. This element was a lower priority for many economists as many families have maintained their jobs and incomes through the very uneven recovery from the spring stalemate. Still, the checks will gross the economy billions of dollars and help people who keep their jobs but have lost hours or incomes.
However, the help may not be enough to propel the economy past the recovery that has spanned the recent recessions. There are already signs that the crisis is taking a lasting economic toll: long-term unemployment is rising, racial disparities are widening and more people – especially women – are leaving the workforce.
Cash payments in the new package – up to $ 600 per person for households and a weekly supplement of $ 300 for unemployment benefits – are half what they were in Congress last spring. This means that they cause fewer economic problems and do not do as much to offset the savings of the unemployed who get by on benefits that are typically a few hundred dollars a week.
And two programs – one for those who are not covered by traditional unemployment insurance and one that provides assistance after state benefits have expired – will be extended for less than three months. Millions of unemployed Americans will lose vital support if recruitment does not increase significantly in the meantime.
The recovery can also be hampered by what Congress has not done. At its greatest threat is the inability of negotiators to reach an agreement of hundreds of billions of dollars to fill gaps in state and local budgets that have cost 1.3 million jobs since March. Forecasters say the decline in sales makes sustained layoffs likely.
“Things aren’t as bad as they looked in the dark days of March and April, but there are still risks,” said Tracy Gordon, a senior fellow at the Urban Institute in Washington. “It takes a while for things in the economy to find their way into government budgets.”
President-elect Joseph R. Biden Jr. and the Democrats in Congress characterized the relief package as a down payment to prevent short-term economic damage. These efforts should be followed by further assistance to ensure a robust recovery.
But Republican opposition – and growing optimism that vaccine use could stop the pandemic and kick-start tourism, live events, indoor dining, and other declining industries as the New Year begins – makes it likely that Congress will have a hard time overtaking another major bailout package. Achieving this goal in Mr Biden’s early days as president could depend on Democrats winning two runoff elections in Georgia that will determine control of the Senate.
Economy & Economy
Apr. 18, 2020 at 12:25 am ET
Legislators quickly agreed on the $ 2.2 trillion CARES bill in March but got bogged down in a second round of relief for months after the Democratically controlled house passed a $ 3 trillion version in May would have. The delay took a toll on the recovery and hurt both households and business owners.
The rebound started quickly when companies reopened in May and June, but has slowed significantly and there have been signs in recent weeks that it will reverse. Layoffs are rising, retail sales are falling, and the surge in virus cases has led many states to cut back on business and consumer activities.
Business owner data collected by Alignable, an online small business network, showed steady improvement in their business operations over the summer as the economy reopened – and then struggled again since September when aid dried up Virus cases increased and consumers withdrew.
“A lot of those companies who thought they saw the light at the end of the tunnel in June or July are now looking back and realizing that it’s just a train heading for them,” said Eric Groves, CEO of Alignable.
An analysis of 40,000 small businesses that are tracked by Homebase and provide scheduling and time tracking software for businesses shows that nearly half of the businesses that closed in March at the start of the pandemic either did not reopen or reopen, but then closed again were. The smallest companies were most likely to stay closed or closed again, said Jesse Rothstein of the University of California at Berkeley, who is a member of the economics team that studied the data.
“Everyone laid off a few workers,” Rothstein said as demand plunged into crisis. “If you only had a few workers, it meant you went away.”
For the surviving businesses, the new aid package revitalizes the Paycheck Protection Program, which offers employers forgivable loans.
However, it’s not clear whether the aid will be timely or enough to save companies that have been marginalized, said Kenan Fikri, director of research at the Economic Innovation Group in Washington.
“Small businesses have only just gotten through and now we are in a precarious stage where many of them cannot expect a full return on sales for at least six months depending on when we launch a vaccine,” he said. ‘Did we lose in the seventh inning?’ I think we’ll find out the question here. “
There are reasons to be optimistic. The economy has proven to be more resilient than many forecasters expected earlier this year. The unemployment rate fell from nearly 15 percent in April to 6.7 percent in November, and economists, including the Fed, have repeatedly raised their economic forecasts. Many companies have found new ways of operating. The recent surge in layoffs is far less severe than the spring job losses.
This resilience is due in part to previous rounds of government assistance that have proven sustainable. Household savings spiked in the spring when stimulus checks and increased unemployment benefits surfaced on American bank accounts. According to JPMorgan Chase, the typical family’s balance in October, although they have declined since then, was above pre-pandemic institute levels.
However, the effects are not evenly distributed – and even if the most recent round of relief contributes to a full recovery, scars remain.
“I don’t think we can undo the damage,” said Michelle Holder, an economist at John Jay College of Criminal Justice in New York. “The damage is done.”
Account balances have declined fastest for low-wage workers, who were hardest hit by job losses during the pandemic and most likely to need the $ 600 grant that ended in July.
Researchers estimate that millions of families have fallen into poverty during the pandemic. While a new round of government aid could bring many of them back above the poverty line, it will still have lasting effects.
“The best scenario is we look back at it and say, ‘Well, an ounce of prevention would have been worth a pound of cure,” said Elizabeth Ananat, an economist at Barnard College who researched the effects of the pandemic on low-income households.
“The more likely scenario,” she added, “is that we will all spend the next 30 years documenting the damage it does.”
Emily Cochrane contributed to the coverage.