From the Federal Reserve to the trading houses of Wall Street, economists and analysts agree the US economy needs more stimulus to bounce back from the coronavirus downturn.
But Democrats and Republicans in Congress have been deadlocked for months, a disagreement that is showing no sign of easing even with President-elect Joe Biden set to take office in January after defeating incumbent Donald Trump.
Here is what is on the table — and what is at stake — in the long-running stimulus negotiations:
– How much to spend? –
At the end of March, Democrats and Republicans set aside their differences to pass the $2.2 trillion CARES Act that expanded unemployment payments and supported small businesses.
They followed it up with another $500 billion measure to further support small- and medium-sized enterprises.
But much of that money has expired, and Democratic House Speaker Nancy Pelosi wants to pass another massive bill, costing somewhere between $2 trillion and $2.4 trillion.
Republicans who control the Senate have meanwhile said they prefer to pass smaller measures, with the chamber’s Majority Leader Mitch McConnell proposing $500 billion in spending.
The massive gap is driving a stalemate that has persisted since the summer, but it appears Biden, a Democrat, may be leaning towards getting something rather than nothing, with The New York Times reporting Democrats were considering a vote on the $500 billion proposal.
– The economy worsens –
Many analysts now fear the US economy is set to get worse as Covid-19 cases surge, raising the possibility of a wave of foreclosures, evictions and bankruptcies.
A study from progressive think tank The Century Foundation estimates that nearly 12 million workers will be receiving benefits from two unemployment programs paid for by the CARES Act when funding expires at the end of the year.
“If Congress doesn’t move quickly, it can get much more severe, and it doesn’t necessarily get easier to solve,” Edward Alden of the Council on Foreign Relations said.
Gregory Daco of Oxford Economics forecasts that without aid, the economic situation “will be precarious at the dawn of 2021, which will jeopardize the country’s economic dynamism.”
“Politicians are going about things the wrong way around: we need a supportive plan to prevent the situation from getting worse, not waiting for it to get worse before voting on a plan,” he said.
In an open letter released Monday, more than 120 economists called for a renewed round of stimulus checks like those sent out under the CARES Act.
“We urge policymakers to use all the tools at their disposal to revitalize the economy, including direct cash payments, which are one of the quickest, most equitable, and most effective ways to get families and the economy back on track,” the group wrote.
– Other ideas –
Besides a stimulus bill, Biden has also proposed a massive infrastructure spending plan, a long-overdue investment that could further aid the economy’s recovery during the pandemic.
But if Republicans retain the Senate, which will be decided by two elections in Georgia set for January, such a plan could face opposition.
Biden however could use executive action to provide some relief after he takes office, perhaps by extending a moratorium on evictions, foreclosures and student loan repayments that expires at the end of the year.
The New York Times reported on people close to the president-elect suggesting that he approve a relaxed schedule for paying back taxes deferred by employers, including the federal government, under a Trump executive order.