Congress to Decide on Additional Stimulus in Near Future
Congress is being tasked with determining what it will take for the US economy to stay afloat as millions are still out of work, according to the Wall Street Journal.
Deadlines are approaching quickly. Millions of unemployed Americans will see the federal boost disappear at the end of July, deferred tax payments are due July 15, and state and local government budgets are due by June 30. The Federal Reserve has committed to keeping the economy afloat no matter the cost. Yesterday, Fed chairman Jerome Powell announced the Fed planned to keep rates close to zero through 2022 and would maintain security purchases.
“I’m concerned this will be interpreted as the all-clear signal—that the economy will recover on its own,” said Mohamed El-Erian, chief economic adviser at Allianz. “The first steps of coming out of the lockdown look like a very sharp recovery, but then it gets a lot tougher.”
When Powell was asked about the future of the economy, he stated “Of course if there were more fiscal support, you would see better results sooner. But that’s a question for Congress.”
On Wednesday, Treasury Secretary Steven Mnuchin said there would "definitely" be another stimulus package. “Whatever we do going forward needs to be much more targeted, particularly to the industries and small businesses that are having the most difficulty reopening,” Mnuchin said.
Last month, House Democrats passed a $3.5 trillion stimulus bill that extended jobless benefits through the end of the year among other measures. The Senate has yet to vote on the bill because they believe that a wait and see approach is needed for the trillions already pumped into the economy. Furthermore, Republicans believe the $600 boost has discouraged people from returning to work since many are making more on unemployment than they did prior to losing their job. “We’ll be in a very different place in July where the opportunity for people to return to work will be far greater,” Labor Secretary Eugene Scalia told lawmakers Tuesday.
Instead, Republicans have floated hiring bonuses to incentivize people to return to work. Last month, employers added $2.5 million jobs. “Even with the good news, we know we’re still in a very deep hole—much deeper than the hole ever got during the Great Recession a dozen years ago,” said David Wilcox, former chief economist at the Federal Reserve.
Fed economists examined what percentage of households would have enough savings to cover three to six months of living expenses including the assistance provided by stimulus packages. They determined that 85 percent of householders would be able to cover living expenses if they were jobless.
State and local government aid has also become a focal point for lawmakers. Since February, they have cut 1.5 million jobs. The CARES Act allocated $150 billion in grants to state and local governments to cover coronavirus related expenditures, but they have requested additional unrestricted funds.
“At a time where we need to grow faster and reduce the unemployment rate, you want to avoid doing things that are, in fact, contractionary at the same time,” Dallas Fed President Robert Kaplan said. That makes more help for cities and states “one obvious thing that needs to be done.”
Congress is up to bat and the country needs a home run.