The congressional deal for a $ 900 billion dose 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 – Sunday’s deal could build a bridge to a vaccine-related rebound. 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 too 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 contain 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 and adds money to their checks to pay their bills. It revives 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 kind of rebound that has emerged from recent recessions. There are already signs that the crisis is taking a lasting economic toll: long-term unemployment is rising, racial disparities are growing, 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 unemployment benefit of $ 300 – 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.
Two programs – one for those who are not covered by traditional unemployment insurance and one that provides assistance after state benefits have expired – are 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. Most importantly, negotiators’ inability to reach an agreement on 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 are not 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 avoid 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 early in the new year – 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 may depend on Democrats winning two runoff elections in Georgia that will determine control of the Senate.
Economy & Economy
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 AlignableThe online network for small businesses showed a steady improvement in its business operations in the summer as the economy reopened – and distress again since September when aid dried up, virus cases increased and consumers withdrew.
“Many of these 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 is 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 team of economists who studied the data.
“Everyone laid off a few workers,” Rothstein said when demand plunged into crisis. “If you only had a few workers, it meant you went away.”
For the surviving businesses, the new aid package revives the paycheck protection program, which offers employers forgivable loans.
It’s not clear, however, whether the aid will come in time or enough to save companies that have been marginalized, said Kenan Fikri, director of research at Washington’s Economic Innovation Group.
“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?’ Is probably the question we are going to find out here. “
There are reasons to be optimistic. The economy has proven to be more resilient than many forecasters anticipated earlier this year. The unemployment rate fell to 6.7 percent November from a high of nearly 15 percent in April, and economists, including those of 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 as stimulus checks and increased unemployment benefits surfaced on American bank accounts, and although they have declined since then, the typical family account balance in October remained above pre-pandemic levels, according to data Data from JPMorgan Chase Institute.
However, the effects aren’t evenly distributed – and even if the final round of relief helps make 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, they say there will still be 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 pandemic’s impact 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.