The U.S. economy could plunge off a fiscal cliff unless Congress approves a new rescue package, which many economists urge should be at least worth $1 trillion to avert financial disaster.
In a survey conducted early in June before the latest virus surges, Bloomberg asked economists how much additional stimulus spending would be appropriate this year.
“If Congress fumbles this, it’ll be a pretty big setback for the economy,” says Michael Feroli, chief U.S. economist for JPMorgan Chase & Co., the country’s largest bank.
The median answer: $1.75 trillion. JPMorgan’s Feroli says $1 trillion represents the minimum needed to support demand.
A growing body of research shows the $3 trillion approved by Congress since March played an enormous role in preventing the economy from sinking into a depression.
“It was definitely a godsend,” says David Beckworth, a senior research fellow at the Mercator Center at George Mason University, a group that champions free-market economic theory. “Nothing’s perfect, but in the absence of that we would now be very much worse off.”
Most important, the Cares Act sent direct payments of $1,200 to low- and middle-income households, plus more to those with children, and topped up unemployment benefits by $600 a week. Income for some families increased, and they spent most of the money, providing the overall economy with desperately needed relief.
“If nothing is passed, the likelihood of a double dip becomes our base case,” says Julia Coronado, president and founder of MacroPolicy Perspectives, an economic advisory firm. “Too many unemployed people are just running out of money.”
Meanwhile, the Associated Press reported that the price tag for the next COVID-19 aid package could quickly swell above $1 trillion as White House officials negotiate with Congress over money to reopen schools, prop up small businesses, boost virus testing and keep cash flowing to Americans while the virus crisis deepens in the U.S.
Senate Majority Leader Mitch McConnell on Tuesday promised a new round of direct payments to earners below a certain income level, similar to the $1,200 checks sent in the spring. President Donald Trump insists on a payroll tax holiday for workers. And Democrats want billions to outfit schools and shore up local governments.
“Regretfully, this is not over,” McConnell said, urging Americans to learn to live with the new virus by wearing masks and practicing social distancing until a vaccine can be found.
Treasury Secretary Mnuchin and acting chief of staff Mark Meadows spent the day on Capitol Hill, meeting separately with McConnell, House Speaker Nancy Pelosi and others trying to broker a compromise between the GOP's emerging $1 trillion proposal with the House's more sweeping $3 trillion bill.
This report uses material from the AP, Bloomberg and Reuters.
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