A month before the election date, the US faces stalled job growth, mounting layoffs, and no more immediate help.
The US households and businesses have gone for two months without the enhanced unemployment benefits, low-interest loans, and other programs to boost the economy.
And now, the President announced that he would cut off stimulus negotiations until after the election. So the wait will go on for another month or likely until the next presidential term starts in 2021.
The delay is dangerous.
Several layoffs are already turning into permanent job losses, and major companies initiate another round of layoffs. The hotel industry is warning thousands of closures, and thousands of small businesses are considering closing shop for good. It’ll take longer for the economy to heal out of all these.
What do Economists Think?
According to economists, lawmakers should send money immediately to unemployed workers due to recession. They should support all businesses struggling to survive until the pandemic abates and customers return fully.
They should also support state and local governments that have experienced tax revenue decline and are already moving off public employees.
Lawmakers disagree about how much the federal aid the economy needs now. But it seems virtually all economists agree on $1 trillion to $2 trillion.
President Trump appeared to suggest piecemeal measures such as aid for airlines and individual checks. But even the possibility for a limited offer wasn’t clear and would be less than what most economists say neds to keep businesses and households solvent.
On Tuesday, Jerome Powell, the Federal Reserve chair, echoed their concerns arguing that the government’s failure to support the economy carried risks. He added that too little support means a weak recovery, creating unnecessary hardship for businesses and households.
Eventually, business and household bankruptcies would rise, harming the economy’s productive capacity and holding back wage growth.
Business leaders urgently pleaded for help, arguing that failure to act could doom the entire sector. Laid-off workers are under pressure, are beginning to exhaust their savings from previous rounds of aid. Now they are struggling to buy food and pay rent.
Many economists prioritize unemployment benefits. The $600 a week as extra benefits which kept most households afloat expired end of July. The lapse left millions of families struggling to get by on their regular unemployment benefits – which is just a few hundred dollars a week.
Millions of other Americans depend on temporary programs that extend aid to those unqualified for regular state benefits or whose benefits have expired. Such programs lapse by the end of the year.
Unemployment benefits as an effective form of economic stimulus
According to research, unemployment benefits are among the most effective forms of economic stimulus. Jobless people are likely to spend the money rather than save it.
However, Senate Republicans said they’ll not support restoring the full $600 supplement.
Since the pandemic is taking longer than expected, businesses are facing new challenges that require different strategies from what the Congress previously funded.
For example, new programs need to provide more flexibility to businesses allowing them to make adjustments such as laying off staff to survive a crisis that could stretch another one year or more.
Economists say the failure to help local and state governments was one of the worst recession’s worst policy mistakes. Back then, local and state governments cut thousands of jobs, raised taxes, slashed spending, offsetting federal efforts to boost the economy through deficit spending and tax cuts.
It’s distressing that we didn’t learn the lesson after 2008, that state budgets were extremely essential to the aggregate economy.
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