Without more relief spending, the recovery’s likely to stall
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President Trump’s messages in tweets and signals over the last 24 hours have gone back and forth on whether he supports another coronavirus relief plan.
Relief from Congress would help boost the economy and help American households and the unemployed, small businesses and giant airlines and state and local governments.
Proposals have ranged from $1.5 trillion to $3 trillion. Federal Reserve Chair Jerome Powell called Tuesday for erring on the side of spending more rather than less to keep the recovery going.
But there may be none — at least until after Election Day. What does that mean for the economy?
Back in March, Washington sent $3 trillion coursing through the economy’s veins.
One of the biggest infusions was $600-a-week in extra unemployment payments to more than 20 million jobless Americans. That expired in mid-summer, and the amount of cash going out to laid-off workers cratered, according to Jay Shambaugh, an economist at George Washington University.
“It fell from $110 [billion] in July to $34 billion in September,” he said. “So there’s this massive drop-off to the economy and also to the most vulnerable households.”
Those $1,200 relief checks from the spring have been spent. With most of the federal pandemic relief now gone, “we’ve seen a slowing of retail sales and personal spending,” said Joseph Brusuelas, chief economist at consulting company RSM.
A quarter of small businesses have closed, he said. Brusuelas predicts without more federal support — including lending to small businesses — more will fail.
And state and local governments can’t keep teachers and other essential workers on the payroll, said Michael Graetz, professor emeritus at Columbia Law School.
“Loss of civil service jobs will disproportionately affect minorities, because they’ve been hired into those jobs,” he said.
“OK, let’s say we don’t have a stimulus package, the economy gets pretty severely damaged in the short term — probably four or five years to get back to full employment,” said Dan North, chief economist at credit insurer Euler Hermes North America.
The burden is falling to families, that are running out of time and money, Graetz said.
“People are facing evictions, difficulty paying for food and lodging. This is a desperate situation,” he said.
One that the chaos in Washington isn’t making any better.
COVID-19 Economy FAQs
So what’s up with “Zoom fatigue”?
It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.
How are Americans spending their money these days?
Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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